Bradshaw v Blunden (HM Inspector of Taxes) (No. 2)
| Jurisdiction | England & Wales |
| Judgment Date | 24 May 1960 |
| Date | 24 May 1960 |
| Court | Chancery Division |
HIGH COURT OF JUSTICE (CHANCERY DIVISION)-
Income Tax - Procedure - Appeal - Remission of case to Commissioners by High Court - Adjustment of assessments - Admission of further evidence - Right to withdraw appeal.
The Appellant, a builder, formed a company in December, 1945, with the object of taking over his business. The company did not acquire houses belonging to the Appellant which were then unsold. Certain of these properties were subsequently sold, and assessments to Income Tax were made on the Appellant on the footing that these houses were trading stock and that his business had not been discontinued. On appeal it was held, in the Chancery Division(1), that the trade was permanently discontinued in December, 1945, and that the houses were retained as investments. The case was remitted to the General Commissioners to adjust the assessments in accordance with the judgment.
The Commissioners then held that the provisions of Section 31 (1), Finance Act, 1926, and Section 26 (1) (b), Finance Act, 1938, should be applied and that further evidence, including evidence of the market value of the houses in December, 1945, must be produced. The Appellant demanded a Case and in the High Court sought to withdraw the appeal as regards the year 1945-46.
Held, (1) that the Appellant was not entitled to withdraw the appeal;
(2) that the provisions of Section 31 (1), Finance Act, 1926, and Section 26 (1) (b), Finance Act, 1938, fell to be applied in adjusting the assessments;
(3) that the Commissioners were not entitled to hear evidence as to the market value of the properties which were trading stock at the date of discontinuance.
Stated under the Income Tax Act, 1952, Section 64, by the Commissioners for the General Purposes of the Income Tax for the Division of Havering in the County of Essex for the opinion of the High Court of Justice.
1. At a meeting of the General Commissioners for the Havering Division held at Romford Town Hall on 17th April, 1959, the hearing was resumed of the appeal by Harry Edward Bradshaw, hereinafter still called "the Appellant", against Income Tax assessments on his profits as a builder, so far as it related to the years 1944-45 and 1945-46.
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(a) The Appellant was originally assessed in respect of his profits as a builder on profits disclosed by his accounts as follows:
Year of assessment
Basis year ended
Amount
£
1944-45
31st October, 1943
782
1945-46
31st October, 1944
1255
1946-47
31st October, 1945
871
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(b) The assessments for 1944-45 and 1945-46 were signed by the Additional Commissioners pursuant to Section 122(2) of the Income Tax Act, 1918, and
became effective in accordance with Paragraph 4(1) of Part 1 of the Tenth Schedule to the Finance Act, 1942. The assessment for 1946-47 was later discharged in consequence of a claim to cessation at 10th December, 1945. -
(c) The Inspector of Taxes subsequently discovered that the proceeds of sale of certain houses had not been included in the accounts on which such first assessments had been based, and had caused additional first assessments to be raised as follows:
£
1944-45
1500
1945-46
1000
1946-47
1000
1947-48
3000
1948-49
2000
It was against these assessments that the Appellant originally appealed.
3. At a hearing in 1954 we, the Commissioners, determined the appeal in principle by finding that the Appellant's business as a builder did not cease in December, 1945, when he sold his active building business to a company, but that his subsequent sales of such of his houses as had constituted trading stock were in continuation of his trading as a builder. We adjourned for agreement on figures. The total profits were subsequently reported to us as follows:
| £ | ||
| Year to 31st October, 1943 | 782 | (No additional profit from sale of houses) |
| Year to 31st October, 1944 | 1744 | (£489 additional profit from sales of houses) |
| Year to 31st October, 1945 | 1219 | (£348 additional profit from sales of houses) |
| Year to 31st October, 1946 | 2366 | |
| Year to 31st October, 1947 | 1177 |
At a further meeting on 11th February, 1955, we determined the appeal accordingly as follows:
| 1944-45 | Additional first assessment (£1,500)-reduced to Nil |
| 1945-46 | Additional first assessment (£1,000)-reduced to £489 |
| 1946-47 | First assessment (£1,000)-increased to £1,219 |
| 1947-48 | First assessment (£3,000)-reduced to £2,366 |
| 1948-49 | First assessment (£2,000)-reduced to £1,177 |
From this determination the Appellant appealed to the High Court.
4. As reported at 36 T.C. 397, the case was decided by the High Court on 22nd March, 1956, when it was found that the trade was permanently discontinued at 10th December, 1945, and that thereafter all the houses were retained as an investment. The Court Order reads as follows:
The Court is of opinion that the determination of the said Commissioners is erroneous and allowing this appeal doth reverse the said determination accordingly. And it is ordered that the said Case be remitted to the said Commissioners for them to adjust the assessments in accordance with the Judgment of the Court.
A copy of this Order, sealed on 10th May, 1956, was before us at the resumed hearing on 17th April, 1959.
5. It was agreed between the parties that under the judgment the amended first assessments for 1946-47, 1947-48, and 1948-49 fell to be discharged. The hearing resumed on 17th April, 1959, was accordingly confined to the years 1944-45 and 1945-46.
6. At the resumed hearing our attention was drawn on behalf of the Inspector of Taxes to the Sections which, it was submitted, the finding by the High Court of permanent discontinuance brought into operation, viz., Section 31 of the Finance Act, 1926, and Section 26 of the Finance Act, 1938. Under the former the assessment for 1945-46, which we had based on the year to 31st October, 1944, fell to be adjusted on the basis of the actual profits for the period from 6th April, 1945, to 10th December, 1945. Under the latter, trading stock on discontinuance of the trade required to be valued on the basis of sale in the open market. Controversy had, however, arisen with regard to the application of this provision since no evidence as to the market value of the houses constituting stock-in-trade had earlier been produced to us; and we were now invited to decide in principle whether we could and would hear such evidence.
7. Reference was made to the case of Burston v.Commissioners of Inland Revenue, 28 T.C. 123, in particular the judgment of Scott, L.J., at pages 133-6.
8. On behalf of the Appellant it was contended that:
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(a) as the additional first assessment for 1945-46 under appeal was made in consequence of a discovery by the Inspector of Taxes that the proceeds of sale of certain houses had not been included in the accounts on which the first assessment had been based, the additional first assessment could only be adjusted by reference to the profits from the sale of such houses in the basis period; or alternatively that
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(b) the form of the Court Order did not permit new evidence as to the market value of the unsold trading stock at the cessation date. The Order directed that the assessments should be adjusted in accordance with the judgment, which meant that it must be done by reference only to the evidence already given. The Order was made under Subsection (6) and not Sub-section (7) of Section 64 of the Income Tax Act, 1952. The determination was simply reversed; or alternatively that
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(c) the Court should not exercise its discretion to permit new evidence as it would be well-nigh impossible at this date to determine the value of houses in 1945, and a professional valuation of something over 70 houses would be expensive.
9. It was contended on behalf of the Inspector of Taxes that:
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(a) Roxburgh, J., having in his judgment held that the Appellant's...
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