Barron (Inspector of Taxes) v Littman
| Jurisdiction | England & Wales |
| Judge | Viscount Simon,Lord Normand,Lord Oaksey,Lord Reid,Lord Asquith of Bishopstone |
| Judgment Date | 31 July 1952 |
| Judgment citation (vLex) | [1952] UKHL J0731-1 |
| Date | 31 July 1952 |
| Court | House of Lords |
[1952] UKHL J0731-1
House of Lords
Viscount Simon
Lord Normand
Lord Oaksey
Lord Reid
Lord Asquith of Bishopstone
Upon Report from the Appellate Committee, to whom was referred the Cause Barron (Inspector of Taxes) against Littman, that the Committee had heard Counsel, as well on Tuesday the 10th, as on Wednesday the 11th, Thursday the 12th, Monday the 16th and Tuesday the 17th, days of June last, upon the Petition and Appeal of Harry Kelton Barron, of Minford House, Rockley Road, West Kensington, W.14 (one of His Majesty's Inspectors of Taxes), praying. That the matter of the Order set forth in the Schedule thereto, namely, an Order of His Majesty's Court of Appeal of the 15th of June 1951, so far as therein stated to be appealed against, might be reviewed before His Majesty the King, in His Court of Parliament, and that the said Order, so far as aforesaid, might be reversed, varied or altered, or that the Petitioner might have such other relief in the premises as to His Majesty the King, in His Court of Parliament. might seem meet; as also upon the printed Case of J. A. Littman, lodged in answer to the said Appeal ; and due consideration had this day of what was offered on either side in this Cause:
It is Ordered and Adjudged, by the Lords Spiritual and Temporal in the Court of Parliament of Her Majesty the Queen assembled, That the said Order of His late Majesty's Court of Appeal, of the 15th day of June 1951, in part complained of in the said Appeal, be, and the same is hereby, Affirmed, and that the said Petition and Appeal be, and the same is hereby, dismissed this House: And it is further Ordered, That the Appellant do pay, or cause to be paid, to the said Respondent the Costs incurred by him in respect of the said Appeal, the amount thereof to be certified by the Clerk of the Parliaments.
My Lords,
The question in this appeal arises on a Case Stated by the Special Commissioners pursuant to Section 149 of the Income Tax Act. 1918. The Special Commissioners' decision was in favour of the Crown and this decision was confirmed by Mr. Justice Wynn-Parry. In the Court of Appeal there was a difference of opinion, Cohen, L.J., and Singleton. L.J., being in favour of the present Respondent, while Jenkins, L.J., would have upheld the decision of the Court below. The taxpayer's appeal was, therefore, allowed, but, upon the present Appellant undertaking by his Counsel not to seek to disturb the order of the Court of Appeal as to costs, he was given liberty to lodge a petition of appeal to the House of Lords, and this appeal is the result.
The matter under discussion concerns certain assessments to income tax for the years 1940-41, 1941- 42 and 1942-43. It is only necessary to consider and decide the issue in the third and last of these years, since it is agreed that this decision will equally govern the two previous years.
The controversy that has arisen between the Crown and the taxpayer involves the consideration of section 15 of the Finance Act, 1940, under which the Respondent, who is a dealer in property, has been charged to tax under Case VI of Schedule D in respect of excess rents in twenty-three cases where he has succeeded in reletting property so as to attract tax under that section, and raises the question whether, under section 27 of the Finance Act, 1927, he may set off against the amounts so assessed losses which he has incurred in five other cases where he acquired properties on lease for the purpose of reletting, but only succeeded in reletting them at a substantially lower rent or failed to relet them at all.
In the well-known case of Fry v. Salisbury House Estate, Limited [1930] A.C. 432, it was decided that the holder of property assessed under Schedule A, who received rents from letting the property which gave him a profit over and above the Schedule A annual value, was not liable to tax under Schedule D in respect of that extra profit inasmuch as the annual income derived from the ownership of lands, tenements and hereditaments could only be assessed under Schedule A and in accordance with the rules of that Schedule. While the Revenue has an option to choose under which Case of Schedule D they will claim tax, they have no option as between Schedules, and the annual value to the taxpayer of property assessed under Schedule A did not, as the law then stood, expose the holder to additional tax under another Schedule on the ground that he was receiving more profit from the properties than was represented by Schedule A values. At the time of the decision in the Salisbury House case, the annual value of London properties was fixed under the Valuation (Metropolis) Act, 1869, while the annual value of properties elsewhere was measured by Rule 1 of the Rules applicable to Schedule A, and was the annual rent if the hereditament had been let at a rack-rent within seven years of the assessment, or, if not, the rack-rent which they were actually worth subject to the statutory allowances. This difference of treatment was got rid of by section 31 of the Finance Act, 1930, which in effect made the rules for ascertaining annual value under Schedule A in the rest of England applicable also in London. Schedule A was, however, itself preserved as the Schedule under which all income from the ownership of land continued to be taxed.
Partly for the reason that the Salisbury House decision left the profit which the Revenue sought to tax in that case untaxed, and partly because a quinquennial valuation of properties was due to be carried out at a time when the country was involved in war and those concerned in such a valuation would be otherwise occupied, Parliament enacted section 15 of the Finance Act 1940. That section is as follows :—
"(1) If, as respects any year of assessment, the immediate lessor of a unit of assessment is entitled in respect of the unit to any rent payable under a lease or leases to which this section applies, he shall be chargeable to tax under Case VI of Schedule D in respect of the excess, if any, of the amount which would have been the amount of the assessment of the unit for the purposes of Schedule A, as reduced for the purpose of collection, if the annual value of the unit had been determined (in accordance, in whatever part of the United Kingdom the unit is situated, with the Rules applicable to Schedule A set out in the First Schedule to the Income Tax Act, 1918) by reference to that rent and the other terms of the lease or leases, over whichever is the greater of—
( a) the actual amount of the assessment of the unit for the purposes of Schedule A, as reduced for the purpose of collection; or
( b) the amount of any rent payable by the immediate lessor in respect of the unit under any short lease or short leases.
(2) Where the immediate lessor of any unit of assessment is occupying any part thereof, subsection (1) of this section shall apply as if the rent to which he is entitled in respect of the unit under any lease or leases to which this section applies were increased by so much of the annual value of the unit (as ascertained for the purposes of Schedule A) as is attributable to the part which he is occupying.
(3) Where for any year an assessment has been made on an immediate lessor by virtue of this section, the amount of any relief which may be claimed by him under Rule 8 of No. V of Schedule A shall be such amount as could have been claimed by him if the annual value of the unit had been determined in the manner described in subsection (1) of this section.
(4) A lease shall be deemed to be a lease to which this section applies if, and only if, the following conditions are fulfilled with respect to it—
( a) that it is a short lease ;
( b) that the land comprised in it is or forms part of a single unit of assessment;
( c) that the rent under it is payable to the immediate lessor of that unit;
( d) that the estate or interest of the immediate lessor of that unit is not, as respects any part of that unit, subject to any short lease which comprises also land not wholly within that unit, being a lease the rent under which is payable to that immediate lessor."
The expression "immediate lessor" is by section 13 (1) of the Finance Act, 1940, defined in relation to any premises as—
"( a) if different parts of the premises are the subject of separate tenancies or separate occupations, a lessor of the whole or any part of the premises whose estate or interest extends to the entirety of the premises and is not subject, immediately or mediately, to a lease of the entirety thereof; and
( b) in any other case, a lessor whose immediate tenant is occupying or entitled to occupy the entirety of the premises:
Provided that if, in any case to which paragraph ( a) of this definition applies, there is more than one lessor satisfying the conditions set out in that paragraph, that one of those lessors shall be deemed to be the immediate lessor whose estate or interest is not reversionary on the estate or interest of any of the others."
The portion of this definition that is applicable to the present case is the portion at ( b) above. The phrase "short lease" is defined by section 13 as a lease which is not a long lease; and "long lease" means a lease granted for a term exceeding fifty years, other than a lease which is or takes effect as a lease for a term of years determinable after the death or marriage of any person. The phrase "unit of assessment" means, by the same section, any land which forms a unit of assessment for the purposes of Schedule A.
The Respondent does not dispute that the "excess" in respect of which he is chargeable to tax under Case VI of Schedule D has been correctly calculated in accordance with section 15 of the Act of 1940. For example, he held 22, Oxford Street on a short lease and relet it at a net rent of £3,500. The...
To continue reading
Request your trial
-
Philippi v Commissioners of Inland Revenue
...of Inland Revenue TAX(1943) 25 T.C.305Congreve v. Commissioners of Inland Revenue TAX(1948) 30 T.C. 163Littman v. Barron; TAXELR33 T.C. 373; [1953] A.C. 96Bambridge v. Commissioners of Inland Revenue TAXWLR36 T.C. 313; [1955] 1 W.L.R. 1329Bradshaw v. Blunden (No. 2) TAX(1960) 39 T.C. 73Rae ......
-
Commissioners of Customs and Excise v Wellington Private Hospital Ltd
... ... Chemical Industries Ltd v Caro WLR [1961] 1 WLR 529 Littman v Barron (HMIT) ELR [1951] Ch 993 Marleasing SA v La ... ...
-
Littman v Barron (HM Inspector of Taxes)
...[Solicitors:-Tobin & Co.; Solicitor of Inland Revenue.] 1 Reported [1951] 1 All E.R. 701; [1951] 2 All E.R. 393; [1951] 2 T.L.R. 323; [1952] 2 All E.R. 548; [1952] 2 T.L.R. 445. 1 Not included in the present print. 1 Salisbury House Estate, Ltd. v. Fry, 15 T.C. 266. 1 15 T.C. 266. 1 15 T.C.......
-
Trustees of the Tollemache Settled Estates v Coughtrie (HM Inspector of Taxes)
...Section 175 (formerly Section 15 of the Finance Act, 1940) is set out in the speech of Lord Asquith of Bishopstone inLittman v. Barron, 33 T.C. 373, at page 411, where he said this: The activity on which the Respondent was engaged was that of acquiring property-freehold or leasehold-with th......