War damage compensation for stock-in-trade counts as trading income unless legislation clearly excludes it from tax.

Compensation received by a trader for war damage to stock-in-trade is a trading receipt chargeable to income tax and profits tax unless Parliament expressly or by necessary implication excludes it from tax computation. The War Damage legislation did not do so: section 66(1) treated contributions as capital outgoings only for that scheme, and section 28 of the 1949 Act merely disallowed deductions for repair expenditure where payment had been received. No statutory exclusion displaced the ordinary principle that compensation replacing trading stock falls into trading income, so the value payments were properly brought into account and the appeal failed.

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Issues: Whether war damage value payments received by a property-dealing company in respect of stock-in-trade were trading receipts chargeable to income tax and profits tax, or whether the War Damage legislation required them to be treated as capital receipts outside the trading account.

Analysis: The payments were received because the company's trading stock had been diminished by war damage, and in ordinary income-tax principle compensation received in place of trading stock is a trading receipt. The War Damage legislation did not contain any express provision excluding value payments from receipts for tax purposes. Section 66(1) of the War Damage Act, 1943, treated contributions as capital outgoings, but that did not imply that corresponding payments were capital in the hands of a trader. Section 28 of the War Damage (Public Utility Undertakings, etc.) Act, 1949, was directed to disallowing deductions for expenditure on repairing war damage where payment had been received, not to excluding such payments from income altogether. No necessary implication could be read into the statute to displace the normal fiscal consequence of receipt of compensation for trading stock.

Conclusion: The value payments were trading receipts and were properly brought into account for income tax and profits tax. The appeal failed.

Ratio Decidendi: Compensation received by a trader for loss or damage to stock-in-trade is a trading receipt unless Parliament has expressly or by necessary implication excluded it from tax computation; a deduction-disallowance provision does not of itself exclude the receipt from income.

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