Taxability of chitty surplus turns on business nexus; investment-style participation made the receipt non-taxable.

Surplus arising on closure of a long-term chitty was held not taxable merely because it represented excess receipts over subscriptions. The receipt was treated as casual unless the Department showed a nexus with the assessee's business; on the facts, the unusually long duration, the assessee's non-participation in the auctions, and the character of the arrangement showed an investment activity rather than a trading venture. Mere payment from business funds was insufficient to prove that the subscription was undertaken for financing business. The amount was therefore not assessable to tax.

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Issues: Whether the surplus arising on closure of a long-term chitty subscribed to by the assessee was assessable as business income or taxable on any other basis.

Analysis: The surplus was held not to be taxable merely because it represented an excess of receipts over subscriptions. The receipt was treated as casual in nature unless the Department established a nexus with the assessee's business. On the facts, the chitty was of unusually long duration, the assessee never bid in the auctions, and the arrangement was treated as an investment rather than a business activity. Mere payment from business funds was insufficient to show that the subscription was undertaken for financing trade.

Conclusion: The amount was not assessable to tax and the assessee succeeded.

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