Characterisation of shares as stock-in-trade is unsustainable where findings relied on inadmissible evidence, matter remitted for fresh findings.

The document addresses whether the Tribunal's conclusion that shares were stock-in-trade and sale proceeds were trading profit constitutes a legal inference. It notes the Tribunal's earlier decision relied on suspicions, surmises and inadmissible material, rendering that factual finding vitiated; on remand the Tribunal treated the receipts as capital for an earlier year but for the years in question simply relied on the prior contaminated order without fresh adjudication. Consequently the characterisation as stock-in-trade cannot be sustained and the matter is remitted for fresh legally valid findings.

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Issues: (i) Whether the Tribunal's inference that the shares constituted stock-in-trade and that the profit on sale was a trading profit is a legal inference.

Analysis: The Tribunal's earlier decision relied upon suspicions, surmises and partly inadmissible material; the Supreme Court held that a finding of fact tainted by use of irrelevant or inadmissible material is vitiated. On remand the Tribunal reconsidered and found the receipts to be capital in nature for the earlier year; the Tribunal's subsequent order for the years now in question merely referred to its prior order without fresh adjudication. Since the prior decision was found unsustainable for relying on inadmissible material, the inference that the shares were stock-in-trade cannot stand without a fresh legally valid finding. The statement of case improperly included irrelevant references to subsequent orders and annexures which were ordered deleted.

Conclusion: The inference that the shares constituted stock-in-trade and that the profit on sale was a trading profit is not a legal inference and cannot be sustained; the matter is remitted for fresh findings by the Tribunal.

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