Commissioners of Inland Revenue v Barr
| Jurisdiction | England & Wales |
| Judge | Lord Morton of Henryton,Lord Reid,Lord Cohen |
| Judgment Date | 04 May 1954 |
| Judgment citation (vLex) | [1954] UKHL J0504-1 |
| Date | 04 May 1954 |
| Court | House of Lords |
[1954] UKHL J0504-1
House of Lords
Lord Morton of Henryton
Lord Reid
Lord Tucker
Lord Asquith of Bishopstone
Lord Cohen
Upon Report from the Appellate Committee, to whom was referred the Cause Commissioners of Inland Revenue against Barr, trading as Henry & Galt, that the Committee had heard Counsel, as well on Monday the 29th, as on Tuesday the 30th, days of March last, upon the Petition and Appeal of the Commissioners of Inland Revenue, praying, That the matter of the Interlocutor set forth in the Schedule thereto, namely, an Interlocutor of the Lords of Session in Scotland, of the First Division, sitting as the Court of Exchequer, of the 13th of January 1953, might be reviewed before Her Majesty the Queen, in Her Court of Parliament, and that the said Interlocutor might be reversed, varied or altered, or that the Petitioners might have such other relief in the premises as to Her Majesty the Queen, in Her Court of Parliament, might seem meet; as also upon the printed Case of John Barr, trading as Henry & Galt, 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 Interlocutor, of the 13th day of January 1953, complained of in the said Appeal, be, and the same is hereby, Reversed, except in regard to expenses: And it is further Ordered That the Question of law in the Case Stated be answered in the Affirmative: And it is further Ordered, That the said Cause be, and the same is hereby, remitted back to the Court of Session in Scotland to do therein as shall be just and consistent with this Judgment: And it is further Ordered, (on consent), That the Appellants do pay, or cause to be paid, to the said Respondent the Costs incurred by him in respect of the said Appeal to this House, such Costs to be taxed as between Solicitor and Client and the amount thereof to be certified by the Clerk of the Parliaments: And it is also further Ordered, That unless the Costs, certified as aforesaid, shall be paid to the party entitled to the same within one calendar month from the date of the certificate thereof, the Court of Session in Scotland, or the Judge acting as Vacation Judge, shall issue such summary process or diligence for the recovery of such Costs as shall be lawful and necessary.
My Lords,
The only question arising on this appeal is whether, on the facts set out in the Case Stated, a liability to a "balancing charge" under Section 17 of the Income Tax Act, 1945, arose on the sale by the Respondent of the plant and machinery used in the business formerly carried on by him under the style of "Henry & Galt". The facts are fully set out in the Case Stated and I can summarise them, for the purposes of my opinion, as follows.
For many years the firm of Henry & Galt carried on business as iron founders at Paisley. The Respondent (who was previously the manager of the concern) became a partner with Mr. James Galt on 1st April, 1928, and from the latter's death in 1945 carried on the business as sole proprietor until July, 1946. On the 15th July, 1946, the transfer of the business as a going concern to one Thomas Reid was completed. The purchase price was £14,000, which included the sum of £4,000 allocated to the plant and fittings. I now quote paragraphs (5) and (6) of the Case Stated—
"(5) The Respondent's interest in and connection with the trade of Henry & Galt ceased when the sale thereof to Mr. Reid took place, and the Respondent then retired from business and permanently discontinued trading.
(6) After the sale the business was carried on and continued as if there had been no change."
I pause to say, that I attach no significance to the change in wording from "trade" in paragraph (5) to "business" in paragraph (6), nor was any argument based on this at the hearing.
Section 17 of the Income Tax Act, 1945, so far as relevant for the present case, is in the following terms:—
"17.—(1) Subject to the provisions of this section, where, on or after the appointed day, any of the following events occurs in the case of any machinery or plant in respect of which an initial allowance or a deduction under Rule 6 of the Rules applicable to Cases I and II of Schedule D has been made or allowed for any year of assessment to a person carrying on a trade, that is to say, either—
( a) the machinery or plant is sold, whether while still in use or not; or
( b) the machinery or plant, whether still in use or not, ceases to belong to the person carrying on the trade by reason of the coming to an end of a foreign concession; or
( c) the machinery or plant is destroyed; or
( d) the machinery or plant is put out of use as being worn out or obsolete or otherwise useless or no longer required,
and the event in question occurs before the trade is permanently discontinued, an allowance or charge (in this Part of this Act referred to as 'a balancing allowance' or 'a balancing charge') shall, in the circumstances mentioned in this section, be made to, or, as the case may be, on, that person for the year of assessment in his basis period for which that event occurs….
Any reference in this subsection to the permanent discontinuance of a trade does not include a reference to the happening of any event which, by virtue of any of the provisions of Rule 11 of the Rules applicable to Cases I and II of Schedule D, is to be treated as equivalent to the discontinuance of the trade."
It will be observed that a balancing charge is made in the case of machinery or plant only if three conditions are fulfilled, namely, (1) that an initial allowance or a deduction under Rule 6 of the Rules applicable to cases I and II of Schedule D has been made or allowed for any year of assessment to a person carrying on a trade; (2) that one of the four events set out in the section has occurred; and (3) that the event in question occurs before the trade is "permanently discontinued". My Lords, it is common ground that the first two of these conditions are fulfilled in the present case, but your Lordships have to determine whether the sale to Mr. Reid occurred before the trade was permanently discontinued, within the meaning of the section.
Before I go on to consider this question I ought to quote Sections 68 (4) and 70 of the Act of 1945.
"68.—(4). Any reference in this Act to the setting up or permanent discontinuance of a trade includes, except where the contrary is expressly provided, a reference to the occurring of any event which, under any of the provisions of the Income Tax Acts, is to be treated as equivalent to the setting up or permanent discontinuance of a trade."
It is common ground that the concluding sentence of Section 17 (1) of the Act supplies an instance where "the contrary is expressly provided".
"70. This Act may be cited as the Income Tax Act, 1945, and shall be construed as one with the Income Tax Acts."
I shall refer later to Rule 11 of the rules applicable to cases I and II of Schedule D, as this rule is referred to in Section 17 (1) of the Act of 1945 and is, in my view, of considerable importance in the case.
The Respondent appealed against the assessment to income tax upon him for the year of assessment 1946-47 so far as it included a balancing charge of £1,405. The Commissioners expressed their decision in the Case Stated as follows:—
We, the Commissioners who heard the appeal, held that we were bound by the decision of the Court of Session in the case of C.I.R. v. West and others ("Girl Eileen") 1950 S.C. 516, and that no 'balancing charge' was exigible in this case, and the assessment in respect thereof was accordingly discharged."
They stated a question of law for the opinion of the Court in the terms which I quoted in my opening words. In the First Division of the Court of Session Lord Carmont referred to the case of C.I.R. v. West and continued:
"It was held in that case that no balancing charge was exigible, and although the facts before us are different from those in West's case, the Lord Advocate for the Appellants, in opening his appeal before us, said he could not maintain that the ratio of West's case did not cover the present case. Accordingly, as the case cannot be argued on the footing that the decision in West is distinguishable, the judgment of the Court in that case applies in such circumstances as we have now before us, and there is no alternative open to us but to answer the question put in the negative, and I so move your Lordships."
Lord Russell and Lord Keith agreed.
In the case of C.I.R. v. West the Court of Session had to consider whether a balancing charge arose on the sale of certain fishing vessels, the relevant vessel for the present purpose being named "The Girl Eileen". In my view West's case is distinguishable from the present case, for reasons which I shall state hereafter; but the Lord President and Lord Keith, in the course of their opinions, expressed views upon the construction of section 17 (1) of the Act of 1945 which, if they are correct, would be fatal to the claim of the Appellants in the present case. For instance. Lord Keith, at page 536 said:
"It is clear, in my opinion, that section 17 is looking, not towards continuance of the machinery or plant in trade but to the continuance of the owner of the machinery or plant in trade".
These views were not accepted by Upjohn, J. in Boarland v. Madras Electric Supply Corporation [1953] W.L.R. 920 or by Danckwerts, J. in Bramford's Road Transport Ltd. v. Evans 1953 1 W.L.R. 1385. Each of these two learned Judges felt free to differ from the Court of Session, in all the circumstances, for reasons which he expresses in his judgment.
My Lords, the...
To continue reading
Request your trial
-
Morgan v Tate & Lyle Ltd
...body which was to carry on the industry would have been their successors in their trade. The recent decision of this House in Inland Revenue Commissioners v. Barr [1954] 1 W.L.R. 792, by approving the actual decision in Inland Revenue Commissioners v. West 1950, S.C. 516, though not the gro......
-
Madras Electric Supply Corporation Ltd v Boarland
...... an appeal by the Respondent from a determination of the Commissioners for the Special Purposes of the Income Tax Acts upon a Case stated by ... imposed upon the trader, so as in effect to restore to the public revenue the amount in respect of past allowances for income tax which is shown in ......
- Bramford's Road Transport Ltd v Evans (Inspector of Taxes)
-
Odeon Associated Theatres Ltd v Jones (HM Inspector of Taxes)
...Naval Colliery Co. Ltd. v. Commissioners of Inland Revenue (1928) 12 T.C. 1017; Commissioners of Inland Revenue v. Barr 35 T.C. 293; 1954 S.C. (H.L.) 71; Commissioners of Inland Revenue v.Patrick Thomson Ltd. (1956) 37 T.C. 145; Hyam v. Commissioners of Inland Revenue 14 T.C. 479; 1929 S.C.......