Revaluation loss on immovable property is not a deductible trading loss until it is actually realised.

An estimated diminution in the value of immovable property on revaluation made during reconstitution of a firm was not an actual trading loss deductible in the accounting year. The claimed loss arose only from a book valuation of assets and not from any realised disposal or sale during the relevant period. Because no evidence showed that the property had been sold or otherwise realised for value, the fall in capital value remained unrealised and could not be treated as a trading loss. The claim was therefore not allowable in the accounting year, and the issue was answered against the taxpayer and in favour of the Revenue.

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Issues: Whether the estimated diminution in value of immovable property, based on a revaluation made on reconstitution of the firm, constituted a trading loss deductible in the accounting year.

Analysis: The sum claimed did not represent an actual loss realised in the accounting year. It arose only from a valuation of the assets made for the purpose of reconstituting the firm, not for ascertaining trading loss during the relevant period. No evidence showed that the immovable property had been sold or otherwise disposed of for value so as to crystallise any loss. A trading loss in respect of such property could arise only upon realization, not from an estimated fall in capital value on revaluation.

Conclusion: The claimed amount was not a trading loss deductible in the accounting year, and the question was answered in the negative, in favour of the Revenue.

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