Banking stock-in-trade remains taxable as business income when immovable assets acquired for debt recovery are later sold after amalgamation.

Immovable properties acquired by a bank in satisfaction of debts during money-lending activity retained their character as stock-in-trade after transfer to the assessee under an amalgamation scheme. Their sale surplus remained taxable as business income because the decisive factor was the nature and source of acquisition, not the compulsory disposal requirement under banking law or the market-value transfer. The article distinguishes cases involving capital assets or property acquired outside the course of banking business, and concludes that such surplus is assessable in the hands of the banking business.

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Issues: Whether the surplus realised on sale of immovable properties acquired by a bank in satisfaction of debts and transferred to the assessee under an amalgamation scheme was assessable as income from banking business.

Analysis: The properties had originally been acquired by the bank from its debtors in satisfaction of debts in the course of its money-lending business, and were thus of the nature of stock-in-trade. Their transfer to the assessee under the amalgamation scheme, even at market value, did not change their character. The obligation under the banking law to dispose of non-banking assets did not convert the surplus into capital gain or exempt it from tax as business income. The decisive test was the character of the assets and the source of their acquisition, not the compulsory nature of the transfer or sale. Authorities dealing with properties treated as capital assets or acquired outside the money-lending business were distinguished.

Conclusion: The surplus was taxable as business income from the assessee's banking business and the answer to the referred question was against the assessee and in favour of the Revenue.

Ratio Decidendi: Immovable properties acquired in satisfaction of debts in the course of a banking or money-lending business retain the character of stock-in-trade even after amalgamation or compulsory disposal, and surplus realised on their sale is assessable as business income.

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