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Taxability of surplus realization by assessee-company as income arising from an adventure in the nature of trade. Analysis: The judgment by the High Court of Delhi addressed the issue of whether a surplus realization by an assessee-company should be considered taxable income arising from an adventure in the nature of trade. The case involved M/s. Joint Financers (P.) Ltd., a company in liquidation, for the assessment year 1961-62. The company had purchased land jointly with another individual, and later agreed to sell its half share to that individual for a certain amount. Although no sale deed was executed, the company received the agreed sum, which was treated as profit and distributed as dividends. The court considered various factors to determine the nature of the transaction. Firstly, the company's memorandum of association allowed dealing with property, including land. Secondly, the joint purchase resolution indicated a profit motive. Thirdly, the location of the land in an area likely to be declared industrial was significant. Additionally, the quick succession of transactions and the realization of the entire sum without a sale deed pointed towards a business intent. The court concluded that the surplus amount was indeed taxable income under the Income Tax Act, considering the cumulative circumstances. The judgment favored the revenue, and as the company was in liquidation, no costs were imposed. In conclusion, the court held that the surplus realized by the assessee-company was taxable income arising from an adventure in the nature of trade. The judgment emphasized the company's profit motive, the location of the land, the quick succession of transactions, and the absence of a sale deed in reaching this decision. The court's analysis considered the circumstances cumulatively to determine the taxability of the surplus amount, ultimately ruling in favor of the revenue.
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