Sale of Plant- Whther Business Activity or Investment?

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The assessee-bought a Margarine Plant which was after ceratin repair and maintenance was sold . In the return for the assessment year 1974-75, the assessee returned the surplus as profit from an adventure in the nature of trade. The Assessing Authority, however, rejected such claim and treated the surplus as a short-term capital gain. On appeal, Commissioner (Appeals) held that the surplus should be treated as income from adventure in the nature of trade. Tribunal also upheld the order of Commissioner (Appeals).

The issue involved before Hon’ble Court in case of Amrit Foods (P.) Ltd 199CTR28 was

Whether since minutes of various meetings of board of directors amply proved that intention of assessee from very beginning was to sell plant by treating it as one of its business, it had rightly been treated by Tribunal to be adventure in nature of trade

ALLAHABAD High Court vide its order dt 1/6/2005 held as under :

The various minutes of the meetings of the board of directors amply proved that the intention from the very beginning was to sell the Margarine plant by treating it as one of its business, and therefore, it had rightly been treated by the Tribunal to be in the nature of adventure in trade. Further, merely because the assessee had shown it under the head ‘Plant & machinery’ would not make any difference, as entry of a transaction in the books of account is not determinative of the true nature of the transaction. As held by the Apex Court in the case of Dalmia Cement Ltd. v. CIT [1976] 4 SCL 614, even an isolated transaction is capable of falling within the definition of ‘business’.