H.N. Seth, J.
1. This is a reference under Section 66(1) of the Indian Income-tax Act, 1922. The assessee in this case is Sri Kali Nath, in his capacity as an individual. The relevant assessment year is 1949-50, corresponding previous year ending on March 31, 1949.
2. The facts giving rise to the present reference are that one Henry Celestine John claimed that he had 1/20th share in certain industrial properties known as John Mills property and one-fourth share in some bungalows. Other members of the family of Johns denied the claim of Celestine John, and alleged that he had no share either in industrial properties or in the bungalows. Henry Celestine John went away to England in 1911, and did not return to India thereafter. It is alleged that taking advantage of his absence, other members of the family, who were in India, created charges on properties and protracted litigation ensued. Henry Celestine John decided to sell his undivided shares and interests in the properties. As the properties got involved in litigation he experienced difficulty in finding a purchaser who was willing to pay him a decent price.
3. The assessee. Sri Kali Nath, advocate, was in the know of the entire affairs of the Johns and with his help one Beni Madho, brother-in-law of Raj Bahadur, the brother of Kali Nath, was set up as a benamidar for purchasing the property. On August 22, 1939, Henry Celestine John executed a sale deed in favour of Beni Madho in which it was stipulated that if Beni Madho succeeded in recovering any property, then half the gross value thereof would be paid to Henry Celestine John. Subsequently, Sri Beni Madho made a declaration that the real purchaser of the property was Raj Bahadur. A litigation in respect of this property ensued. In the year 1943, a first appeal was filed by Sri Beni Madho before the Allahabad High Court. This first appeal was accepted and a preliminary decree for partition was passed. Thereafter, on 24th of August, 1946, an agreement was entered into between Sri Kali Nath and his two brothers, Madan Gopal and Raj Bahadur, stating that the John Mills property had been acquired by them in the name of Beni Madho, who was the brother-in-law of Raj Bahadur. The three brothers agreed that they would pay a sum of Rs. 12,500 to Sri Beni Madho as compensation for having lent his name and will get the deed of transfer from him in respect of the Johns Mills properties to be allotted to his share. On 27th February, 1947, Sri Bsni Madho received a sum of Rs. 12,500 and transferred the properties to Raj Bahadur. Before, however, the partition decree could be executed, the parties entered into a compromise under which the Johns paid a sum of Rs. 1,75,000 to Sri Raj Bahadur in consideration of his giving up his claim in respect of the John Mills properties. This sum of Rs. 1,75,000 was paid to Sri Raj Bahadur on 5th of July, 1948. From out of this sum Sri Raj Bahadur paid a sum of Rs. 19,462 to Sri Kali Nath as his share of money.
4. For the assessment year 1949-50 Sri Kali Nath filed a return of his income claiming the aforesaid amount of Rs. 19,462 as capital receipt not liable to be taxed.
5. The Income-tax Officer held that the entire transaction was carried on benami by Sri Kali Nath alone. In the result he held that the entire receipt of Rs, 1,75,000 was income of Sri Kali Nath. From this he deducted a sum of Rs. 35,000, the estimated cost of litigation as expenditure and taxed Rs. 2,50,000, (sic) as his income. In appeal, the Appellate Assistant Commissioner confirmed the order of the Income-tax Officer. The assessee then filed a second appeal before the Income-tax Appellate Tribunal. The Tribunal relied upon certain observations made by the High Court in the first appeal in which the decree for partition had been passed and held that the motive behind the entire transaction was to earn profit and that there was also a risk involved in the transaction inasmuch as there was every likelihood that the suit might not succeed. The Tribunal also observed that ever since 1942-43 the assessee had been carrying on money-lendingbusiness. Amongst the money-lenders such transactions of purchasing properties which was involved in litigation is quite common. It, therefore, came to the conclusion that the entire transaction was in the nature of an adventure with a motive to earn profits. It was neither capital transaction, nor could it be described as a casual transaction. The profit earned by the assessee was, therefore, liable to be taxed under Section 10 of the Act. The Tribunal also pointed out that, under the agreement, the assessee was liable to pay 50% of the proceeds to the estate of Henry Celestine John. It held that this liability was a permissible deduction. Even though the amount had not been paid back to the successors of Henry Celestine John, still the assessee was entitled to claim this deduction. In the result the Tribunal calculated the share of Kali Nath which could be included in his total income as Rs. 33,654. The manner in which this amount of Rs. 33,654 was worked out was as follows :
Exclude share of H. C. John
Further exclude cost and expenditureestimated
6. The assessee felt that the Tribunal went wrong in holding that the transaction by which the assessee acquired the interest in John Mills property, which he subsequently sold, was an adventure in the nature of trade. According to him the receipt of money in lieu of his interest in the John Mills properties was merely a casual or capital receipt not liable to be taxed. He, therefore, got the following question referred to this court for opinion :
' (1) Whether, in the circumstances of the case, it could be said that the transactions were in the nature of an adventure with a motive to earn profits of Rs. 33,654 and whether it is liable to be taxed under Section 10 of the Indian Income-tax Act, 1922, in the assessment year 1949-50 '
7. The Commissioner of Income-tax, however, felt that the Tribunal was not right in excluding the sum of Rs. 77,500 from the total receipt of Rs. 1,75,000, as the share of H.C. John, as the same had actually not been paid by the assessee to the estate of H. C. John. It was contended that the accounts of the assessee were maintained not on mercantile system but on cash basis. In the circumstances, merely because the assessec was liable to return the sum of Rs. 77,500 to H. C. John's estate, he was not entitled toclaim that deduction unless he actually paid the amount. At the instance of the Commissioner of Income-tax the Tribunal has referred the following question for the opinion of this court :
' (2) Whether, on the facts and in the circumstances of the case, Rs. 77,500 being the share of Henry John, could be deducted from the profits even though it was not actually paid in the previous year when the method of accounting was cash '
8. So far as the question referred at the instance of the assessee is concerned, the Tribunal has dealt with it in paragraph 7 of its order. In this connection the Tribunal observed as follows :
' We may first dispose of the contention raised by the assessee that the surplus arising from this transaction is not taxable. This contention has no force at all. It is obvious that the motive of the entire transaction was to earn a profit. It is true that there was a risk in it inasmuch as the suits might not have been successful. However, such a risk is always present in a champertous transaction. The series of transactions were clearly entered into with a view to earn profit and the profit is obviously liable to tax under Section 10, Further, ever since 1942-43 the assessee had been carrying on money-lending business and assessed on interest earnings. In the case of money-lenders such transactions are quite common. In any case, we find that the whole transaction is clearly in the nature of an adventure with a motive to earn profit. We have no doubt that the surpluses arising from these transactions are clearly taxable.'
9. An analysis of the view expressed by the Tribunal shows that for holding that the money received by the assessee was liable to tax, it relied upon the following circumstances :
(1) The motive behind the entire transaction entered into by the assessee was to earn profit and the profit is obviously liable to be taxed under Section 10.
(2) The assessee had been carrying on money-lending business and the transaction in question was such that was quite common in the case of persons carrying on the money-lending business. In any case the whole transaction was in the nature of adventure with a motive to earn profit.
10. Mere fact that the transaction has been entered into with a motive for earning profits is not sufficient to bring the profits so earned within the meaning of the word ' income ' which is taxable under the Income-tax Act. In order that such profit should be taxable, it must fall within one of the heads, which have been made taxable under the Indian Income-tax Act. According to the revenue, the receipt is taxable under the head ' profits and gains of business or profession.' It is nobody's case that the amount in dispute represented the assessee's profits from profession. The department tried to bring this amount to tax under the head ' profits andgains of business ' which according to Section 2(13) of the Act includes the profits.and gains from any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture.
11. In the case of Saroj Kumar Mazumdar v. Commissioner of Income-tax,  37 I.T.R. 242, 248;  Supp. 2 S.C.R, 846 (S.C.), the Supreme Court approved the observations made by Lord Carmont in the case of Commissioners of Inland Revenue v. Reinhold,  34 T.C. 389, 393 to the effect that the burden lies on the revenue to bring the case within the words of the statute. In that case it was held that the burden lay upon the revenue to show that the profits earned by the assessee from the transaction fell within the expression ' adventure in the nature of trade ' and unless that was done the profits earned by the assessee could not be brought to tax. Although the Tribunal has recorded a finding that the transaction was entered into by the assessee with a view to earn profit, but it has not recorded any finding or given any reason for holding that the transaction entered into by the assessee was a transaction which had been entered into by him in the course of money-lending business and as such the profit was liable to be taxed as profits of money-lending business. The nature of the transactions entered into in the case was that Beni Madho, the benamidar for the assessee, had expressed his willingness to purchase right, title and interest of Henry Calestine John and had agreed to fight out the litigation at his own cost. In the event of his succeeding he was to pay as consideration a sum equivalent to 50% of the amount or the value that he was able to recover and realise in respect of and out of the share of Henry Celestine John in the properties mentioned in the agreement, which was conveyed to Beni Madho. The transaction was not entered into in order to claim any money advanced by Beni Madho to Henry Celestine John. Prima facie, it does not appear that such a transaction is a normal transaction which is entered into by a party in the course of money-lending business. Moreover, the Tribunal has not stated any material on the basis of which it could be held that such transactions are entered into by money-lenders in the course of their money-lending business. It may be that money-lenders may purchase properties involved in litigation with a view to realise the amount which is due to them from their vendors, but it is, very doubtful if money-lenders would purchase properties involved in litigation, as a part of their money-lending business where the purchase was wholly unconnected with a previous money-lending transaction between them and the owner of the property. In our opinion, this circumstance relied upon by the Tribunal is not based on material and cannot be taken into consideration for determining whether the profits earned by the assessee in this case were his business profits.
12. Coming now to the last circumstance pointed out by the Tribunal, it appears that the Tribunal came to the conclusion that the transaction was an adventure in the nature of trade merely because in its view the assessee entered into this transaction with a motive to earn profit. As stated earlier, the burden of proving that the transaction was an adventure in the nature of trade is on the revenue. The revenue has not only to establish that the transaction is an adventure but it has to go further and establish that it is in the nature of trade. In the case of Venkataswami Naidu and Co. v. Commissioner of Income-tax,  35 I.T.R. 594, 608;  Supp. I S.C.R. 646 (S.C.) the Supreme Court made the following observation :
' Sometimes it is said that a single plunge in the waters of trade may partake of the character of an adventure in the nature of trade. This statement may be true but in its application due regard must be shown to the requirement that a single plunge must be in the waters of trade. '
13. In other words, at least some of the essential features of the trade must be present in the isolated or single transaction before it can be considered to be adventure in the nature of trade. Any adventure which is not of the nature of trade will not be considered to yield business-income. We have, therefore, to see whether the transaction which ultimately resulted in the receipt of Rs. 1,75,000 has, any characteristic of trade or not. The expression 'trade' normally means an activity of buying and selling or profitable pursuit. A person is said to engage in trade if he carries on the activity of buying and selling or engages himself in a profitable pursuit. Before an adventure can be said to be in the nature of trade, the revenue has to show that the nature of transaction is such which is normally entered into by persons who carry on trading activity. As mentioned earlier Henry Celestine John sold his interest in the John Mill's properties and in certain bungalows to Beni Madho, benamidar of the assessee, as he was not in a position to sell those properties to any other person. It was urged that in case the assessee was able to bring the litigation pending in respect of that property to a successful conclusion and to recover the same, he would pay 50% of the value of the property recoverable by him to Henry Celestine John. The assessee fought out the litigation and ultimately secured a decree for partition. Before the decree could be executed and the assessee could obtain possession of the property he entered into a compromise with other parties and received a sum of Rs. 1,75,000, in consideration of giving up his claim to the properties. The precise words in which the compromise was entered into have neither been stated in the statement of the case, nor in any of the, orders which have been filed along with the statement of the case. The fact remains that a compromise had been entered .into between Raj Bahadur, brother of the assessee, and the Johns and that Raj Bahadur gave up his claim under a decree passed in his favour by receiving a sum of Rs. 1,75,000. This transaction does not bear the indicia of a trade. We know of no such trade in which the person makes profit by giving up a disputed claim after receiving some monetary compensation. It may be that the transaction in question was entered into with a motive for earning, profit, but this circumstance by itself is not sufficient to show that the adventure which had been entered into by the assessee was in the nature of trade. Apart from saying that the transaction was entered into with a profit making motive the Tribunal has not stated anything to show as to why it considered the transaction to be in the nature of trade. On the material before us it is not possible to hold that the department has succeeded in establishing that the receipt of Rs. 1,75,000 was as a result of an adventure in the nature of trade. In this view of the matter the receipt of Rs. 1,75,000 or any part thereof could not be brought to tax under the head ' profits and gains of business '.
14. In the result the question referred to us at the instance of the assessee will have to be answered in the negative and in his favour.
15. In view of our finding on the first question being in favour of the assessee, the question of considering the deductions to be made from out of the sum of Rs. 1,75,000 does not arise. The question referred at the instance of the department, therefore, becomes academic and need not be answered,
16. The assessee is entitled to his costs which we assess at Rs. 200. Counsel's fee is also assessed at the same figure.