Adventure in the nature of trade: land resale gains are taxable as business income when facts show a profit-making venture.

An isolated purchase and resale of contiguous land plots may constitute an adventure in the nature of trade where the totality of circumstances shows a commercial venture rather than investment. The governing test is whether the transaction has the essential characteristics of trade, assessed by factors such as the nature of the property, the manner of acquisition and disposal, the absence of income-yielding use, and whether the land was acquired with the sole intention of resale at a profit. On the stated facts, the planned series of purchases and resale to a particular purchaser supported treatment of the surplus as business income.

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Issues: Whether the surplus arising from the purchase and resale of contiguous plots of land was taxable as income from an adventure in the nature of trade.

Analysis: The expression "adventure in the nature of trade" in the Income-tax Act denotes a transaction which is not ordinary trade but has enough of the essential characteristics of trade or business to be treated as such. The character of an isolated transaction is not determined by any single formula or by the mere fact of resale at a profit; all relevant circumstances must be considered, including the nature of the commodity, the manner of acquisition and disposal, the absence or presence of income-yielding use, and whether the purchase was made with the sole intention of resale at a profit. Where the facts disclose a planned series of purchases, no user consistent with investment, and circumstances showing that the property was acquired with the object of resale to a particular purchaser at a profit, the resulting gain is not a mere capital accretion.

Conclusion: The transaction was rightly treated as an adventure in the nature of trade and the surplus was taxable as business income.

Ratio Decidendi: Whether an isolated purchase and resale is an adventure in the nature of trade depends on the totality of relevant circumstances, and a sole intention to resell at a profit, when not displaced by contrary factors, may justify treating the gain as business income.

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