Law:

Section:

Section 4 of the Income-tax Act, 1961 [Corresponding to section 3 of the Indian Income-tax Act, 1922] - Income - Chargeable as - Assessment year 1960-61 - Assessee was deriving income from owning and managing plantation and at relevant time, he owned about 1000 acres of estate - In year 1958, he purchased certain acres of estate and later on sold part of it in order to clear his debts - There was no iota of evidence that estate in question was not bought with idea of keeping it - Whether sale of estate by assessee represented an adventure in nature of trade resulting in a taxable profit - Held, no FACTS The assessee was in the occupation of and was deriving income from owning and managing plantation. He purchased certain acres of estate and later sold a part of said estate on profit. The sale transaction of said estate was held as an adventure in nature of trade giving rise to taxable profits. The Tribunal rejected the case of assessee that he sold said estate in order to clear his debts on ground that there was still time to pay and sale agreement need not have been entered into earlier. HELD The occupation of the assessee was to derive income from owning and managing plantation. At the time he entered into the agreement in 1958 with ME Ltd., to purchase 575.175 acres of estate he was already the owner of 1,000 acres. He sold only 225 acres out of the 575.175 acres he purchased. No doubt by the sale he made a profit in the sense that he got more than he paid for that part of the estate which he sold. He had borrowed for purchasing the estate. He had more than 3 lakhs of rupees debt at the time he sold the estate. The remaining part by no means was negligible. Actually, the balance 350 acres remained with the assessee at the time the ITO passed the order of assessment, nearly seven years after the purchase, and nearly six years after the sale of a part of the property that he purchased. The property was sold to a company in which the assessee himself held 98 per cent of the shares, In effect, it was, therefore, only a transaction of transfer from an individual to an one-man company. Thus, it was to be held that there was no adventure in the nature of trade. The…

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