Money-lender property as stock-in-trade depends on business treatment, making sale surplus taxable as business income.

Property acquired by a money-lender in discharge of debts may be treated as stock-in-trade where the facts show integration with the money-lending business. The decisive factors were the accounting treatment of the lands in business folios, payment of related expenses from business funds, and application of the sale surplus to increase business capital. On that basis, the surplus realised on sale of the agricultural lands was treated as income arising from the money-lending business and assessable to tax, rather than as a separate capital receipt. The principle turns on subsequent treatment and business use of the property after acquisition.

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Issues: Whether the surplus realised on sale of agricultural lands acquired by a money-lender in discharge of debts formed part of the stock-in-trade of the money-lending business and was taxable as income.

Analysis: The decisive factor was the manner in which the assessee treated the properties after acquisition. The lands were not kept as a separate personal asset; the income from them was credited in separate folios within the business accounts, the expenses relating to them were met from business funds, and the surplus realised on sale was allowed to swell the money-lending capital. The treatment of the properties in the books and the use of the surplus for business purposes showed that the properties were integrated with the money-lending business. Whether property acquired by a money-lender becomes stock-in-trade depends on the facts, especially the subsequent accounting treatment and business use.

Conclusion: The surplus on sale of the lands was taxable income arising from stock-in-trade of the money-lending business and the answer to the referred question was in the affirmative, in favour of the Revenue.

Final Conclusion: The reference was answered by holding that the excess realised on sale of the lands was assessable as income of the assessee's money-lending business.

Ratio Decidendi: Property acquired by a money-lender becomes stock-in-trade where, on the facts, it is treated as part of the business assets and the surplus on its sale is applied to the business rather than retained as a separate capital asset.

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