Agricultural land sale proceeds not treated as business income where no trading intent or conversion to non-agricultural use was shown.

Surplus from sale of agricultural and plantation land was not taxable as business income because the land retained its agricultural character, had been held for a long period, and was used for cultivation with supporting revenue records. Mere subdivision into plots and sale, without conversion for non-agricultural use or evidence of a trading design, did not establish an adventure in the nature of trade. The decisive factors were the intention at acquisition, the nature of the land, the absence of conversion, and the department's failure to prove trading operations. The surplus was therefore treated as arising from a capital asset.

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Issues: Whether the surplus arising from sale of the assessee's agricultural/plantation land was taxable as business income on the footing of an adventure in the nature of trade, or as capital gains from transfer of a capital asset.

Analysis: The land was acquired over a long period, used for agricultural and plantation activity, and remained classified and treated as agricultural land. The assessee did not seek conversion for non-agricultural use, and the record showed cultivation and supporting revenue documents. Merely plotting the land into smaller pieces and selling it, in the surrounding financial circumstances, was not enough by itself to establish a trading venture. The decisive consideration was the intention at the time of acquisition, the character of the land, the absence of conversion, and the lack of material showing a design to trade in land. The department did not discharge the burden of proving that the transactions were undertaken as trading operations.

Conclusion: The surplus from sale of the land was not assessable as business income as an adventure in the nature of trade; it was to be treated as arising from a capital asset, in favour of the assessee.

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