The Tax Publishers

Solitary Transaction of Sale of Land--Whether Constitutes Adventure in Nature of Trade

CA. Nisha Bhandari

The question whether a transaction is an adventure in the nature of trade is essentially a question of fact and such fact has to be ascertained from all the circumstances of the case. Apart from several other test, the test as to whether a single or an isolated transaction can be regarded as an adventure in the nature of trade, has been discussed in various cases. The learned author tries to identify some of such important instances relating to transaction in purchase or sale of land.

1. Meaning of adventure in the nature of trade

According to the inclusive definition of 'business' in Section 2(13), an adventure in the nature of trade is to be regarded as business for the purposes of the Income Tax Act. The word 'adventure' would imply that the activity described by it may not be a continuous activity, therefore, continuity and regularity are not the characteristics of the adventure in the nature of trade. Several judicial pronouncements have held that even a single transaction may constitute an adventure in the nature of trade provided it satisfies the basic requirements of a trade. The expression 'in the nature of trade' appearing in the definition of 'business' in Section 2(13) postulates the existence of certain elements in the adventure which in law would render it with the character of trade or business.--Vide G. Venkataswami Naidu & Co. v. CIT (1959) 35 ITR 594 (SC), Kali Nath v. CIT (1973) 88 ITR 347 (All) and Ch. Atchaiah v. CIT (1985) 156 ITR 78 (AP).

The term 'an adventure in the nature of trade' clearly suggests that the transaction in question cannot properly be regarded as trade or business. It is allied to a transaction that constitutes 'trade or business but may not be trade or business itself. It is in fact characterised by some of the essential features that make up a trade or business but not all of them.--Vide Bhagirath Prasad Bilgaiya v. CIT (1983) 139 ITR 916 (MP).

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