Agricultural land sale as investment, not trade, where trading intention at purchase was not proved.

Purchase and resale of agricultural plots will be treated as an adventure in the nature of trade only if, on the totality of circumstances, the revenue proves that the land was acquired at inception with a trading intention. Here, the assessee was an agriculturist who cultivated the lands, held them for years, mutated them in revenue records, and sold only to meet heavy liabilities. The revenue's reliance on alleged acquisition knowledge, borrowed funds, purchase price, and later building-site value was unsupported by evidence. The surplus was therefore held to arise from investment disposal, not business activity, and was not taxable as business profit.

---

---

Issues: Whether the purchase and resale of agricultural plots by the assessee constituted an adventure in the nature of trade and, consequently, whether the resulting surplus was taxable as revenue income.

Analysis: The transaction had to be judged on the totality of circumstances, with the burden on the revenue to establish that the profit arose from a trading adventure. The assessee was found to be an agriculturist who cultivated the lands, retained them for several years, mutated them in the revenue records, and sold them only when heavy liabilities required funds. The material relied upon by the revenue on alleged knowledge of proposed acquisition, borrowed funds, high purchase price, and potential building-site value was found unsupported by evidence or based on surmise. The Court held that the crucial inquiry is the intention at the inception of the purchase, and that a mere expectation of rise in value does not convert a capital investment into trade. Agricultural land is ordinarily capable of being held as an investment, and the facts here showed investment and not a trading scheme.

Conclusion: The purchase and sale of the plots did not constitute an adventure in the nature of trade and the surplus was not taxable as business profit.

Ratio Decidendi: A transaction in agricultural land is not an adventure in the nature of trade unless the revenue proves, on the totality of circumstances, that the land was bought at inception with a trading intention; a mere expectation of resale at a profit or subsequent profitable disposal is insufficient.

---