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 1947-48 - Assessee in herited huge amount of money and gold bars after death of her husband "F" - "F" had only purchased gold bars and had not sold a single of them during his life time even certain gold bars remained with him for thirteen years from date of their purchase - After death of "F" assessee had also purchased gold bars - She purchased gold bars within a short period of death of her husband - Assessee purchased certain gold bars even when market price was high - However assessee within a course of about three years disposed of entire set-of gold bars and converted consideration therefrom in to cash -Whether in view of above facts transaction of purchase and sale of gold did not constitute a business or adventure in nature of trade and, thus, profit made therefrom was not taxable - Held, yes FACTS F. was an Austrian citizen doing business in India. The assessee, his widow, had succeeded to his estate. During his lifetime 'F.' amassed considerable wealth and, he was possessed of over Rs. 21 lakhs. During his lifetime 'F,' purchased a large number of gold bars commencing from 15-11-1933, and until a few days before he passed away on 15-3-1943. After the death of "F" the assessee also purchased certain gold bars. However subsequently assessee sold all gold bars. During the previous year assessee sold 10 gold bars which were purchased by "F". The surplus made on sale of said bars was subject to tax by ITO as income from business i.e. adventure in nature of trade. On appeal, the AAC upheld the ITO action in taxing the profits but held that the transactions of purchase and sale of these bars amounted to a regular business. He, however, reduced the quantum of business profits, on the ground that, for the purpose of computing the profits, the cost of the bars should be taken at the market rate ruling on 9-10-1943, when the first sale was made by the assessee and when her business in gold bars could be said to have come into existence. Before the Tribunal the assessee came up on appeal against the…

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