Profit on sale of land is business income only when the totality of facts shows a trading venture, not investment.

Profit on sale of land is taxable as business income only where, on the totality of circumstances, the Revenue proves that the land was acquired and dealt with as a trading asset rather than as an investment. The governing test considers the nature of the asset, the manner of acquisition and disposal, the absence or presence of repetitive dealing, and whether the property was treated as stock-in-trade. On the facts noted, the lands were acquired as agricultural lands with stated industrial use permissions, extensions were sought for industrial structures, and efforts were made to use the land for industrial purposes before sale. Those circumstances did not show a trading venture, so the gain was assessable as capital gain.

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Issues: Whether the purchase and sale of the land by the assessees constituted an adventure in the nature of trade and gave rise to business income, or whether the profit was taxable only as long-term capital gain.

Analysis: The governing test is whether the transaction, judged by the totality of relevant circumstances, bears the character of a trading venture. No single factor is decisive. The burden lies on the Revenue to establish that the profit falls within the taxing provision as business income. Relevant considerations include the nature of the commodity, the manner of acquisition and disposal, subsequent efforts to use the property for the stated purpose, the absence of repetitive dealing in immovable property, and whether the asset was treated as stock-in-trade or held as an investment. Here, the lands were purchased as agricultural lands with permissions indicating bona fide industrial use, extensions were sought for putting up industrial structures, and the assessees made efforts to use the land for industrial purposes before eventual sale. The surrounding facts did not establish that the sole intention at purchase was resale at a profit.

Conclusion: The transaction was not an adventure in the nature of trade. The profit did not constitute business income and was assessable as capital gain.

Ratio Decidendi: A profit on sale of land is taxable as business income only when, on the totality of circumstances, the Revenue proves that the land was acquired and dealt with as a trading asset and not as an investment.

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