Indivisible realisation sale of factory assets and stock cannot be split to tax part of the consideration.

An integrated sale of factory assets, chemicals and match paper was treated as one indivisible realisation transaction rather than separate sales of trading stock and capital assets. Because no part of the consideration could be separately identified as the price of the raw materials, the bargain could not be severed to tax any portion as business profit. The later arrangement merely completed the disposal of closed business assets after the earlier agreement failed, and the company's prior dealings in chemicals did not change the composite character of the disposal. The amounts attributed to the raw materials were therefore not taxable as income.

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Issues: Whether the sale of chemicals and match paper, together with the sale of machinery, plant and premises, constituted an indivisible realisation sale not giving rise to taxable income, and whether the consideration could be split so as to tax a part of it as business profit.

Analysis: The agreement for sale was held to be one integrated bargain. No part of the consideration could be separately identified as the price of chemicals or match paper, and the later arrangement was made only to complete the disposal of the factory assets after the earlier agreement had failed. The transaction was therefore not severable into distinct sales of machinery on the one hand and raw materials on the other. Applying the settled test of whether the sale of assets is composite and indivisible, and whether the arrangement was merely for the more advantageous realisation of the closed business assets, the sale was treated as a realisation sale rather than a trading operation. The fact that the company had dealt in chemicals did not alter the character of this composite disposal.

Conclusion: The amounts attributed to the sale of raw materials were not taxable as income, and the transaction was a single indivisible realisation sale. The attempt to treat the chemicals and match paper as a separate taxable sale was rejected.

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