Agricultural land sale proceeds were not business income where the land remained agricultural and no trading activity was shown.

Transfer of agricultural land purchased as an investment was not treated as business income where the assessee did not develop, plot, or otherwise trade in the land, and the surrounding circumstances did not show an adventure in the nature of trade. The land remained agricultural in the revenue record and was situated beyond the municipal limits, while conversion for non-agricultural use was carried out only by the purchaser after transfer. On these facts, the profit from sale was not assessable as business income, and the gain was not taxable in the assessee's hands for the year under appeal.

---

---

Issues: Whether the profit arising from transfer of the assessee's agricultural land was taxable as business income or capital gain, or whether it was exempt as transfer of agricultural land beyond the municipal limits.

Analysis: The lands were purchased by the assessee in his individual capacity as agricultural lands and were sold without any material showing that they were acquired as stock-in-trade. The land was not developed or plotted by the assessee, and the conversion for non-agricultural use was undertaken by the purchaser after the assessee's transfer. The frequency and surrounding circumstances of the transactions did not establish organised trading activity or an adventure in the nature of trade. The land in question was beyond 8 km of the municipal limits and was treated as agricultural land in the revenue record. One of the transactions relied upon by the Revenue also pertained to an earlier year and did not arise in the year under appeal.

Conclusion: The receipt from transfer of the land was not assessable as business income and the gain was not taxable in the assessee's hands for the year under appeal.

Ratio Decidendi: A transfer of agricultural land purchased as investment, without development, plotting, or trading activity by the assessee, does not become business income merely because the land is later sold at a profit, particularly where it lies beyond the municipal limits and remains agricultural in character.

---