Law: Income-tax Act (IX of 1922)

Section: 2(4),10

Income-tax---   Expression "Trade "-"Adventure in the nature of Trade "-To be determined by examining combination of circumstances-Isolated transaction may be such " adventure " (Ceylon case)-[Income-tax Act (XI of 1922), Ss. 2 (4) and 10].   The respondent's wife was owner of a four acre block of land and had an undivided share in some surrounding land with other co-owners. These lands were requisitioned during the war and the Admiralty erected ten hangars and other buildings thereon. It was the policy of the Naval and Military authorities to give owners of requisitioned land the option of " purchasing " buildings erected thereon. If this option was not exercised the requisitioning authority could themselves remove the buildings and pay compensation for any damage done to the land. The respondent came to an arrangement with the co-owners for surrendering to him their rights in the option above referred to and their rights to compensation for damages. Having this authority as also the authority of his wife for the land which she owned and for the other land he negotiated with the authorities and an agreement was come to for the handing over to the respondent of nine of the ten hangars for Rs. 90,000. There was a demand for these hangars in India and after some troubles the respondent received Rs. 2,79,000 for the nine hangars. After agreed deductions this left a profit of Rs. 1,44,000.   Held, that this amount was not taxable.   The word " adventure " suggests a man going out to seek the fortune sought to be taxed. Here the materials disposed of had been placed on his wife's land and something had to be done about them.   An isolated transaction could be an adventure in the nature of trade.   But for an isolated transaction to be an " adventure ", it is not necessary that it must relate to an ordinary article of f commerce,-linen, brandy, paper and so on.   There was in this case a combination of circumstances in which it could not be said to be wrong to arrive at the conclusion appealed against.   Appeal was dismissed.   Edwards v. Bairstow 1956 A C…