Trading stock on liquidation: surplus over cost was treated as revenue receipt, not capital receipt, in share-dealing business.

Excess amounts received by a share-dealing assessee on liquidation of a company, where the shares were held as stock-in-trade, were treated as revenue receipts assessable to income-tax. The liquidation was regarded as a realisation of trading stock, and the surplus over cost was characterised as trading profit rather than a capital distribution. The absence of an open-market sale did not change the commercial substance of the receipt, because the transaction still represented conversion of stock-in-trade into money in the course of the assessee's business.

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Issues: Whether the excess amounts received on liquidation of a company, in respect of shares held as stock-in-trade by a share-dealing assessee, constituted revenue receipts assessable to income-tax.

Analysis: The shares in question formed part of the assessee's stock-in-trade in its share business. On the liquidation of the company, the assessee received amounts in excess of the cost of acquisition. The receipt was treated as an income realisation arising from the assessee's trading operations, not as a mere capital distribution retaining the character of capital in the assessee's hands. The fact that the shares were not sold in the open market did not alter the substance of the transaction, because the liquidation operated as a realisation of the stock-in-trade and the surplus over cost represented trading profit.

Conclusion: The excess amounts of Rs. 75,000 and Rs. 8,021 were revenue receipts assessable to income-tax and not capital receipts.

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