Trading loss on sale of preference shares depends on facts; isolated investment transaction was not deductible

Whether a loss on sale of preference shares qualifies as a trading loss depends on the facts and circumstances of each case. The Tribunal's characterisation of the transaction is ordinarily a finding of fact and will not be disturbed unless irrelevant considerations were taken into account or relevant ones ignored. On the facts, the assessee's main business was biscuit manufacturing, share dealing was only an isolated transaction, the shares carried fixed dividend, and the purchase was made from a sister concern within a common control group during expansion. These features supported the conclusion that the purchase was an investment, not a trading operation, so the loss was not deductible.

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Issues: Whether the loss arising from the sale of preference shares was a trading loss deductible in computing the assessee's profits.

Analysis: The question whether a loss is trading loss depends on the facts and circumstances of each case. The Tribunal's finding on that question is ordinarily one of fact and is not to be disturbed unless irrelevant matters were considered or relevant matters ignored. On the facts, the assessee's main business was manufacturing biscuits, share dealing was only an isolated incident, the shares were preference shares carrying fixed dividend, the purchase was not in the open market but from a sister concern at the time of its expansion, and the companies were controlled by the same group. These circumstances supported the view that the transaction was an investment and not a trading operation.

Conclusion: The loss was not a trading loss and was not deductible. The appeal failed.

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