Adventure in the nature of trade: repeated land dealings and profit motive justified treating surplus as taxable revenue income.

Repeated land purchases and sales at short intervals supported a finding that the plots were acquired with a profit motive, so the surplus was treated as income from an adventure in the nature of trade and taxed as revenue receipt. The court applied the cumulative effect of all relevant facts and circumstances, including frequency of dealings, the nature of the transactions, and the assessee's conduct. Once the surplus was characterised as revenue income, the alternative plea to substitute the market value at the date of conversion for the purchase cost was rejected because it assumed a non-trading transaction.

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Issues: (i) Whether the surplus arising from sale of plots was income from an adventure in the nature of trade and taxable as revenue receipt; (ii) Whether, in computing the surplus, the market value at the date of conversion should be substituted for the cost of purchase.

Issue (i): Whether the surplus arising from sale of plots was income from an adventure in the nature of trade and taxable as revenue receipt.

Analysis: The character of a transaction as an adventure in the nature of trade depends on the total impression created by all relevant facts and circumstances. The assessee engaged in a series of land purchases and sales at short intervals. The authorities found that the surrounding circumstances, the frequency of dealings, the nature of the transactions, and the conduct of the assessee supported an inference that the plots were acquired with the object of resale at a profit rather than for construction of a residential house.

Conclusion: The surplus was rightly treated as income from an adventure in the nature of trade and was taxable as revenue receipt, in favour of the Revenue.

Issue (ii): Whether, in computing the surplus, the market value at the date of conversion should be substituted for the cost of purchase.

Analysis: The alternative plea rested on the premise that the transaction was not a trading venture. Once the transaction was held to be part of a profit-making scheme and the resultant surplus to be business or revenue income, there was no basis to substitute the market value on the alleged date of conversion in the manner suggested by the assessee.

Conclusion: The alternative claim was rightly rejected, in favour of the Revenue.

Final Conclusion: The reference was answered against the assessee on all substantial questions, and the revenue characterization of the surplus was upheld.

Ratio Decidendi: Whether a land transaction is an adventure in the nature of trade must be determined from the cumulative effect of all relevant circumstances, and repeated purchases and sales with an apparent profit motive can justify treating the resulting surplus as taxable revenue income.

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