Capital loss on sale of securities, not revenue deduction, where securities were held as investment rather than stock-in-trade.

Loss on sale of securities was treated as a capital loss rather than a revenue deduction because the assessee was not a dealer in securities, held substantial securities during the accounting period, and failed to show any commercial exigency for their sale. The claim that the securities were acquired only as trading assets for pledging against overdraft facilities was rejected, as the surrounding circumstances did not support the characterisation of the securities as circulating capital or stock-in-trade. The securities were found to be an investment of a capital nature, so the loss was not allowable as a business deduction.

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Issues: Whether loss on sale of securities held by the assessee was a capital loss not allowable as a revenue deduction.

Analysis: The assessee was not a dealer in securities and held substantial securities during the accounting period. Its case that the securities were acquired only as trading assets for pledging with the bank against overdraft facilities was not accepted, as the securities were sold without any shown commercial exigency and the surrounding circumstances did not support the claim that they formed part of the circulating capital or stock-in-trade of the business. The securities were found to be an investment of a capital nature.

Conclusion: The loss on sale of the securities was a capital loss and was not allowable as a revenue deduction, in favour of the Revenue and against the assessee.

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