Business expediency in buying Government securities can make loss on sale deductible as revenue loss.

Loss on purchase and sale of Government securities was treated as a revenue loss where the securities were acquired in the course of business for commercial expediency. The factual finding accepted by the Tribunal was that the assessee purchased U.P. Land Development Bonds because such dealings were customary and required by business necessity in its transactions with district authorities. Applying the principle that loss from sale of Government bonds bought for business purposes is deductible, the transaction was treated as incidental to the carrying on of the business and therefore allowable as a deduction.

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Issues: Whether the loss of Rs. 16,000 on purchase and sale of Government securities was a revenue loss incidental to the assessee's business and therefore allowable as a deduction.

Analysis: The assessee, a sugar manufacturer, purchased U.P. Land Development Bonds in the course of its business on the footing that such purchases were required by business expediency and were customary in its dealings with the district authorities. The Tribunal accepted this factual finding and treated the transaction as one driven by business necessity. The same reasoning had already been accepted in an earlier identical matter, and the principle applied by the Supreme Court in a similar case was that loss arising from sale of Government bonds purchased for business purposes is deductible as a revenue loss.

Conclusion: The loss was held to be a revenue loss incidental to the carrying on of the assessee's business and was deductible, in favour of the assessee.

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