Money-lending business realisation treated as revenue income where property taken for debt recovery was promptly resold.

Property taken in satisfaction of a loan in the course of money-lending business, and sold promptly in parts to realise the debt, was treated as part of the business process rather than a capital investment. The court held that the acquisition and resale were steps in recovering money advanced in the ordinary course of business, so the surplus on resale arose from a business transaction and had the character of revenue income. The reference was answered against the assessee and in favour of the Revenue.

---

---

Issues: (i) Whether the acquisition of the Match Factory property and its subsequent sale in parts could be held to have been entered into in the course of the assessee's money-lending business; (ii) whether the surplus realised on resale of the property was a revenue receipt or a capital receipt.

Issue (i): Whether the acquisition of the Match Factory property and its subsequent sale in parts could be held to have been entered into in the course of the assessee's money-lending business.

Analysis: The property was not taken as an investment of capital. It was accepted in lieu of the assessee's loan when recovery of the debt had become necessary, and it was sold and converted into cash as soon as it was feasible. On the primary facts found, the acquisition and resale were merely steps in the process of realising the loan advanced in the ordinary course of the assessee's money-lending business.

Conclusion: The transaction could legally be held to have been entered into in the course of the assessee's money-lending business.

Issue (ii): Whether the surplus realised on resale of the property was a revenue receipt or a capital receipt.

Analysis: Since the property was held only temporarily as part of the process of recovering the money lent and was promptly turned into cash for re-employment in the business, the surplus was not the result of a capital investment. The receipt arose from a business transaction connected with the realisation of the debt and therefore bore the character of business income.

Conclusion: The surplus realised on resale was a revenue receipt.

Final Conclusion: The reference was answered against the assessee and in favour of the Revenue, holding that the property transaction formed part of the money-lending business and the resulting surplus was taxable as revenue income.

Ratio Decidendi: Where property is accepted in satisfaction of a loan in the course of money-lending business and is sold promptly as part of the process of realising that loan, the transaction is a business transaction and any surplus realised is a revenue receipt.

---