Adventure in the nature of trade: machinery transfer treated as taxable trading profit on the facts.

Whether a receipt from transfer of machinery was taxable as profits from an adventure in the nature of trade depended on the totality of circumstances, not on the assessee's original intention when the machinery was ordered. The facts showed that the original order for the Dandot plant was later diverted, the machinery was ultimately earmarked for Orissa Cement Ltd. after partition, an import licence was obtained in the meantime, and the plant was transferred to secure a higher price. On that sequence, the purchase and resale were interconnected, and the machinery was not treated as an indefinitely held capital investment. The receipt of Rs. 7 lakhs was therefore treated as trading profit and taxable.

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Issues: Whether the sum of Rs. 7 lakhs received by the assessee from Orissa Cement Ltd. was taxable as profits arising from an adventure in the nature of trade.

Analysis: The transaction had to be judged on the totality of circumstances and not by isolating the intention existing at the time the original machinery order was placed. The relevant facts showed that the original order for the Dandot plant was later diverted, the machinery was ultimately earmarked for Orissa Cement Ltd. after the partition, an import licence was obtained in the meantime, and the plant was in fact transferred with a view to securing a higher price. The machinery was not a capital asset of the kind that could be held indefinitely as an investment, and the sequence of events showed that the purchase and resale were interconnected rather than independent.

Conclusion: The receipt of Rs. 7 lakhs was an adventure in the nature of trade and was taxable, against the assessee and in favour of the revenue.

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