After a customer ("HIL") of the Hong Kong and Shanghai Banking Corporation (the "Bank") began experiencing financial difficulty, the Bank, in light of the losses it would suffer if HIL were forced into liquidation, incorporated the taxpayer as a wholly-owned subsidiary, and had the taxpayer provide capital to HIL by way of share subscription. The Privy Council upheld the finding of the Board of Review that a gain which the taxpayer realized four years later from the sale of a portion of its shareholding was a capital gain. The bona fides of the Bank's declared policy of holding long-term investments through subsidiary companies had not been challenged. In addition, even if the HIL shares had been held directly by the Bank, they nonetheless would have been held as a long-term investment rather than being held as part of the Bank's circulating assets available to meet depositors' demands.
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