Business asset treatment of property in money-lending business meant surplus on sale was taxable as business income.

Property acquired in the course of a money-lending business retained its character as a business asset where the assessee dealt with related outgoings and losses in the business accounts and part of the bad-debt write-off was referable to that property. On those facts, the sale proceeds were treated as a business realisation rather than the conversion of a capital asset, so the surplus on sale was assessable as profits and gains of the money-lending business and not as a capital receipt. The issue was answered in favour of the Revenue and against the assessee.

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Issues: Whether the surplus realised on sale of the property purchased in connection with the assessee's money-lending business was taxable as business profits or was a capital receipt.

Analysis: The property had been acquired in the course of the money-lending business, the assessee had treated related outgoings and losses in the business accounts, and a part of the amount written off as bad debt was referable to monies laid out in connection with that property. On these facts, the property continued to retain the character of a business asset and stock-in-trade rather than becoming a capital asset. The sale proceeds therefore represented a business realisation and the surplus was exigible to tax as profits and gains of the money-lending business.

Conclusion: The question was answered in favour of the Revenue and against the assessee.

Ratio Decidendi: Where property acquired in the course of a money-lending business is treated and retained as part of that business's circulating assets, the surplus on its sale is assessable as business income and not as capital receipt.

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