Section 2(13)

Section 2(13) — the law in short

What the courts have decided on section 2(13), in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• Janki Ram Bahadur Ram v CIT Supreme CourtHelps taxpayer
  I bought a factory that had nothing to do with my line of business, never ran it, and sold it within months at a large profit. Is that profit business income?
  No, not on these facts. The Supreme Court held the purchase was an isolated transaction unrelated to the assessee's business in iron scrap and hardware, and that a profit motive is not decisive, since an accretion to capital does not become taxable income merely because the asset was bought in the expectation of selling it at a profit. It is for the Revenue to bring the profit within the charge. Even accepting that the assessee got a good bargain and would have sold on a favourable offer, that alone could not support an inference of an adventure in the nature of trade. The High Court's answer was discharged and a negative answer recorded.
• CIT v Suresh Chand Goyal High CourtHelps taxpayer
  I inherited agricultural land, got it converted, carved it into plots, laid roads and drains and sold the plots over three years. The Assessing Officer says it is an adventure in the nature of trade. Must the gain be business income?
  Not on these facts. The Madhya Pradesh High Court held that selling one's own land after plotting it out in order to secure a better price is not an adventure in the nature of trade or business, that an isolated transaction can be business only where there is regular activity of purchasing and selling, and that nothing showed the land had been acquired for the purpose of selling it in plots. The Revenue's appeals were dismissed, on that ground and also because the tax effect fell below the CBDT's monetary limit for filing an appeal.

Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.