Long-held shares treated as investments may give rise to capital loss, not trading loss, on sale.

Shares acquired and retained for about 14 years, recorded in the accounts as investments and not sold despite earlier price rises, were treated as investment assets rather than stock-in-trade. On those proved facts, the Tribunal drew a reasonable inference that the loss on sale was capital in nature, not a trading loss, and that mixed question of law and fact was upheld against the assessee. The assessee's claim to revenue treatment therefore failed, and the characterisation of the loss as capital loss was sustained.

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Issues: Whether the loss arising from sale of shares held for about 14 years was a capital loss or a trading loss.

Analysis: The shares were purchased in 1941, were retained till 1955, were reflected in the assessee's books and balance-sheet as investments, and were not sold even when their price had earlier risen. The Tribunal treated the long retention, accounting treatment, absence of a trading pattern, and surrounding circumstances as supporting the inference that the shares were held as investment and not as stock-in-trade. The question was treated as a mixed question of law and fact, and the only enquiry was whether the inference drawn from the proved facts was a reasonable one.

Conclusion: The loss was correctly held to be a capital loss and not a trading loss, and the finding was sustained against the assessee.

Final Conclusion: The assessee's claim to treat the loss as revenue loss failed, and the Tribunal's characterisation of the loss as capital loss was upheld.

Ratio Decidendi: Where the surrounding circumstances show that shares were acquired and retained as investments, their long holding period and treatment in the accounts may justify treating the resultant loss on sale as a capital loss.

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