Willingale (Inspector of Taxes) v International Commercial Bank Ltd

[1977] 2 All ER 618

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(Judgment by: Stamp LJ)

Between: Willingale (Inspector of Taxes)
And: International Commercial Bank Ltd

Court:

Judges:
Stamp LJOrmrod LJ
Sir John Pennycuick

Subject References:
Income tax
Computation of profits
Discounting bills of exchange
Anticipated profits
Increase in value of bills as maturity approaches
Apportioned part of increase for each year preceding maturity treated as profit attributable to that year
Bank discounting or purchasing discounted bills
Bills sold or held to maturity
Provision made in annual accounts including proportion of anticipated profits
Profits realised on sale or maturity
Whether proportion of profits anticipated on sale or maturity to be included in bank's taxable profits for accounting years preceding sale or maturity

Case References:
Absalom v Talbot (Inspector of Taxes) - [1944] 1 All ER 642; [1944] AC 204; 26 Tax Cas 166; 113 LJCh 369; 171 LT 53, HL; 28(1) Digest (Reissue) 86, 258
BSC Footwear Ltd (formerly Freeman, Hardy & Willis Ltd) v Ridgway (Inspector of Taxes) - [1971] 2 All ER 534; [1972] AC 544; [1971] 2 WLR 1313; 47 Tax Cas 495; 50 ATC 153; [1971] TR 121, HL; Digest (Cont Vol D) 447, 365
Bennett v Ogston (Inspector of Taxes) - (1930) 15 Tax Cas 374; 28(1) Digest (Reissue) 276, 915
Brown (Surveyor of Taxes) v National Provident Institution - [1921] AC 222; 8 Tax Cas 57; 90 LJKB 1009; 125 LT 417, HL; 28(1) Digest (Reissue) 250, 787
Gardner, Mountain and D'Ambrumenil Ltd v Inland Revenue Comrs - [1947] 1 All ER 650; 29 Tax Cas 69; 177 LT 16, HL; 28(1) Digest (Reissue) 532, 1945
Harrison (Inspector of Taxes) v John Cronk & Sons Ltd - [1936] 3 AllER 747; [1937] AC 185; 20 Tax Cas 612; 106 LJKB 70; 156 LT 20, HL; 28(1) Digest (Reissue) 85, 254
Heather (Inspector of Taxes) v P-E Consulting Group Ltd - [1973] 1 All ER 8; [1973] Ch 189; [1972] 3 WLR 833; 48 Tax Cas 293; 51 ATC 255; [1972] TR 237, CA; Digest (Cont Vol D) 449, 439a
Inland Revenue Comrs v Nelson & Sons Ltd - [1938] SC 816; 22 Tax Cas 175, CS; 28(1) Digest (Reissue) 255, *821
Lomax (Inspector of Taxes) v Peter Dixon & Son Ltd - [1943] 2 All ER 255; [1943] 1 KB 671; 25 Tax Cas 353; 112 LJKB 593; 169 LT 145, CA; 28(1) Digest (Reissue) 300, 1028
Leigh v Inland Revenue Comrs - [1928] 1 KB 73; 11 Tax Cas 590; 96 LJKB 853; 137 LT 303; 28(1) Digest (Reissue) 502, 1822
Odeon Associated Theatres Ltd v Jones (Inspector of Taxes) - [1971] 2 All ER 407; [1971] 1 WLR 442; 48 Tax Cas 257; 50 ATC 398; [1971] TR 373, CA; 28(1) Digest (Reissue) 170, 517
Ostime (Inspector of Taxes) v Duple Motor Bodies Ltd - [1961] 2 All ER 167; [1961] 1 WLR 739; 39 Tax Cas 537; 40 ATC 21; [1961] TR 29, HL; 28(1) Digest (Reissue) 125, 371
Paton (Fenton's Trustee) v Inland Revenue Comrs - [1938] 1 All ER 786; [1938] AC 341; 107 LJKB 354; 158 LT 426; 21 Tax Cas 626, HL; 28(1) Digest (Reissue) 286, 958
Southern Railway of Peru Ltd v Owen (Inspector of Taxes) - [1956] 2 All ER 728; [1957] AC 334; [1956] 3 WLR 389; 36 Tax Cas 602; 32 ATC 147; [1956] TR 197; 49 R & IT 468, HL; 28(1) Digest (Reissue) 124, 369
Sun Insurance Office v Clark (Surveyor of Taxes) - [1912] AC 443; [1911-13] All ER Rep 495; 6 Tax Cas 59; 81 LJKB 488; 106 LT 438, HL; 28(1) Digest (Reissue) 134, 398
Try Ltd v Johnson (Inspector of Taxes) - [1946] 1 All ER 532; 27 Tax Cas 167; 174 LT 399, CA; 28(1) Digest (Reissue) 43, 179

Hearing date: 3, 4 February 1977
Judgment date: 15 March 1977

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Judgment by:
Stamp LJ

This is an appeal by the Crown from an order of Walton J ( [1976] 2 All ER 468 , [1976] 1 WLR 657 , [1976] STC 188) dismissing an appeal by the Crown by way of case stated from a decision of Commissioners for the General Purposes of the Income Tax. The commissioners had allowed appeals by the bank against assessments to corporation tax for the six month accounting period to 31 December 1967, and the years ended respectively 31 December, 1968, 1969, and 1970. The case below ( [1976] 2 All ER 468 , [1976] 1 WLR 657 , [1976] STC 188) is reported and since the facts are set out in the judgment of Walton J ( [1976] 2 All ER 468 , [1976] 1 WLR 657 , [1976] STC 188) it is not necessary to recite them.

Let me say at once that I think some confusion has been introduced into the case by the form in which the commissioners stated the question which falls to be determined ( [1976] 2 All ER 468 at 469, [1976] STC 188 at 189):

'... whether in ascertaining the profits of [the bank] ... in the case of bills (including promissory notes) discounted or bought by [the bank] and held until maturity or sale a proportionate part of the expected profit on maturity or sale referable to the accounting periods in question fell to be included in the computation of the assessable profit of [the bank] for those periods ....'

So to pose the question leads to confusion, because in computing the profits of a business you do not bring in as separate items and add together the profits on the several profitable transactions of the taxpayer and deduct therefrom the aggregate of the losses suffered on those transactions which were unprofitable. If the computation falls to be made on a receipts basis you bring into account on the credit side not your profits, but your receipts. If the computation falls to be made on what is called an earnings basis you place on the credit side not the profits which you have earned but, broadly, the amount of money you have earned.

The relevant statutory provisions of Case 1 of Sch D are set out in s 108 of the Income and Corporation Taxes Act 1970. The tax is-

'charged in respect of-

(a)

the annual profits or gains arising or accruing ...

(ii)

to any person residing in the United Kingdom from any trade, profession or vocation ....'

And so the question which falls to be determined is whether in computing the profits or gains of the bank arising or accruing in a relevant year or accounting period there ought to be brought into the computation on the asset or credit side an appropriate part of the discount on bills held by the bank at the end of the year which have not reached maturity. It is the bank's contention that such discounts represent a profit which in accordance with income tax law is not to be anticipated, and that only on maturity does a discount fall to be brought into account. In its commercial accounts the discount is properly treated as accruing over the whole period during which the bank is the holder of the bill, and it is not in issue that this method of computing the profits gives effect to the correct principle of commercial accountancy. The Crown submits that it is likewise correct for the purposes of Case 1, and that in making up the Case 1 account the amount of discount referable to each year is properly brought into account on the credit side of the account for that year, and that this in no way conflicts with the principle of income tax that you may not anticipate a profit, but is an appropriate step in the process of finding out what were 'the profits or gains' of the taxpayer 'arising or accruing' in each year.

Before proceeding with this judgment it is necessary to emphasise three things which are, I think, fundamental to the consideration of the question whether in preparing its commercial accounts in the way it did the bank transgressed the income tax rule that you may not be taxed on an anticipated profit.

In the first place, the profits or gains of a trade are, and have been for I know not how long, usually computed for the purposes of Case 1 on an earnings basis. And so if in the course of the trade a sum of money is earned, but has not been paid during the accounting period, that sum is nevertheless brought into account on the credit side. So far as I know, it has never been suggested that so to do is to contravene an income tax principle that you may not anticipate a profit. If in the event the sum is not recoverable it comes back on the debit side of the account in some subsequent accounting period as a bad debt. And, as I will endeavour to show hereafter, even contingent debts may fall to be brought in on the credit side of the account without infringing any such principle. Here the liability under the bills is not contingent.

Secondly, I would emphasise that the bank has not been found to be carrying on the business of acquiring bills of exchange for the purpose of resale at a profit. Its business is that of acquiring bills of exchange and holding them until maturity, and that is the basis on which the Crown seeks to assess the tax. It borrows 'short' at a lower and lends 'long' at a higher rate of interest. And so you find on the debit side of the account the interest which it pays and on the credit side the discount which it received during the years, and in its commercial accounts the discounts which, though not yet received or receivable, are treated as having 'accrued'. Although for business reasons it may be, and sometimes is, convenient to sell bills before they reach maturity, there is no finding that the bank carries on the business of buying bills of exchange with a view to resale at a profit. And so for present purposes, even if bills can properly be described as stock-in-trade, they are not the stock-in-trade of a trader who buys bills of exchange with a view to resale. A trader who is buying bills of exchange with a view to resale at a profit would, so I would have thought, though I know nothing of such a business, prepare his commercial account by bringing in on the debit side of the account the amount laid out in the purchase of the bills during the year, and on the credit side the amount of sales during the year and the cost of bills unsold at the end of the year. This is not the way the bank prepared its commercial accounts which, it is common ground, were prepared on correct commercial accounting principles. In the account of the trading profit no account is taken of the cost of acquiring bills of exchange, and no account is taken of money received on maturity in respect of the capital content of the bills.

Thirdly, I would say something of the nature of those discounts. The discounts at which the payment for the bills was made or the premiums at which they were made payable were not calculated by reference to the degree of risk of the bills not being met on maturity. The amount payable at maturity represents the amount advanced, plus interest at a commercial rate compounded annually over the period during which the bills were to mature. Accordingly, the discount or premium was, as Lord Greene MR put it in Lomax (Inspector of Taxes) v Peter Dixon ( [1943] 2 All ER 255 at 262, [1943] 1 KB 671 at 681, 25 Tax Cas 353 at 366), '... the reward and in the normal case (since such bills do not as a rule carry interest) the only reward which the person discounting the bill obtains for his money'. In Inland Revenue Comrs v Nelson and Sons Ltd (1938 SC 816 at 820, 22 Tax Cas 175 at 179, 180) Lord Normand in the Court of Session described the premiums as part of the consideration given by the borrowers for the use of the capital lent to them, and, quoting Bell's Dictionary under the definition of 'Interest of Money', 'the creditors' share of the profit which the borrower ... is presumed to make from the use of the money'. So regarded, I see no objection in the law relating to income tax to treating the reward or consideration as being earned and accruing over the period while the money advanced is outstanding.

Each bill creates a present obligation to pay a sum of money on a future date. So much of that sum as represents repayment of capital finds no place in the Sch D computation. So much of it as represents interest must at some point of time be brought in to the credit side of the computation and for this purpose must be disentangled from the principal content of the amount payable at maturity. The principal and discount can be disentangled, because the principal is the amount paid for the bill and the discount represents interest compounded annually at a fixed rate over the whole period of the bill. Similarly, the amount of discount attributable to each year over the period until maturity can be readily ascertained. This applies whether the bill be expressed in sterling or some other currency.

In its commercial accounts the bank brought into the account each year a sum representing the proportion of the discount attributable to that year. In effect it treated the capital content as having been laid out at the stipulated rate of interest and earning interest at that rate notwithstanding that the payment of the interest is deferred. In a computation made on an earnings basis this appears to be unobjectionable, and no more anticipates a profit than does the inclusion on the credit side of the account of any other sum which has been earned, but not yet paid. The holder of the bill has been out of his capital during the year and the proportion of the discount attributable to that year may properly be treated as so much of the reward of the bank as has been earned during the year.

It is not, I think, in question that interest earned in the course of a business on a sum laid out for the purposes of the business is properly brought into the account in the period in which it is earned, and I would accept the submission that there is no distinction in principle between earning interest and earning discount.

The statement of the principle of income tax law relied on by the bank that a profit may not be anticipated means no more than that you may not in making your Case 1 computation bring in in year 1 a sum which you may with whatever degree of certainty anticipate will be earned in year 2. Although it may be almost certain because of a rise in prices that a trader who has bought stock for resale will realise the stock which he holds at the end of year 1 at a price in excess of its cost, to bring the stock into account at the higher value would be to anticipate a profit which will not have been earned until the stock has been realised: see BSC Footwear Ltd (formerly Freeman, Hardy & Willis Ltd) v Ridgway (Inspector of Taxes). That it was in this sense that Lord Reid ( [1971] 2 All ER 534 at 536, [1972] AC 544 at 552, 47 Tax Cas 495 at 524) in his speech in that case used the phrase 'neither profit nor loss may be anticipated', appears from the words which immediately follow:

'A trader may have made such a good contract in year one that it is virtually certain to produce a large profit in year two. But he cannot be required to pay tax on that profit until it actually accrues.'

And I think that Lord Morris of Borth-y-Gest in that same case spoke in the same sense when he said ( [1971] 2 All ER 534 at 542, [1972] AC 544 at 560, 47 Tax Cas 495 at 531):

'... profits are not to be taxed until they are realised. So it would not normally be fitting to enter the stock-in-trade at the figure of selling price.'

And in the context of the facts of that case and in the scope of the rival contentions, I cannot think that Viscount Dilhorne ( [1971] 2 All ER 534 at 546, [1972] AC 544 at 565, 47 Tax Cas 495 at 535) in remarking that it was axiomatic that 'profits should only be included in the account for the year in which they are realised' was laying down any wider principle or throwing any doubt on the practice of preparing the Case 1 account on an earnings and not a cash basis. In the case of trading stock which the trader has bought for resale the trader earns nothing until he realises the stock, but that does not mean that when he has sold the stock for a sum of money you do not bring that sum of money into the account notwithstanding it has not yet been received. Similarly, when Lord Reid in Ostime (Inspector of Taxes) v Duple Motor Bodies Ltd ( [1961] 2 All ER 167 at 172, [1961] 1 WLR 739 at 751, 39 Tax Cas 537 at 569, 570) stated that it was 'a cardinal principle that profit shall not be taxed until realised', he was, as appears from the context, speaking of the realisation of the asset which was bought for resale. Only when the trader has sold the stock which it is part of his business to sell or performed the services which it is his business to perform has he earned his money, and only then can the price of the goods or services be brought into the credit side of the account. That does not, however, involve the proposition that money promised to be paid to a trader for goods sold or services rendered in the course of his business may not be brought in until received or immediately receivable; though it may, of course, turn out that the money due or to become due is never received, and when that happens account has to be taken of it as a bad debt.

Before departing from the consideration of what is meant by the principle that a profit may not be anticipated, I would mention that in the court below it appears to have been accepted that this means that the account is not to be prepared so as to throw up a profit which has not been earned ( [1976] 2 All ER 468 at 473, [1976] 1 WLR 657 at 661, [1976] STC 188 at 193).

In coming to my conclusion that the method of treating the discounts here in question adopted in the commercial accounts of the bank does not offend the principle that you may not for tax purposes anticipate a profit, I have derived great assistance from the illuminating speech of Lord Radcliffe in Southern Railway of Peru Ltd v Owen (Inspector of Taxes) ( [1956] 2 All ER 728 at 737, [1957] AC 334 at 354, 36 Tax Cas 602 at 642) on which counsel for the Crown greatly relied, and which I make no apology for quoting at some length. The passage which I quote begins with an extract from the speech of Viscount Simon in Gardner Mountain & D'Ambrumenil Ltd v Inland Revenue Comrs ( [1947] 1 All ER 650 at 653, 653, 29 Tax Cas 69 at 93), where he said:

'In calculating the taxable profit of a business on income tax principles ... services completely rendered or goods supplied which are not to be paid for till a subsequent year cannot, generally speaking, be dealt with by treating the taxpayer's outlay as pure loss in the year in which it was incurred and bringing in the remuneration as pure profit in the subsequent year in which it is paid, or is due to be paid. In making an assessment to income tax under Sch D, the net result of the transaction, setting expense on the one side and a figure for remuneration on the other side, ought to appear (as it would appear in a proper system of accountancy), in the same year's profit and loss account, and that year will be the year when the service was rendered or the goods delivered ... This may involve, in some instances, an estimate of what the future remuneration will amount to (and in theory, though not usually in practice, a discounting of the amount to be paid in the future) ... If the accounts ... were made up before the amount of the commission was ascertained, a provisional estimate of what the amount would be might be inserted in the first place, and could be corrected when the precise figure was known, by additional assessment or by a return of any excess within six years of the original assessment.'

Lord Radcliffe ( [1956] 2 All ER 728 at 737, [1957] AC 334 at 255, 36 Tax Cas 602 at 642) went on to say that it was clear that there was nothing improper in admitting valuations or estimates if by so doing a truer balance is arrived at between the receipts and the cost of earning them or the expenses of a year and the fruits of incurring them. Lord Radcliffe pointed out that such estimates were in fact directed in Harrison (Inspector of Taxes) v John Cronk & Sons Ltd, and again by the House of Lords in Absalom v Talbot (Inspector of Taxes), and that the decision of this court in Try Ltd v Johnson (Inspector of Taxes) was ( [1956] 2 All ER 728 at 737, 738, [1957] AC 334 at 355, 36 Tax Cas 602 at 642)-

'of value in illustrating the point that, however desirable it may be to bring in a valuation or estimate in order to give a better balance to a year's accounts, it cannot be right to do so if the figure which is to be inserted, "hedged around with every kind of contingency and speculation", is too uncertain to be fairly treated as a receipt.'

The Crown in Southern Railway of Peru Ltd v Owen (Inspector of Taxes) had, so it appears, contended that there was an absolute rule of law which must be adhered to whatever the current principles or practices of commercial accountancy might require as a method of ascertaining the years' profits, which forbids the introduction of any provision for future payments in or payments out if the right to receive them or the liability to make them is in legal terms contingent at the closing of the relevant year. Lord Radcliffe in holding there to be no such rule of law referred to the decisions of the House of Lords which negatived the existence of any such rule of law, namely Sun Insurance Office v Clark (Surveyor of Taxes) and Harrison (Inspector of Taxes) v John Cronk & Sons Ltd. In the latter case the trader had acquired by his trading a contingent right to receive certain moneys deposited with a building society. It would be impossible to say of any one of the deposits in the year in which it was made that it represented a certain right for the trader to be paid any part of it in the future. Like the money payable under a bill of exchange or promissory note, it was not money in the trader's hands and might never be. Yet, as Lord Radcliffe ( [1956] 2 All ER 728 at 738, [1957] AC 334 at 356, 357, 36 Tax Cas 602 at 643) remarked, the House of Lords upheld the order of the Court of Appeal that the contingent rights ought to be brought in as receipts in the year in which they arose, though at a valuation (if feasible) not at their face value.

In considering the proper approach in the instant case, I also gain assistance from the warning sounded by Lord Radcliffe in Southern Railway of Paru Ltd v Owen ( [1956] 2 All ER 728 at 738, 739, [1957] AC 334 at 357, 36 Tax Cas 602 at 643, 644), that the answer to the question what can or cannot be admitted into the annual account is not possible by any exact analysis of the legal form of the relevant obligation.

You may, and in the instant case I think you do-

'get into a world of unreality if you try and solve your problem in that way, because where you are dealing with a number of similar obligations that arise from trading, although it may be true to say of each separate one that it may never mature, it is the sum of the obligations that matters to the trader, and experience may show that, while each remains uncertain, the aggregate can be fixed with some precision. For the trader, the practical question is always the same in these cases-How much more shall I have to pay out or shall I be able to get in than my current accounts of the year are recording? Legal analysis of the obligation may present it in a variety of different forms. There is the deferred payment which is subject to nothing more than the practical contingency that it may not be received. That is dealt with, as we know, by bringing it in at its face value, subject to allowance, or, in some cases, at a valuation. There is the future payment for work done which is only legally exigible if the whole work is completed. A large part of this particular aspect must be covered by such items of receipt as work in progress, but I do not know enough of the methods of valuing or allowing for this to speak with any confidence about it. And, lastly, there is the contingent obligation to make a future payment, which is our present case. But, whatever the legal analysis, I think that for liabilities as for debts their proper treatment in annual statements of profit depends not on the legal form but on the trader's answer to two separate questions. The first is -Have I adequately stated my profits for the year if I do not include some figure in respect of these obligations? The second is-Do the circumstances of the case, which include the techniques of established accounting practice, make it possible to supply a figure reliable enough for the purpose.'

Reverting to consideration of the method of computation for tax purposes contended for by the bank in the instant appeal, I ask the question, first, whether by adopting that method the bank would have in the words I have just quoted, adequately stated its profits for the year if it had not included an appropriate part of the discounts on bills of exchange held at the end of the year; and secondly, did the circumstances of the case make it possible to supply a figure reliable enough for the purpose?

In relation to the first question, the learned judge in the court below remarked that the figures agreed on the basis that the bank's submission be accepted showed quite startling reductions in the assessments made by the Crown on the basis of the commercial accounts. I am not by any means startled, because I do not think the banks' submission, if adopted, does result in an adequate statement of its profits. Suppose at the end of any year the bank in this case:

(a)

having in previous years laid out £1,000,000 long term at eight per cent interest had received £80,000 interest in that year,

(b)

had in previous years laid out £1,000,000 in the acquisition of bills of exchange of a face value of £1,500,000 which it still held at the end of the year, the £500,000 discount representing interest at the rate of eight per cent compounded annually (and not a discount against the risk of the bill not being met); and

(c)

had borrowed £2,000,000 for the purpose of its business at five per cent per annum costing £100,000 in interest in that year.

Could it be said that the bank had correctly computed 'the profits or gains arising or accruing' if it ignored the growing discount, or as I would say discount 'earned' in that year by the £1,000,000 laid out in acquiring the bills, and returned a loss of £20,000, made up as follows: interest received: £80,000; interest payable: £100,000; loss £20,000.

If the discount like interest be a reward for the use of your money is it not being earned throughout the period you are out of your money or does the value of the bill just grow? I think the former is the case.

In relation, in effect, to the second question which must be propounded: did the circumstances of the case make it possible to supply a figure reliable enough for the purpose of adequately stating the profits, counsel for the bank pointed out that many and perhaps most of the bills were for sums expressed in foreign currency, and he urged that because of variations in rates of exchange it was impossible to forecast with any degree of certainty what in terms of English money, which is how accounts have to be made up, would in the event be realised. I know not how profits and losses resulting from future changes in rates of exchange are reflected in commercial accounts of banks, but it is stated in a note to the bank's accounts that assets and liabilities in foreign currencies have been converted into sterling at rates current at the end of the period for which the accounts are made up. We have no means of discovering, and I do not suppose that counsel for the Crown when he made his reply had the information from which he could tell us, how this operated in relation to the discounts. But if it meant that the discount earned during the year was computed in the currency in which a bill was expressed and then converted into sterling, it would seem to me an appropriate way of calculating what ought to be brought in on the credit side of the account. There is an item in the summary of the bank's profit and loss account 'net profit on exchange', which may (or may not) have something to do with the matter. With all respect to counsel for the bank, that submission does not, however, touch the question whether the sums payable under the bills were earned or whether the process of bringing them into the accounts involved the anticipation of a profit, but goes to a different question, namely, whether the amount payable ought for the purpose of the account to be regarded as fully recoverable. One comes here into the area of valuation of which Lord Radcliffe spoke in the passages of his speech to which I have referred. Here it cannot be doubted that the bank had done all that it had to do to earn the money payable.

The point raised by counsel for the bank was not raised below, and for that reason, and because it in no way affects my view that the method of computation adopted by the bank does not bring in an unearned profit or anticipate a profit in the sense in which that expression is used, I do not pursue it. In making up the account, questions of valuation may well arise; but the aggregate amounts payable under the bills attributable as well to discount as to principal are readily ascertainable, and we are not, as I see it, concerned with the provisions which ought to be made in the accounts for contingencies.

I can summarise my conclusions thus.

(1)

The annual profits or gains arising or accruing from the trade under Case 1 of Sch D must be ascertained in accordance with the principles of commercial accounting, but subject to any relevant statutory provisions or overriding principles of tax law.

(2)

The bringing in on the credit side of the account made for the purpose of computing the annual profits or gains arising or accruing from a trade under Case 1 of Sch D of a present debt which is payable in future does not offend the principle that you may not anticipate a profit.

(3)

The amount of the discount on a bill of exchange is such a debt or part of such a debt, and accordingly to bring in the whole or an appropriate part of it into the account on the credit side does not offend the principle.

(4)

Since the bringing in of a discount before it is received does not offend the principle it becomes a matter of accountancy to determine what part, if any, of the discount ought to be brought into the account in any year.

(5)

In the instant case it is common ground that in ascertaining the profits of the bank's trade it accords with the principles of commercial accountancy to treat these discounts as being earned or accruing over the period in which the money advanced on the bill is outstanding.

I have only to add that since the bank has not been assessed on the basis that it carried on the business of buying or acquiring bills of exchange with a view to resale, and it has not been suggested that it should be, it appears to me irrelevant that the bills which it held may in some sense be described as its stock-in-trade. I would allow the appeal.