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 1949-50 - In 1946, assessee who was carrying on business of manufacturing of materials, dealing in chemicals, mill stores, etc. had purchased certain agricultural land - He had not altered nature of land and used this land for cultivation - No moneys were borrowed to pay for those lands - In 1949 assessee sold these lands to meet his heavy liability on account of income-tax and other liabilities - Plots were sold in same shape as they were purchased - Whether, on facts, it could not be said that assessee purchased lands with view to an adventure in nature of trade and, thus, profit made on sale could not be assessed as income of assessee - Held, yes FACTS The assessee carried on several busineses, inter alia, of manufacturing and selling sizing materials, dealing in chemicals, mill stores, and china clay. He had also a business in forward transactions in shares and bullion. In the years 1945 and 1946, the assessee purchased two plots of land. During the accounting year relevant to the assessment year 1950-51, the assessee sold these plots on profit. The assessee claimed that the profit earned on sale of those plots was not assessable on the grounds that no moneys were borrowed in order to pay for these plots ; that during the time that the plots were in the possession of the assessee he had cultivated the plots and received agricultural income from them ; that when they were sold they were in the same condition as when they were purchased and that the lands were not the property of the assessee's business but were the joint property of his family. He filed in support of his claim land revenue receipts and records of rights. The assessee further stated that he was compelled to sell these family lands as he had to make heavy payments of income-tax and meet other liabilities. He also stated that he would have suffered heavily by fall in the price if he had delayed the sale of those plots and that the alleged amount of profits was nothing but a surplus realised by the assessee from his agricultural capital…

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