Property acquired in satisfaction of debts is not business stock-in-trade absent evidence of incorporation, so sale proceeds are not business income.

Whether sums realised on sale of immovable property acquired in satisfaction of loans are taxable as profits of a money-lending business turns on fact: the properties must be shown to have been incorporated into business assets to qualify as stock-in-trade. Evidence of incorporation includes treatment in business accounts, inclusion of income and expenditure in business books, use of property income for business, a habitual scheme of buying and selling in the business, or express mortgaging/charging for business capital. Absent such evidence, and with the burden on the department to prove business incorporation, sale proceeds are not business income.

---

---

Issues: Whether sums realised on sale of immovable properties acquired by the assessee in discharge of debts during his money-lending business are income liable to assessment as profits of the money-lending business.

Analysis: The decisive issue is factual: whether the properties, after acquisition in satisfaction of debts, were treated and operated as part of the money-lending business stock-in-trade. Authorities establish that such determination depends on evidence showing incorporation of the properties into business assets-for example, treatment in business accounts, inclusion of income and expenditure in business books, use of property income in the business, an established course of buying and selling as part of the business scheme, or express mortgaging/charging of the properties for business capital. Mere acquisition in discharge of loans and later sale, without evidence that income/expenditure were brought into the business accounts or that the properties were dealt with in the ordinary course of the money-lending business, does not suffice to treat them as stock-in-trade. The burden lies on the department to prove that the properties formed part of the business assets, subject to possible shifting of onus by specific circumstances or presumptions.

Conclusion: The sums realised on sale of the properties are not taxable as profits of the money-lending business; the properties were not shown to have been part of the business stock-in-trade.

Ratio Decidendi: Whether immovable property acquired in satisfaction of debts forms part of a money-lender's stock-in-trade is a question of fact to be established by evidence of incorporation into business assets; absent such evidence, profits on subsequent sale are not business income.

---