Do one-off transactions result into tax consequences? This is a moot question which has been a subject-matter of extensive debate in the realm of fiscal laws and the answer, unsurprisingly, given the wide range and coverage of tax laws, is in the affirmative. The law to this regard is now fairly well settled that single or isolated transactions can result in fiscal consequences. This article traces the linear growth of jurisprudence on this aspect to highlight the critical importance of the need to be vividly aware of the provision of fiscal laws which overwhelmingly cover even isolated transactions within the sphere of taxability.
Income tax law
In the context of income tax, its wide coverage is evident from the definition of business which specifically includes “any adventure or concern in the nature of trade” so as to bring any such activity within the coverage of income tax. On what constitutes “adventure” in this context, invariably the judicial response has been that even single or isolated transactions are covered therein. The legal position has been succinctly summarised in Kanga and Palkhivala’s famous treatise to the following effect: “A single transaction of purchase and sale outside the assessee’s line of business may constitute an adventure in the nature of trade even if the assessee does nothing to the article or commodity purchased before he sells it. Neither repetition nor continuity of similar transactions is necessary to constitute a transaction as adventure in the nature of trade.”
It is noteworthy that earlier the income tax law specifically excluded “any receipts which are of casual and non-recurring nature, to the extent such receipts do not exceed five thousand rupees in the aggregate” from the scope of taxable income. Thus, the legislature specifically recognised casual and non-recurring transactions and provided a carve-out against their taxation. However, with the omission of the relevant provision from the statute, the legislative intent to tax even casual and isolated transactions is overtly demonstrated.
Sales tax laws
Even in the context of indirect taxes, the law seems to specifically cover even singular and isolated transactions. Judicial reports are replete with illustrations wherein non-business entities, such as Official Liquidator of Companies, Port Trust, etc. have been declared to be within the charge of sales tax when they carry out taxable transactions. To illustrate, the Supreme Court in Cochin Port Trust, dealing with “a statutory authority constituted for rendering port services under the Major Port Trusts Act, 1963”, was called upon to examine whether the authority could be called upon to pay sales tax in respect of the “sale of scrap items effected” by it. Answering in the affirmative, the Supreme Court based its conclusion to the statutory scheme where the “perusal of the aforesaid definition would indicate that definition of ‘dealer’ under the Act is an inclusive definition whereby wide range of persons have been placed under the ambit of ‘dealer’. It includes persons involved in carrying on any business or trading activity and transactions effected by them whether in the course of business or not”. In this decision while the Supreme Court acknowledged that the tax liability would not follow as a matter of course and there could be instances wherein the activity was not covered within the scope of “business” or “dealer”. However, in the pragmatic realm, given the consistently wide definition of “business” and “dealer” in the sales tax laws, the exclusion of non-recurring activities from scope of sales tax has been limited.
Furthermore, the concept of “casual dealer” has been introduced in these laws for the purpose of fixing the liability of sales tax specifically upon those persons who may carry out business activities irregularly. In a recent judgment the Supreme Court specifically adverted to the scope of casual dealer concept to declare that a person carrying out even one transaction is also covered within the scope of casual dealer required to discharge sales tax liability. Thus, even liability of sales tax in the context of occasional transactions appears to be fairly well settled.
Goods and services tax law (GST)
The taxability of single or isolated transactions has continued even under the GST laws which have replaced the erstwhile sales tax laws. To illustrate, Section 2(17) of the Central Goods and Services Tax Act, 2017 stipulates the definition of “business”. Clause (a) of this provision defines it to mean “any trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar activity, whether or not it is for a pecuniary benefit”. Thus, it is evident that “adventure” is specifically covered. To obviate all doubts, perhaps, clause (c) of the same provision extends this concept inter alia specifically to single or isolated transactions insofar as it provides that an activity or transaction in the nature of clause (a) would nonetheless be covered “whether or not there is volume, frequency, continuity or regularity of such transaction”.
In addition to the above statutory coverage of non-frequent activities, there is, in fact, a special regime stipulated in the GST laws which is perhaps an extension of the “casual dealer” concept upon the sales tax laws. To exemplify, Section 2(20) of the Central Goods and Services Tax Act, 2017 introduces a definition of “casual taxable person” to state that it “means a person who occasionally undertakes transactions involving supply of goods or services or both in the course or furtherance of business, whether as principal, agent or in any other capacity, in the taxable territory where he has no fixed place of business”. There are distinct and special provisions in the GST laws providing for “registration” of such persons. In fact, the GST laws provide that such persons are obliged to “make an advance deposit of tax in an amount equivalent to the estimated tax liability of such person for the period for which the registration is sought”. The GST laws, therefore, do not leave to imagination of any aspect of the tax liability of casual or non-recurring transactions.
It is naïve to expect equity in the levy of taxes; the legal position regarding taxability of single transaction does not disappoint on this count either. Supplementing the judicial view, the current spate of taxing statutes specifically include provisions relating to taxability of such transactions, rending the inquiry academic. The current statutory framework, in fact, even taxes windfall gains. Thus, it appears as given with little scope to contend that a single transaction does not lead to tax consequences.
†Tarun Jain, Advocate, Supreme Court of India; LLM (Taxation), London School of Economics.
 Kanga and Palkhivala’s: The Law and Practice of Income Tax, 8th edn., 1990, p. 149. As a caveat, it is relevant to point out that the treatise further states that in the event profit motive is absent or other circumstances indicate that the transaction was not “an adventure in the nature of trade”, the transaction may nonetheless be taxable as a capital transaction. Thus, liability of tax on such transactions may not be successfully avoided albeit the nature of tax and the incidence thereon may vary.
 Relying upon Regent Estates Ltd. v. CIT, 1962 SCC OnLine Cal 272 : (1963) 48 ITR 162. In this case it was inter alia observed as under: “7. [a]s to isolated transactions it was said in Rutledge v. Commissioners of Inland Revenue, (1929) 14 TC 490, that if a person purchased by an isolated transaction some particular commodity for no purpose except that of resale at a profit an intention to trade can properly be inferred. Ordinarily, one of the tests as to isolated transactions is whether the thing purchased is such as is likely to give the purchaser a pride of possession so that he might like to hold and cherish it as a thing possessing for its own sake. Another possible test is whether the bulk of the commodity purchased is so large that in order to sell it the purchaser must have recourse to some organisation and activity of the kind that is required in trade. The third test is whether the thing purchased is such as must be subjected to some processing for the purpose of making it marketable. In the present case it cannot be said that the foreign exchange was acquired for the purpose of pride of possession nor can it be said that any organisation is required to sell foreign exchange nor that any processing is required to make foreign exchange marketable. Therefore, the only test which will be applicable here is whether there was any intention to turn the commodity over for the purpose of making profit.”
 S. 10(3), Income Tax Act, 1961, omitted by Finance Act, 2002.
 It is noteworthy that this exclusion was found to be of limited application as, according to the Supreme Court in Ram Kumar Agarwalla v. CIT, AIR 1967 SC 921 : (1967) 63 ITR 622, it was applicable only if the receipts were not inter alia in the nature of business income. Much earlier, the Bombay High Court in Surat District Cotton Dealers’ Assn. v. CIT, 1958 SCC OnLine Bom 270 : (1959) 35 ITR 121 had observed that the provision was limited in coverage given that “[t]he test of casualness is this, that the receipt is fortuitous in the sense that it is not anticipated or foreseen.” See also,P.D. Ghanekar v. CIT, 1970 SCC OnLine Bom 159 : (1971) 80 ITR 236.
 CTO v. Bhagat Singh, Special Leave Petition (Civil) No. 15870 of 2020, decision dated 21-1-2021]. In this case, the Supreme Court was considering the following definition in the Rajasthan Sales Tax Act, 1994: “Casual trader means a person who has, whether as principal, agent or in any capacity, occasional transaction of business nature involving the buying, selling, supply or distribution of such goods as may be specified by the State Government by notification in the Official Gazette whether for cash, or for deferred payment, or for commission, remuneration or other valuable consideration.”
 Ss. 24(ii) and 27, Central Goods and Services Tax Act, 2017.
 S. 27(2), Central Goods and Services Tax Act, 2017.
 For illustration, see S. 2(24)(ix), Income Tax Act, 1961 which declares as income “any winnings from lotteries, crossword puzzles, races including horse races, card games and other games of any sort or from gambling or betting of any form or nature whatsoever” and scope of each of these expressions is further expanded by way of an ‘explanation’ appended to this provision”.