Classification of securities as stock in trade alters deduction of valuation losses and taxation of net interest. Securities held by banks are to be regarded as stock in trade, so valuation losses debited in the books are treated like other stock in trade losses for tax purposes. Interest payments and receipts on securities, including broken period interest, are revenue in nature; only net interest on securities is taxable as business income.
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Provisions expressly mentioned in the judgment/order text.
Classification of securities as stock in trade alters deduction of valuation losses and taxation of net interest.
Securities held by banks are to be regarded as stock in trade, so valuation losses debited in the books are treated like other stock in trade losses for tax purposes. Interest payments and receipts on securities, including broken period interest, are revenue in nature; only net interest on securities is taxable as business income.
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