Profit on sale of investment property is not business income where sales are incidental and not trading adventures.

Profits from the sale of estates and properties are taxable as business income only if, on the collective facts, the transactions amount to an adventure in the nature of trade. The mere existence of a power to sell property, or a few isolated sales, is not decisive. Here, the company had acquired the assets to take over an existing firm, carried on planting operations, and held the properties as investments while making occasional sales for management reasons and disposal of uneconomic portions. The surplus was therefore treated as capital accretion, not income chargeable to tax.

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Issues: Whether the surplus arising from the sale of estates and properties held in Malaya was chargeable as income under the Indian Income-tax Act, or was a capital accretion not taxable as revenue receipt.

Analysis: The determination depended on the nature of the transactions viewed in the light of all the surrounding circumstances. The company had been formed to take over the assets of the P. K. N. firm and thereafter carried on planting operations, developed the estates, and derived substantial income from rubber. Large-scale purchases were confined to the initial period, while later sales were occasional and were occasioned by management difficulties, destruction by fire, or the sale of inconvenient and uneconomic portions. The existence of wide powers in the memorandum to sell or deal with property was not decisive. On the facts, the properties were held as investments and as part of the company's business of planters, not as stock-in-trade in a real estate venture.

Conclusion: The surplus from the sale of the estates and properties was not income chargeable to tax; the transactions did not amount to an adventure in the nature of trade.

Ratio Decidendi: Whether profits from sale of property are taxable as business income depends on the collective effect of all relevant facts and circumstances, and not on the mere existence of power to sell or on isolated sales; incidental realisation of investment property does not by itself constitute trade.

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