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Adventure in nature of trade

Vishal Khot (64 Points)

22 March 2016

Dear all, pls tell me the meaning of "adventure in nature of trade"

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CA PRATIK DHRUVE (CHARTERED ACCOUNTANT) (634 Points)
Replied 22 March 2016

The term 'Adventure in the nature of trade' has not been defined in the Income Tax Act, 1961. As far as the dictionary meaning of the word 'adventure' is concerned, it implies a pecuniary risk, a venture, a commercial purpose. The word 'venture' is defined as a commercial activity in which there is a risk of loss as well as a chance of gain. The term 'trade' in the context of the definition of the expression 'business' is a wider concept and once this term associated with the term 'adventure' the scope further enlarged. The adventure in the nature of trade is allowed to transaction that constitutes a trade or business but may not be a business itself. The business has characterized by some of essential ventures such as repetitive transactions, holding of stock-in-trade, dealing with the customers and implied intention between the parties, etc., But, contrary to this even an isolated transaction can satisfy the descripttion of an adventure in the nature of trade. For an adventure, it is not necessary that there should be a series of transactions, i.e., both of purchase and of sales. A single transaction or purchase and sale may be outside the assessee's line of business, can constitute an adventure in the nature of trade. Therefore, neither repetitive nor continuity of similar transaction is necessary to constitute a transaction then it is nothing but carrying on a business and in such situation, the question of adventure in the nature of trade can hardly arise. To supplement as also to further elaborate this discussion, it can be added that the word 'adventure' may be in the realms of travel, voyage, hunting etc., but it is attached with other words, i.e., adventure in the nature of trade, then the move adventure is attached with motive of trade.