Law:

Section:

Section 2(13) of the Income-tax Act, 1961 - Adventure in nature of trade - Assessment year 1962-63 - Assessee purchased two plots of land and sold same for huge profits - Assessee's business was not purchase and sale of land --Tribunal found as of fact that plots were purchased as investment and assessee had pressing need to invest in shares of a company which necessitated sale of plots -Whether on facts, excess price realised by assessee by sale of plots could not be regarded as profit accruing fromadventure in nature of trade - Held, yes FACTS The assessee-family owned a building and resided in part of it while its remaining portion was in the occupation of tenants. On 9-1-1959, it purchased one plot of land, for Rs. 9,465. On 18-1-1959, it purchased another plot for Rs. 9,250. On 8-4-1961. the first plot was sold by it for Rs. 27,000 and on June 9, 1961, it sold the second plot also for Rs. 27,000 thereby earning a substantial profit. During the assessment for the year 1962-63 the assessee contended before the ITO that this profit was a capital gain. The ITO repelled this contention and held that this profit was business profit earned by "adventure in the nature of a trade". The amount was, therefore, added to the income of the assessee and assessment was framed accordingly. Aggrieved by this, the assessee filed an appeal before the AAC but the same was dismissed. On further appeal, the Tribunal found that the assessee-family was making tremendous progress in business and wanted to acquire status and stability by making permanent investment in immovable properties and by building up a permanent source of property income. According to it the occasion for the sale of these two plots arose because the assessee at the relevant time was committed to acquire shares worth Rs. 25,00,000 in a company and it was this pressing necessity which forced it to drop its original idea of constructing buildings over these two plots and to sell them. On reference : HELD The answer to the question whether the particular transaction is an adventure in the nature of trade cannot be decided on the basis of any single test or formula. The answer to this must necessarily depend on…

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