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Issues: Whether the surplus arising from the sale of four immovable properties by the company was assessable as business income under the Income-tax Act.
Analysis: The company's memorandum of association expressly authorised dealing and trafficking in land, house and other property, and the actual course of conduct showed repeated sales of properties soon after incorporation. The fact that the company also derived rental income and assessed some receipts under the head of property did not preclude the impugned surplus from being taxed under the head of business. The question depended on the total impression from the objects of the company, the frequency and nature of the sales, and the surrounding circumstances. On the facts, the sales were not mere realisation of investments but formed part of the company's ordinary trading activity in real estate.
Conclusion: The surplus of Rs. 1,00,673 was rightly assessed as income under the head business and was taxable under section 10 of the Income-tax Act.
Ratio Decidendi: Where a company's objects and actual conduct show trading in immovable property, profits from sales of such property are taxable as business income, and not as capital receipt, if the totality of circumstances indicates that the sales were effected in the course of trade.
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