Bird (R A.) & Company v Commissioners of Inland Revenue
| Jurisdiction | Scotland |
| Judgment Date | 12 December 1924 |
| Docket Number | No. 23. |
| Date | 12 December 1924 |
| Court | Court of Session |
NO. 51*.-COURT OF SESSION, SCOTLAND (FIRST DIVISION).-
Procedure - Appeal - Stated Case - Remit to Commissioners for further findings - Failure to lead evidence before Commissioners.
The Court refused a motion by Appellant to remit a Stated Case to the Commissioners for the finding of additional facts, where the Appellant had failed to lead evidence as to such additional facts before the Commissioners.
Excess Profits Duty-Repayment-Voluntary disposition inter vivos-Son taking over father's share in partnership-Finance Act, 1922 (12 & 13 Geo. V, c. 17), Section 36.
Under certain agreements the son of the senior partner of a firm became a partner in the business with his father and a third person, and was granted an option to take over, on the death of his father, the father's share in the business, upon payment by instalments, with interest, of the amount of capital standing to the father's credit at the date of death. (There was no specific reference to goodwill in the agreements.)
The senior partner's will provided for the payment from the whole of his estate of a life-rent to his widow and for the division, after her death, of the residue between his four children. Further, the trustees were empowered to allow the whole or part of his partnership capital at the date of death to remain on loan in the business.
On the death of the senior partner in the year 1917, his son exercised the option referred to above.
Subsequently a claim was preferred, under Section 38 (3), Finance (No. 2) Act, 1915, for repayment of duty borne by the father by reference to deficiencies sustained by his son, on the ground that the father's interest in the business had passed to the son by virtue of a voluntary disposition inter vivos within the meaning of Section 36, Finance Act, 1922.
Held, that the word "voluntary" in Section 36, Finance Act, 1922, connotes absence of consideration, or at least such inadequacy of consideration as to make it impossible to regard the transaction as a commercial one, and that there were no facts admitted or proved in the Stated Case on which it could be held that the disposition in question was unsupported by material consideration.
Stated at the instance of Messrs. R.A. BIRD & COMPANY, Drysalters, Glasgow, in regard to their claim under Section 36 of the Finance Act, 1922, and Section 38 (3) of the Finance (No. 2) Act, 1915, to be repaid the sum of £1,365 10s. of Excess Profits Duty in respect of the years 1919 and 1920.
At meetings of the General Commissioners for the purposes of the Income Tax and Inhabited House Duty Acts for the Lower Ward of Lanarkshire held at Glasgow upon the 30th October and 13th November, 1923, Messrs. R.A. Bird & Company, drysalters, Glasgow (hereinafter referred to as the Claimants), claimed, under the Sections of the Finance Acts above cited, that they were entitled to be repaid the sum of £1,365 10s.,being the duty computed on account of-
(1) |
a deficiency arising in the accounting period to 31st December, 1919, of the amount of £1,925, the duty on which at the rate of 40 per cent. is and |
£770 |
0 |
0 |
(2) |
a deficiency arising in the accounting period to 31st December, 1920, of the amount of £992 10s., the duty on which at the rate of 60 per cent. is |
595 |
10 |
0 |
Total amount of claim |
£1,365 |
10 |
0 |
I. The following facts were admitted or proved-
(2) The Claimants have carried on business as drysalters in Glasgow for a number of years.
(3) By Contract of Copartnery, dated 13th March, 1909, Robert Archibald Bird, his son William Thornton Bird, and John McGlashan entered into partnership as drysalters, for the period and upon the terms and conditions therein stated.
(4) By Article 9th of the said Contract, it was provided that, in the event of the death of R.A. Bird during the currency of the copartnership, it should be in the option of W.T. Bird to take over the share and interest of R.A. Bird upon the terms and conditions stated in said Article 9th, a copy whereof-along with a copy of Articles 7th, 8th and 10th-is appended hereto and forms part of this Case.
(5) By Minute of Extension appended to said Contract and dated 20th February, 1914, the said parties thereto extended the period of the duration of their copartnery for five years from 1st January, 1914, and by the said Minute of Extension it was provided that, in the event of W.T. Bird predeceasing R.A. Bird, the remaining partners or partner should be bound forthwith to assume R.A. Bird's son, James Cook Bird, as a partner with them or him in the said W.T. Bird's room and place, if J.C. Bird should be willing to be assumed as a partner, and that, in that event, W.T. Bird's rights and liabilities under the said Contract (including his right to take over R.A. Bird's share and interest in the business as provided by Article 9th, but exclusive of sums falling to be paid out to the representatives of W.T. Bird as specified in the said Contract) should as from and after the date of his death devolve upon the said J.C. Bird.
(6) By Minute between the said R.A. Bird, John McGlashan and J.C. Bird, dated 28th and 29th July, 1915, and proceeding on the narrative that the said W.T. Bird had been killed in action on 12th July, 1915, and that it had been arranged that J.C. Bird should be assumed as a partner in his room and place, it was provided that J.C. Bird should be and he thereby was assumed as a partner as from 15th July, 1915, to the effect that he should have all the rights and privileges, and be subject to the conditions, obligations and liabilities competent to, or imposed on W.T. Bird by the said Contract and relative Minute of Extension.
(7) By Minute by R.A. Bird appended to the said Contract of Copartnery and dated 22nd August, 1917, it was declared that the said J.C. Bird was then entirely relieved of the obligation, in the event of his exercising the option to take over the share and interest of R.A. Bird in the business on his death, to pay for a period of years to R.A. Bird's Widow, whom failing to his executors, the sum of £100 per annum, and that J.C. Bird might exercise the said option without the said obligation being enforceable by R.A. Bird's widow or executors.
(8) By further Minute by the said John McGlashan and J.C. Bird, dated 3rd September, 1917, they acknowledged that, as stated in the said Minute by R.A. Bird, dated 22nd August, 1917, it had been arranged and agreed to between him and the said John McGlashan and J.C. Bird, that J.C. Bird should be relieved of the said obligation referred to in the said Minute by R.A. Bird.
(9) Mr. R.A. Bird died upon the 10th September, 1917, and Mr. John McGlashan upon 27th September, 1921.
(10) By his Trust Disposition and Settlement, dated the 11th day of May, 1916, Mr. R.A. Bird (In the Seventh Place) provided that, if at the time of his death he should be carrying on business in partnership with his son, J.C. Bird, alone or with another or others, he thereby specially authorised and empowered the trustees of his said Trust Disposition and Settlement to allow the whole, or any part or parts, of his capital to remain with the said Company as constituted from time to time, for such period or periods beyond the time provided for the repayment thereof by the Partnership Contract or Agreement as his trustees in their absolute discretion should consider expedient, and whether any of his said trustees were, or might become, partners in the firm or not, and that at such rate of interest, with or without security, and generally on such terms and conditions as his trustees might think proper.
(11) The said Trust Disposition and Settlement did not specifically dispose of Mr. R.A. Bird's interest in the Partnership Contract. After dealing with debts and specific legacies, it provided a liferent of the residue to his widow, with power to the trustees to supplement the income out of capital and, after her death, it provided that the residue should be divided in the proportions of one-third to each of Mr. R.A. Bird's two daughters and one-sixth to each of his two sons.
(12) Mr. J.C. Bird exercised the option provided by the said Contract of Copartnery and relative Minutes above referred to, by taking over his father's share of the business as at the date of his death, and now carries on the said business under the said firm of R.A. Bird & Company.
(13) Repayment has been made to Messrs. R.A. Bird & Company of the sum of £1,437 in respect of deficiencies arising for the years ended 31st December, 1918, and 31st December, 1919. The said sum represents that share of the total Excess Profits Duty previously paid by the firm of R.A. Bird & Company calculated as attributable to the two partners (John McGlashan and J.C. Bird) who survived during the years 1918 and 1919. The said sum of £1,437 is made up of (1) the sum of £1,377, being the full amount reclaimable in respect of the deficiency arising in the accounts of the firm of R. A. Bird & Company for the year ended 31st December, 1918, and (2) a sum of £60, being duty on £150, which sum formed part of a total deficiency of £2,075 arising in the accounts of the firm for the year ended 31st December, 1919, The balance of the said deficiency for the year ended 31st December, 1919, is the sum of £1,925 referred to in the foregoing statement of the claim made by the Claimants in this Stated Case.
(14) In the event of its being held that the interest of Mr. R.A. Bird in the said business passed to Mr. J.C. Bird in the sense of Section 36 of the Finance Act, 1922, the said sum of £1,365 10s. fell to be repaid to him under Section 38 (3) of the Finance (No. 2) Act, 1915.
II. -Mr. Arthur Whitson, Writer, Glasgow, for the Claimants submitted the following argument-
(2) That to obtain the benefit provided for under Section 36 of the Finance Act, 1922, the Claimants had to show that Mr. R.A. Bird's interest in the said business had passed to his son...
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