Law:

Section:

Section 2(13) of the Income-tax Act, 1961 [Corresponding to section 2(4) of the Indian Income-tax Act, 1922] - Adventure in nature of trade - Assessment year 1944-45 - Assessee, who was carrying on business in cloth, purchased certain gold bars - Two of bars were utilized in getting ornaments made for his daughter's marriage and remaining were sold at certain profits - Whether profit from sale of gold bars arose from an 'adventure in nature of trade' - Held, no FACTS The assessee carried on the business in cloth. During the relevant accounting year he purchased certain gold bars. In July, 1943, the eldest daughter of the assessee was married and he utilized two bars in getting ornaments made for the marriage. The assessee sold the remaining bars and made certain profits. The ITO was of the opinion that these gold bars were purchased with the sole object of being sold at a profit and this was adventure in the nature of trade. He deducted certain expenses that the assessee had incurred and held that assessee had made a total profit of Rs. 20,888 and that was assessable. On appeal, the Tribunal held that the sum of Rs. 20,888 was income which was liable to be taxed. On reference: HELD There is an activity for the purpose of profit and that, therefore, an adventure to be of the nature of a trade should have a profit motive behind it. If the action of the assessee be capable of more than one interpretation, the one in his favour should be preferred. Put in other words, this means, that the burden lies upon the department to prove that the adventure was undertaken from a motive of making profit and not from any other motive. The findings of the Tribunal did not lead to the conclusion that the purchase of gold was made with the sole or dominant motive of making profit, and that these findings were as much, if not more, consistent with the case of the assessee as they were with the case of the department and that upon these findings it was not possible to hold affirmatively that the dealings in gold were by way of adventure in the nature of a trade. There was not sufficient legal evidence on the record upon which it could be held that the profits from the sale of gold…

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