Agricultural land sale proceeds were not business income where the land retained agricultural character and no non-agricultural conversion was shown.

Agricultural land situated beyond municipal limits retained its agricultural character on the evidence, including land records, cultivation use, grazing, and absence of non-agricultural conversion. Handing over possession under agreements to sell did not by itself convert the land into business stock or the sale proceeds into business profit. On the facts, the receipt from transfer of the lands was not assessable as an adventure in the nature of trade, and the addition made by the Assessing Officer was deleted.

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Issues: Whether the surplus arising from transfer of agricultural lands situated beyond the municipal limits was taxable as business income or adventure in the nature of trade.

Analysis: The land records and surrounding material showed that the lands retained their agricultural character and were used for cultivation or grazing. The fact that possession had been handed over under agreements to sell did not detract from the conclusion that the lands were held and transferred as immovable property; on the facts, the transfer was not shown to have converted the receipt into business profit. The Tribunal agreed that the Revenue had placed undue emphasis on the description in the revenue extracts and the manner of sale, while the Commissioner (Appeals) had correctly examined the nature of the land, the distance from municipal limits, and the absence of any non-agricultural conversion.

Conclusion: The receipt from sale of the agricultural lands was not assessable as adventure in the nature of trade, and the addition made by the Assessing Officer was rightly deleted.

Final Conclusion: The Revenue's challenge failed, and the order granting relief to the assessee was affirmed.

Ratio Decidendi: Agricultural land retaining its character and situated beyond the municipal limits does not become business stock merely because possession is handed over under an agreement to sell; the nature of the land and the surrounding factual matrix govern taxability.

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