Capital realisation in land sales prevails where a company lacks trading activity, repetition, or speculative adventure.

A company's surplus from selling its own land was treated as capital realisation, not trading profit, because the asset had been held for years, the company mainly derived income from letting, and there was no repeated trading pattern, speculative venture, or real trading organisation. The memorandum power to deal in land was relevant but not decisive. The decisive factors were the nature of the asset, length of holding, overall conduct, and absence of trade-like features. Developing land into plots and selling it for a better price, without more, remained consistent with converting a capital investment into money rather than carrying on business or an adventure in the nature of trade.

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Issues: Whether the surplus arising from the sale of plots of land by the company was assessable as trading profit or as income from an adventure in the nature of trade, or whether it was only a capital realisation.

Analysis: The company was a family company which had taken over the family properties and had held them for years, deriving income mainly from letting them out. The power in the memorandum to deal in land was relevant but not ative by itself. The character of the receipt had to be judged from the nature of the asset, the length of holding, the absence of repeated trading transactions, the absence of any real trading organisation or speculative venture, and the overall conduct of the company. Developing land into plots and selling it for a better price, without more, was consistent with realisation of a capital investment. On the facts found, the sales did not exhibit the essential features of trade or of an adventure in the nature of trade.

Conclusion: The surplus from sale of the land was not taxable as business profit and was a capital realisation, so the answer to the reference was in favour of the assessee.

Ratio Decidendi: Where a land-owning company merely develops and sells its own property in the course of realising and turning capital assets into money, without evidence of trading activity, repetition, or speculative adventure, the surplus is capital and not business income, even if the memorandum contains power to trade in land.

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