Withdrawal of stock-in-trade to trustees did not create taxable income absent actual gain or pecuniary benefit.

Withdrawal of shares and silver bars from stock-in-trade for settlement on trusts did not create taxable income where the assets were recorded at cost in the books and nothing was received in exchange. The majority view was that the taxing authority could not tax a merely potential or fictional profit by treating the assessee and its business as separate entities dealing with each other. As there was no immediate pecuniary advantage, the proper accounting entry remained the existing cost value, and no income arose from the transfer.

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Issues: Whether any income arose to the assessee on the transfer of shares and silver bars to the trustees by way of withdrawal from the stock-in-trade.

Analysis: The shares and silver bars formed part of the assessee's stock-in-trade and had been valued in the books at cost price. Their withdrawal for settlement on trusts was not treated by the majority as a business transaction giving rise to any actual income, profit, or gain in the accounting year. The majority held that the taxing authority could not bring to tax a merely potential or fictional profit by treating the assessee and his business as separate entities dealing with each other. Since nothing was received in exchange and the transaction produced no immediate pecuniary advantage, the proper book entry remained the cost value already reflected in the accounts.

Conclusion: No income arose to the assessee from the transfer of the shares and silver bars to the trustees, and the appeal succeeded.

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