In finding that royalties received by a manufacturer from patents which it had developed in its research department or acquired from others were not income from investments for purposes of the exclusion from excess profits tax on profits arising from a trade or business, Lord Simonds stated (p. 264):
['Investments'] is a word of which the meaning may vary according to its context. ... Here, the meaning is limited by the context, and the context is one in which a distinction has to be made between the income of investments and the other profits of a trade or business ... It appears to me that the problem may be solved in this way. I would take a schedule of the assets of the trading company concerned and, omitting assets such as stocks and shares to which ... the title of investments can in no circumstances be denied, would ask of each other asset: 'Is this an asset which the company has acquired or holds for the purpose of earning profits in, or otherwise for the promotion of, its particular trade or business?' ... Applying this test to the facts of the present appeal, I cannot believe that any business man (who may be regarded as the touchstone in such a case) would describe the patents rights here in question as investments of the taxpayer ...
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