1932 (11) TMI 11

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..... r trade for the purposes of income-tax; the question on this appeal is whether in the circumstances I will state such profits has been made. During the years 1917 and 1918 the appellants obtained the following holdings of National War Bonds:- Amount Series. Date of issue. Date when repayable. Price at which repayable. 4,000,000 1st Oct. 1917 1-10-1922 102 250,000 2nd April 1918 1-4-1923 102 2,205,000 2nd April 1918 1-4-1923 102 1,050,000 3rd Sept. 1918 1-9-1923 102 The prospectus that was issued inviting application for the bonds contained a provision entitling the holders to convert the bonds into 5 per cent. War Loan 1929/47 at the rate of £ 100 of such Loan for £ 95 nominal of the value of the surre .....

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..... ntended that unless an item so taken in exchange was sold, or taken out of the business, no tax would be exigible by reason of the fact that the article taken in exchange was of greater value than that for which it was bartered. I appreciate the strength of this argument, and I am not surprised at the perplexity in which the Judges have found themselves, but the wholly different character of the businesses, the uncertainty of values in dealing with a trader's stock, and the probability that articles exchanged in the way of trade would prima facie be of equal commercial value renders the analogy unsound. The exchange effected in the present case was in fact the exact equivalent of what would have taken place had instructions been given t .....

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..... f its application is the determining the amount of accrued discount or the profit made by the original investment. The case of California Copper Syndicate v. Harris, although again the facts are different, accepts the same principle. In that case a company formed to deal in mining properties for fully paid shares in another company, and Lord Trayner stated that the profit was realised and that the price was shares, and adds that though there could be no realised profit, except when paid in cash, the shares were realisable and could have been turned into cash. And Lord Dunedin, in Commissioner of Taxes v. Melbourne Trust Ltd., approves of this principle, and states that enhanced values may be assessable where what is done is not merely a re .....

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