Single profit-making financing transaction can still be business income when funds are advanced for stipulated return.

A receipt arising from a financing arrangement, where funds were advanced in expectation of a profit over and above the amount lent, was treated as income, profits or gains rather than a windfall. The fact that the transaction was undertaken only once did not prevent it from being income when its substance was profit-making. The arrangement was also held to be business in nature because it involved an organised lending transaction with stipulated returns and steps to realise the gain. The receipt was therefore taxable as business income and not exempt under the cited provision.

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Issues: (i) Whether the sum received by the assessee represented income, profits or gains. (ii) Whether the receipt arose from business within the meaning of the exemption provision.

Issue (i): Whether the sum received by the assessee represented income, profits or gains.

Analysis: The receipt arose from a financing arrangement under which the assessee advanced funds in expectation of a monetary return in excess of the amount advanced. The amount ultimately received was treated as a return on money invested and not as a mere windfall or casual payment. The fact that the transaction occurred only once did not prevent it from bearing the character of income if, in substance, it was a profit-making venture.

Conclusion: The sum received constituted income, profits or gains.

Issue (ii): Whether the receipt arose from business within the meaning of the exemption provision.

Analysis: The arrangement showed an organized profit-seeking transaction in the nature of lending with stipulated returns, enforceable rights, and steps taken to realise the agreed gain. A single transaction may amount to business if it is entered into with the object of earning profit. The receipt was therefore not a purely casual receipt and fell within business income.

Conclusion: The receipt arose from business and was not exempt under the cited provision.

Final Conclusion: The reference was answered against the assessee on both questions, and the receipt was held taxable as business income.

Ratio Decidendi: A single profit-making transaction may constitute business, and a receipt obtained as a return on money advanced in such a transaction is income from business even though the transaction is not recurring.

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