Willingale v. International Commercial Bank Ltd. (1978), 52 TC 242 (HL)

In finding that discounts on bills should be taken into income on the disposition of the bills rather than on a straight-line basis, as was done for accounting purposes, Lord Fraser stated (p. 272):

"... the Crown, relied on the general rule that the principles of commercial accounting should normally prevail. But that rule is of little or not assistance to his argument, because the method in which the Bank's accounts were drawn up was not the only method that would be in accordance with sound principles of commercial accounting."

A regular part of a bank's business consisted of discounting or purchasing bills or notes. For accounting purposes the discounts were brought into income on a straight-line basis, but it was found for tax purposes that they were not realized until the notes were sold or matured in light of the finding of the Commissioners that:

"Current prices of discounted bills are affected by the risk involved in rates of interest which are subject to wide fluctuations. The amount of profit a purchaser or discounter of a bill may make is not ascertainable before the bill (a) is sold or (b) reaches maturity."

Lord Fraser stated:

"Interest accrues from day to day, or at other fixed intervals, but discount does not ... [W]hen a bill is discounted nothing is realized until the bill matures or is sold, and the whole profit is postponed or rolled up until one of these events occurs."

Lord Reid's dictum in Duple Motors "that profit shall not be taxed until realised" was adopted in finding that discounts on bills should not be brought into income until the time of disposition of the bills.