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."