Commissioners of Inland Revenue v Wood Bros. (Birkenhead) Ltd
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE JENKINS,LORD JUSTICE PARKER,LORD JUSTICE PEARCE |
| Judgment Date | 04 October 1957 |
| Judgment citation (vLex) | [1957] EWCA Civ J1004-1 |
| Date | 04 October 1957 |
| Court | Court of Appeal |
[1957] EWCA Civ J1004-1
In The Supreme Court of Judicature
Court of Appeal
(Revenue Paper)
Lord Justice Jenkins
Lord Justice Parker
Lord Justice Pearce
Appeal of Appellants
MR JOHN SEHTER.Q.C. and MR E. BLANShand STAMP (instructed by the Solicitor of Inland Revenue, Somerset House, Strand, London, W.C.2) appeared as Counsel for the Appellants.
MR PHILIP SHELBOURNE (instructed by Messrs Simmons & Simmons, 1 Threadneedle Street, London, E. C.2) appeared as Counsel for the Respondents.
: We need not trouble you, Mr Shelbourne.
This is an appeal by the Commissioners of Inland Revenue from a judijment of Mr Justiec Harman dated the l6th July, 1957, whereby he affirmed a determination of the Special Commissioners in favour of the taxpayer concerned, namely a company called Wood Brothers (Birkenhead) Limited.
There is no dispute as to the facts, which are sufficiently dealt with in the Case Stated and in the judgment of the learned Judge, and I need only refer very briefly to the essential points. It is common ground that this company was a company amenable to the provisions relating to surtax on undistributed income of certain bodies corporate now to be found in chapter III of Part XI of the Income Tax Act, 1952. It is further common ground that under these provisions, in the events which have happened, it is proper that the income of the company should be apportioned amongst its members. It is further not in dispute that the accounts of the company were last made up for the period ending the 29th, I think it is (though it sometimes seems to be stated as the 30th), April, 19501 so that the relevant period for the present purposo, the company having gone into liquidation, is the period from the 29th or 30th April, 1950, to the date of the commencement of the winding up, namely, 16th April, 1952. Furthermore, all figures are agreed between the parties, and the appeal involves one point and one point only.
The company contends that the proper amount of income liable to be apportioned to the members ie 57,589. The Commissioners do not dispute that figure, as a figure, but they say that a further sum ought to be included, namely a sum of 18,675. being the amount of a balancing charge which became chargeable under the relevant provisions of lart I of the Act of 1952, which re-enacted in substance provisions formerly to be found in the Finance Act, 1945.
There is no dispute that the case is one in which it is proper for a balancing charge to be made, and there is no dispute as to the figure of 18,675, the point at issue being simply whether the amount of that balancing charge is part of the company's actual income from all sources for the relevant period so as to make it proper to be included in the figure of income to be apportioned amongst the members.
I should next refer to some of the provisions of the Act, beginning with the leading provisions on the matter of surtax on undistributed income of companies. The familiar section 245, formerly section 21 (l) of the Finance Act, 1922, is in these termst "With a view to preventing the "avoidance of tho payment of surtax through the withholding from distribution of income of a company which would otherwise be distributed, it is "hereby enacted that where it appears to the Special Commissioners that any "company to which this section applies has not, within a reasonable time "after the and of any year or other period for which accounts have been "made up, distributed to its members, in such manner as to render the amount "distributed liable to be included in the statements co be made by the "members of the company of their total income for the purposes of surtax, "a reasonable part of its actual income from all sources for the said year "or other period, the Commissioners may, by notice in writing to the "company, direct that, for purposes of assessment to surtax, the said income "of the company shall, for the year or other period specified in the notice, "be deemed to be the income of the members, and the amount thereof shall be "apportioned among the members."
Then section 248 provides, by subsection (l): "Where a direction "has been given under section two hundred and forty-five of this Act with "respect to a company, the apportionment of the actual income from all "sources of the company shall be made by the Special Commissioners in "accordance with the respective interests of the members." Then there are machinery provisions with which I need not trouble. I can go to section 253, which deals with the case of a company in liquidation. That provides, by subseotion (1). "Where an order has been made or a resoition passed for "the winding up of a company to which section two hundred and forty-five of "this Act applies - (a) the income of the company for the period form the "end of the last year or other period for which accounts of the company have "been made up to the time of the commencement of the winding up shall, for "the purposes of the said section, be deemed to bo income of that period "available for distribution to the members of the company and (b) as "respects that period, and the next preceding year or other preceding period "or periods ending within that next preceding year for which accounts have "been made up, the said section shall apply as if the words 'within a "reasonable time' were omitted therefrom."
That provision admittedly applies to the company, as does section 245, and the income in question is the actual income of the company from all sources from the date to which its accounts wore last made up down to the commencement of the winding up.
Finally, I should refer to a definition in section 255 subsection (3). That subsection is in these terms: "In computing, for the purposes of this "Chapter, the actual income from all sources of a company for any year or "period, the income from any source shall be estimated in accordanoe with "the provisions of this Act relating to the computation of income from that "souroc, except that the income shall be computed by reference to tho income "for such year or period as aforesaid and not by roferonco to any other "year or period,"
Pausing thore, it follows that the balancing charge in the present case cannot be included in the income for apportionment amongst the members unless it is within the terms of this definition part of the actual income of the company from all sources for the relevant year or period, and it is in effect round this definition and its implications that the argument in this appeal has centred.
To reach a view on the question whether the balancing charge bears the character of actual income of the company from any scuroe for the period in question, so as to bring it within the definition and moke it a proper subject of apportionment, it is necessary to consider tho provisions of the Act relating to allowances and charges of the kind here in question.
This elaborate legislation as to allowances and charges in respect of machinery and plant was, as I have said, originally enacted by the Income Tax Act, 1945. and it is now to bo found in Port I of the Act of 1952. There have been some amendments which do not, I think, touch this case.
Section 279 provides this: "Subject to the provisions of this Act "and, in particular, subject to the provisions of subsection (5) of this "section, where a person carrying on a trade incurs capital expenditure "on the provision of machinery or plant for the purposes of the trade, "there shall be made to him, for the year of assessment in the basis poriod "for which the expenditure is incurred, an allowance (in this Chapter "referred to as 'an initial allowance') equal to" - then a fraction is mentioned - "of the expenditure" The fraction seems to have been altered by subsequent legislation, but I think it was under the Income Tax Act, 1952, two-fifths and has since been reduced to one-fifth. Nothing, however, turns upon that.
Then section 260 deals with annual allowances: "Subject to the "provisions of this Act, where the person carrying on a trade in any year "of assessment has incurred capital expenditure on the provision of machinery "or plant for the purposes of the trade, an allowanco (in this Chapter "referred to as 'an annual allowance') shall be made to him for that year "of assessment on account of the wear and tear of any of the machinery- or "plant which belongs to him and is in use for the purposes of tho trade at the end of the basis period for that year of assessnent", The basis period, I should perhaps sention, is defined in section 325, and that provides: "In this part of this Act, 'basis period' has the meaning assigned to it by the following provisions of this section." I do not think I need go into those provisions as in the present case the relevant period is the actual period with which wo are concerned.
Than. I think the next section to which I need refer is section 292. That appears under the cross-handing, "Balancing Allowances, Balancing "Charges, etc.," and it provides, by subsection (1) (I am reading the section as it mriginally stood), "Subject to the provisions of this "section, where any of the following events cours in the case of any "manhinery or plant in respect of which an initial allowance or an annual "allownce has been mede for any year of assessnent to a person carrying "on a trade, that is to say, either - (a) the machinery or plant is sold, whather while still i& use or not: or (b) the machinory or plant, whether "still in use or not, cacsos to bolong to the person carrying on the trade "by reason of the comeing to an and of a foreign concession; or (a) the "machinary or plant is destroyed; or (d) the machinery or plant is put out "of use as being...
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Commissioners of Inland Revenue v Wood Bros. (Birkenhead) Ltd
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