Commercial Structures Ltd v Briggs
| Jurisdiction | England & Wales |
| Judgment Date | 16 November 1948 |
| Date | 16 November 1948 |
| Court | Court of Appeal |
No. 1419-HIGH COURT OF JUSTICE (KING'S BENCH DIVISION)-
COURT OF APPEAL-
Income Tax, Schedule A - Additional assessment - Discovery - Income Tax Act, 1918 (8 & 9 Geo. V, c. 40), Section 125.
Premises owned by the Appellant Company were requisitioned in 1940, and the Company received compensation rent under Section 2 (1) (a) of the Compensation (Defence) Act, 1939. The Company was originally assessed to Income Tax under Schedule A in respect of the premises on the amount of the compensation rent. Later, in view of the fact that the occupiers of the premises were liable to bear the cost of repairs, additional assessments were raised for the years 1940-41 to 1944-45 on the footing that the compensation rent was not a rackrent and that the annual value of the premises was 10 per cent. more than the compensation rent.
On an appeal against these additional assessments, the Company contended that, as the Inspector of Taxes had at all material times been in possession of full information as to the terms of the letting, he had not made any discovery, within the meaning of Section 125 of the Income Tax Act, 1918, which would justify the making of the additional assessments. The General Commissioners decided that there had been a discovery, and confirmed the assessments.
Held, that the Commissioners' decision was correct.
Stated under the Income Tax Act, 1918, Section 149, by the Commissioners for the General Purposes of the Income Tax for the Division of Finsbury in the County of Middlesex, for the opinion of the High Court of Justice.
1. At a meeting of the said Commissioners held on the 24th day of October, 1946, Commercial Structures, Ltd. (hereinafter called "the Company") appealed against additional assessments under Schedule A made on them as owners of the upper part of premises Nos. 29 to 55 Gee Street, E.C. 1. for the years and in the amounts following:-
1940-41 |
… |
… |
… |
£235 net. |
1941-42 to 1944-45 |
… |
… |
… |
£412 net each year. |
2. The additional assessment for 1940-41 was for part of the year only, and the original assessments in each case for full years were in the
sums of £4,940 gross, £4,113 net and such original assessments were accepted by the Appellants and tax paid thereon.3. The original assessments were in respect of compensation rent payable under Section 2, Sub-section 1 (a) of the Compensation (Defence) Act, 1939 as from 13th December, 1940, and the additional assessments were based upon the following calculations:-
£ |
|
Compensation Rent |
4940 |
Add 10% for repairs by tenants |
494 |
Gross assessment |
5434 |
Less statutory authorised deduction |
909 |
Net assessment |
4,525 |
Proportion from 13th September, 1940, for year |
|
1940-41 |
2534 |
Less first assessment |
2,299 |
Addition for 1940-41 |
235 |
1941-42 to 1944-45 net assessment as above |
4525 |
Less first assessment |
4,113 |
Additional for years 1941-42 to 1944-45 |
412 |
4. The said additional assessments represent the adjustment admitted by the Company to be necessary by reason of the compensation rent not being a rackrent.
5. It was admitted that the full information as to the terms of the letting was reported to H.M. Inspector of Taxes by the Company's agents on 2nd April, 1942.
6. It was contended by Counsel on behalf of the Company that the Inspector had not made any discovery within the meaning of Section 125 of the Income Tax Act, 1918, which would justify the making of the additional assessments appealed against and that the assessments should therefore be discharged.
7. On behalf of the Crown it was contended that the Inspector had within the meaning of Section 125 of the Income Tax Act, 1918, discovered: (a) that the sums in question were chargeable to tax and had been omitted from the first assessments; (b) that the Company had not been assessed to tax in respect of the said amounts; and (c) that the Company had obtained exemption or relief not authorised by the Income Tax Acts.
8. We, the Commissioners who heard the appeal, gave our decision in the following terms:-
We are of the opinion that we are bound by the case of Williamsv. "Trustees of W.W. Grundy, (deceased), 18 T.C. 271, and for that reason "find that a discovery has been made by the Inspector within the meaning "of Section 125 of the Income Tax Act, 1918. We therefore dismiss the "appeal against the additional assessments.
9. The Company immediately upon the determination of the appeal declared to us their dissatisfaction therewith as being erroneous in point of law and in due course required us to state a Case for the opinion of the High Court pursuant to the Income Tax Act, 1918, Section 149, which we have so stated and do sign accordingly.
Dated this twentieth day of March, 1947.
CHAS. BAXTER.
S. GEOFFREY NUNN.
The case came before Atkinson, J., in the King's Bench Division on 27th October, 1947, when judgment was reserved. On 30th October, 1947 judgment was given in favour of the Crown, with costs.
Atkinson, J.-In this case the Appellants, Commercial Structures, Ltd., are appealing against certain additional assessments under Schedule A made on them as owners of premises in Gee Street, E.C.1, and these additional assessments cover a number of years-part of the year 1940-41 and the four succeeding years up to the end of 1945.
The point arises in this way. They were the owners of a factory, and the factory was requisitioned and thereupon they became entitled to compensation to be fixed in accordance with Section 2 of the Compensation (Defence) Act, 1939, which provides as follows: "(1) The compensation "payable under this Act in respect of the taking possession of any land "shall be the aggregate of the following sums, that is to say,-(a) a sum "equal to the rent which might reasonably be expected to be payable by "a tenant in occupation of the land, during the period for which possession "of the land is retained in the exercise of emergency powers, under a lease "granted immediately before the beginning of that period, whereby the "tenant undertook to pay all the usual tenant's rates and taxes and to "bear the cost of the repairs and insurance and the other expenses". etc., "and (b) a sum equal to the cost of making good any damage to the land "which may have occurred during the period for which possession thereof "is so retained (except in so far as the damage has been made good during "that period by a person acting on behalf of His Majesty), no account "being taken of fair wear and tear or damage caused by war operations".
The premises are assessed in accordance with Schedule A, and No. 1 of Schedule A in the Income Tax Act, 1918, provided this: "In the case "of all lands, tenements, hereditaments, or heritages capable of actual "occupation, of whatever nature, and for whatever purpose occupied or "enjoyed, and of whatever value (except the properties mentioned in "No. II and No. III of this Schedule), the annual value shall be understood "to be:-(1) The amount of the rent by the year at which they are let, if "they are let at rackrent and the amount of that rent has been fixed by "agreement commencing within the period of seven years preceding the "fifth day of April next before the time of making the assessment; or (2) "If they are not let at a rackrent so fixed, then the rackrent at which they "are worth to be let by the year." Then Rule 7 of No. V provided for certain allowances where tax is charged upon annual value estimated otherwise than by relation to profits.
When the Inspector dealt with this originally his task was to find out what was the full rental value of the premises. He had got a figure agreed between whoever requisitioned the premises and the Appellants, a rent of £4,940, and it looks as if he assumed, and very naturally assumed, that that sum represented the full annual value of the land. The Appellants were assessed accordingly and they paid tax on £4,940, less one-sixth, for the then current year and the four years following. Then, during the close of the year 1944-45, the Inspector changed his mind about this. The Case is very scrappy-indeed, silent-as to what led him to change his mind, but, at any rate, he did change his mind and took this view, I gather: "Well, it does not seem quite right that you should get an allowance of a sixth off your annual value for repairs if you are entitled to have the repairs paid for under the Compensation (Defence) Act by the military", and therefore he proceeded to make additional assessments in respect of this period of some five years and worked it out in this way: Compensation rent, £4,940; add 10 per cent. for repairs by the tenants, that is, £494 (that is the value of this liability to make good damage); and then deduct the statutory amount of one-sixth, arriving at a net assessment of £4,525. Having done that, the Inspector proceeded to demand these further payments.
The Appellants appealed and no question was raised before the Commissioners about this new view being the right view. The Case finds that "The said additional assessments represent the adjustment admitted by the "Company to be necessary by reason of the compensation rent not being "a rack rent", so that that point is not before me at all. There might be something to be said on it-I do not know-but at any rate it has been accepted for the purpose of the Case that the Inspector's new view was well-founded and that that really was the sum in which they ought to have been assessed throughout these years. But the point taken was that, on the facts of this case, there was no power to make additional assessment. Additional assessments are made under Section 125 of the Income Tax Act, 1918, and the opening words are these: "(1) If the surveyor discovers-" (and this case turns on the effect to be given to that word "discovers") "that any properties…chargeable to tax have been omitted from the "first assessments; or that a person chargeable…has been undercharged" (I am not reading...
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