Commissioners of Inland Revenue v City of London

JurisdictionEngland & Wales
CourtHouse of Lords
JudgeLord Normand,Lord Morton of Henryton,Lord Reid,Lord Cohen
Judgment Date20 April 1953
Judgment citation (vLex)[1953] UKHL J0420-2

[1953] UKHL J0420-2

House of Lords

Lord Normand

Lord Oaksey

Lord Morton of Henryton

Lord Reid

Lord Cohen

Commissioners of Inland Revenue
and
Mayor and Commonalty and Citizens of the City of London (as the Conservators of Epping Forest)

Upon Report from the Appellate Committee, to whom was referred the Cause Commissioners of Inland Revenue against Mayor and Commonalty and Citizens of the City of London (as the Conservators of Epping Forest), that the Committee had heard Counsel, as well on Monday the 16th, as on Tuesday the 17th, Wednesday the 18th, Thursday the 19th and Monday the 23d, days of February last, upon the Petition and Appeal of the Commissioners of Inland Revenue, of Somerset House, Strand, London, W.C.2, praying, That the matter of the Order set forth in the Schedule thereto, namely, an Order of Her Majesty's Court of Appeal of the 29th of May 1952, might be reviewed before Her Majesty the Queen, in Her Court of Parliament, and that the said Order 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 the Mayor and Commonalty and Citizens of the City of London (as the Conservators of Epping Forest), 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 Her Majesty's Court of Appeal, of the 29th day of May 1952, 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 Appellants do pay, or cause to be paid, to the said Respondents the Costs incurred by them in respect of the said Appeal, the amount thereof to be certified by the Clerk of the Parliaments.

Lord Normand

My Lords,

1

The appeal arises out of a claim by the Respondents for exemption from income tax for the year 1948-49 under section 37 (1) (b) of the Income Tax Act, 1918, and for recovery from the Inland Revenue of the sum of £7,202 15s. 6d., which had been deducted (professedly under Rule 19 (1) of the All Schedules Rules), by the Mayor and Commonalty and Citizens of the City of London in paying to the Respondents a contribution under section 39 (1) of the Epping Forest Act, 1878, for the year ended 31st March, 1949, of £16,006 3s. 4d. The Court of Appeal decided in favour of the Respondent, reversing a judgment of Donovan, J. and reaffirming the determination of the Special Commissioners. Against the decision of the Court of Appeal, this appeal is taken by the Commissioners of Inland Revenue.

2

The substantial question is whether the contribution paid to the Respondents is an "annual payment" within the meaning of Case III of Schedule D. Under Rule 1 of the Rules applicable to Case III, income tax extends to "any interest of money … , or any annuity or other annual payment, whether such payment is payable … either as a charge on any property of the person paying the same by virtue of any deed or will or otherwise, or as a reservation thereout, or as a personal debt or obligation by virtue of any contract, or whether the same is received and payable half-yearly or at any shorter or more distant periods". If the payment of the contribution falls within the words "annual payment", it follows on the facts of the case that the Corporation are entitled under Rule 19 (1) of the General Rules, on making the payment, to deduct and retain a sum representing the amount of the tax thereon at the rate in force during the period when the payment was accruing due, and, further, that the Conservators of Epping Forest, the respondents, can recover from the Inland Revenue the amount of the tax deducted. These consequences inevitably follow from these findings which are now common ground :

(1) that the Conservators, the recipients of the sum, are a separate legal persona from the City of London Corporation which pays them, though the members of the two bodies are the same ;

(2) that the contribution was paid wholly out of profits or gains on which the Corporation had paid income tax ; and

(3) that the Conservators are a body established for charitable purposes only, and therefore exempt from income tax on "annual payments" forming part of their income.

3

In June, 1871, the Court of the Common Council of the Corporation of the City of London met the First Commissioner of Works and offered to abandon certain ancient rights of metage on grain and wares brought into the Port of London and to devote the revenue arising from a fixed duty, which it was proposed should be levied in lieu of metage, to the preservation of Epping Forest for the benefit of the public at large. This offer was voluntary, and it was accepted. In pursuance of this arrangement an Act was passed in 1872 abolishing compulsory metage and creating a fixed due called the "City of London Grain Duty". This Act also created a fund to be applied to the preservation of open spaces near London. In the meantime an enquiry was proceeding in order to ascertain what illegal enclosures had been made in the previous 20 years. There were legal proceedings for the purpose of staying further illegal enclosures and for the purpose of obtaining a declaration that all owners and occupiers of lands and tenements within the regard of the Forest were entitled to rights of common pasture and pannage over the whole waste land of the Forest. These legal proceedings, in which the City Corporation took a part, were successful. Thereafter the Corporation acquired by voluntary purchase the waste lands of certain manors in the Forest. The next step was the introduction by the Government of the day, by arrangement with the Corporation, of a Bill which became the Epping Forest Act, 1878. It should also be mentioned that the Corporation's interest in the preservation of open spaces for the benefit of the public was not confined to Epping Forest. That was, however, much the largest of the open Spaces which the Corporation was anxious to preserve.

4

The Act of 1878 is entitled "An Act for the Disafforestation of Epping Forest and the preservation and management of the uninclosed parts thereof as an open space for the recreation and enjoyment of the public ; and for other purposes". It recites with much detail the steps which had led to its enactment. From these recitals I quote the following:—

"Whereas the Corporation of London have made great exertions to preserve the Forest as an open space for the recreation and enjoyment of the public, and for that purpose they have purchased and hold a large proportion of the waste lands, and have expended large sums of money… . And whereas the Corporation of London are desirous of being constituted Conservators of the Forest, and are willing and able to defray such expenses as are to be borne by the Conservators".

5

Section 3 of the Act provides that Epping Forest shall be regulated and managed under and in accordance with the Act by the Corporation of the City of London, acting by the Mayor, Aldermen and Commons of the City in Common Council assembled, as the Conservators of Epping Forest. Section 7 requires the Conservators at all times to keep the Forest uninclosed and unbuilt on, as an open space for the recreation and enjoyment of the public, and, inter alia, to preserve as far as possible the natural aspect of the Forest, ancient remains within it, and its natural amenities. There are provisions (s. 30) providing for the appointment of verderers, and (s. 31) of a Committee, of which the verderers are ex officio members, with authority to exercise the powers of Conservators. The powers and duties of the conservators are set out (s. 33) and are designed to give the conservators authority and power to manage the forest in order, inter alia, to safeguard and improve the Forest as a place of public resort and enjoyment, and they include powers to set apart such parts as they think fit for the use of the inhabitants to play at cricket and other sports, and to lay out cricket grounds and grounds for other sports and to enter into agreements with and to confer special privileges on particular clubs or schools, and powers to set apart and maintain bathing places. The obligation of the Corporation of London to contribute is dealt with in section 39. The material provisions of the section are:

"(1) the Corporation of London shall from time to time contribute to the capital and income of a fund, to be called the Epping Forest Fund, such moneys as shall be necessary out of the City of London grain duty or from other sources.

(2) The Fund shall consist of—

As regards capital : .

As regards income :

(iv) The annual income arising from the investments of any money, part of the capital of the Fund.

(v) The half-yearly or other periodical payments in respect of rent-charges.

(vi) All fines, penalties, proceeds of timber-cuttings and loppings, and other moneys received by the Conservators, other than capital as aforesaid.

(vii) The fees and income received for marking the cattle of the commoners, and in respect of cattle and animals impounded.

(viii) All moneys contributed by the Corporation of London, or by any person, to the income of the fund."

6

It should be explained that the City of London Grain duty referred to in section 39 (1) came to an end in 1902 and that the contributions to the Epping Forest Fund have since then been provided out of the City's cash, the income of which consists of the profits from the Corporation's estates and markets and certain investments, all of which, in the hands of the Corporation, are brought into computation for income tax purposes.

7

In every year since the...

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