Adventure in the nature of trade requires dominant profit motive and trading indicia; surplus from decree recovery was not business income.

Surplus realised on purchase and recovery of decrees is taxable as business income only if the surrounding circumstances show an adventure in the nature of trade and a dominant profit-making intention at the time of acquisition. Mere proximity between purchase and realisation, or the fact that a surplus was earned, is insufficient. On the facts considered, the assessee's close connection with the debtor-company and related parties made a non-trading motive reasonably possible, including assisting the debtor-company and settling inter se liabilities. Because the revenue could not exclude that explanation, the transaction was not treated as trading in character and the surplus was not assessable as business profits.

---

---

Issues: Whether the surplus arising from purchase and recovery of decrees in the circumstances of the case constituted an adventure in the nature of trade and was therefore taxable as business income.

Analysis: The relevant enquiry was whether the dominant intention at the time of acquiring the decrees was to embark on a trading venture or whether the purchases were explainable on other grounds connected with the assessee's relationship with the debtor-company and the creditors. Mere proximity between purchase and realisation, or the fact that surplus was in fact earned, was not by itself enough. The transaction had to bear the indicia of trade, and the surrounding circumstances had to establish a commercial venture with profit-making intent. On the material available, the assessee's close connection with the debtor-company and related parties made it reasonably possible that the purchases were motivated by a desire to assist the debtor-company and settle inter se liabilities, and not necessarily by a trading design. As that explanation could not be excluded, the revenue failed to establish the necessary trading character of the transaction.

Conclusion: The surplus was not assessable as profits of business, and the question was answered in the negative in favour of the assessee.

Ratio Decidendi: A surplus realised on acquisition and recovery of decrees is taxable as business income only where the revenue establishes that the dominant intention and surrounding circumstances disclose an adventure in the nature of trade with identifiable indicia of trading activity; where a non-trading motive reasonably remains possible, the transaction cannot be so characterised.

---