Share-dealing loss denied where preference share transactions were exceptional and outside the assessee's ordinary business course.

Share transactions that are exceptional in character and outside a dealer's normal course of business do not give rise to a business loss merely because the assessee ordinarily deals in shares. The assessee purchased preference shares at a price above market value, partly with overdraft funds, shortly after an agreement concerning the managed company, and later resold most of them to the same party at a much lower price. On those proved surrounding circumstances, the acquisition and resale were not ordinary share-dealing transactions, so the loss was not incurred in the ordinary course of the share-dealing business and was not allowable as a business loss.

---

---

Issues: Whether the loss suffered by the assessee on sale of preference shares arose in its share-dealing business and was incurred in the ordinary course of that business.

Analysis: The assessee carried on business in shares and securities, but the transaction in question stood out from its normal dealings. The shares were purchased immediately after an agreement concerning the managed company, at a price substantially above the prevailing market rate, acquired partly by overdraft, and most of them were sold back to the same party at a much lower price. The surrounding circumstances showed that the acquisition and resale were not ordinary share-dealing transactions. Even apart from the reasoning adopted by the High Court on the underlying purpose of the transaction, the admitted and proved facts were sufficient to show that the shares were not bought and sold as part of the assessee's normal share-dealing business.

Conclusion: The loss did not arise in the ordinary course of the assessee's share-dealing business and was not allowable as such.

Final Conclusion: The appeal failed and the assessee's claim to treat the loss as a business loss was rejected.

Ratio Decidendi: Where the proved surrounding circumstances show that share transactions are exceptional in character and not entered into in the ordinary course of a dealer's business, the resulting loss is not a business loss merely because the assessee ordinarily deals in shares.

---