War damage compensation for destroyed trading stock is taxable as trading receipt unless statute clearly says otherwise.

Compensation replacing destroyed trading stock or circulating capital is prima facie a trading receipt taxable as part of profits unless the statute clearly provides a different tax character. A property-dealing company's war damage value payment was treated as relating to stock-in-trade, and the war damage scheme did not expressly convert that receipt into capital in the trader's hands. The court refused to infer a wider exemption from the legislation, and the value payment was therefore chargeable as income rather than a capital sum.

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Issues: Whether a war damage value payment received by a property-dealing company in respect of destroyed stock-in-trade was a trading receipt chargeable to income tax, or a capital receipt outside the company's taxable profits.

Analysis: The company carried on the business of property dealing, so its properties formed circulating capital and stock-in-trade. A sum received as compensation for the loss or destruction of such trading stock would ordinarily be brought into account as a trading receipt. The War Damage legislation treated the company's contributions as capital outgoings and imposed restrictions on deductions for restoration expenditure, but it did not expressly provide that value payments received by a trader were to be treated as capital in the trader's hands. The statutory scheme modified some tax consequences, but it did not displace the ordinary fiscal character of compensation replacing lost trading stock. The court declined to infer a wider exemption from the legislation.

Conclusion: The value payment was chargeable as a trading receipt and not exempt as a capital sum.

Final Conclusion: The appeal succeeded and the assessment stood in favour of treating the war damage value payment as part of the company's taxable trading profits.

Ratio Decidendi: Where compensation replaces destroyed trading stock or circulating capital of a trader, it is prima facie a trading receipt unless the statute clearly provides a different tax character.

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