Trading profit vs capital realisation: surplus from closure sale was held not taxable as income.

A surplus from selling chemicals and raw materials during closure of a match business was held not to be taxable trading profit. The decisive test was whether the sale formed part of ordinary trading operations or was merely a winding-up transaction realising capital assets. The Court treated the business as having been closed so far as the owner's own operations were concerned, and found that isolated, insignificant chemical sales did not establish any sustained trading activity. The higher sale price obtained by including those items did not convert the transaction into a stock-in-trade sale. The surplus was therefore a capital realisation, and no trading income arose.

---

---

Issues: Whether the surplus arising from the sale of chemicals and raw materials, when the match business was being closed and the factory was being worked for the purchaser, constituted taxable trading profit or only a realisation of capital assets.

Analysis: The decisive test was whether the transaction was one in the ordinary course of carrying on business or merely a sale made in winding up the business and realising assets. The Court distinguished between a trading sale and a realisation sale, and held that the company's match business had been wound up so far as its own operations were concerned. The power in the memorandum to deal in chemicals did not assist the Revenue, because the evidence showed only a few isolated and insignificant sales of chemicals, insufficient to prove a sustained trading activity. The higher price obtained by including chemicals and raw materials in the sale did not by itself establish that those items were sold as stock-in-trade in the course of business.

Conclusion: The surplus was not taxable as trading income; it was a capital realisation arising from a winding up sale, and the Revenue's contention failed.

Final Conclusion: The appeal was dismissed because the transaction was held to be a sale for realisation of assets and not a business sale giving rise to taxable profit.

Ratio Decidendi: A surplus arising on the sale of assets is taxable only when the sale is part of trading operations; where the sale is merely a winding up and realisation of capital assets, no trading profit arises.

---