Commissioners of Inland Revenue v THE MAYOR and COMMONALTY and CITIZENS of THE CITY of LONDON (as THE CONSERVATORS of EPPING FOREST)
| Jurisdiction | England & Wales |
| Judge | THE MASTER OF THE ROLLS |
| Judgment Date | 29 May 1952 |
| Judgment citation (vLex) | [1952] EWCA Civ J0529-2 |
| Court | Court of Appeal |
| Date | 29 May 1952 |
[1952] EWCA Civ J0529-2
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL
THE MASTER OF THE ROLLS
LORD JUSTICE BIRKETT and
LORD JUSTICE ROMER.
MR CYRIL KING, Q.C., and SIR REGINALD HILLS (instructed by the Solicitor of Inland Revenue) appeared on behalf of the Appellants.
MR J. MILLARD TUCKER, Q.C., and MR N.E. MUSTOE, Q.C. (instructed by The Comptroller and City' Solicitor,' Guildhall, London, E.C.2.) appeared on behalf of the Respondents.
The judgment I am about to read is the judgment of the Court.
The question in this Appeal is whether the Mayor and Commonalty and Citizens of the City of London (to whom in that capacity we will hereafter refer as "the Corporation") were properly entitled in respect of the income tax year 1948/1949 to deduct under the provisions of Rule 19(1) of the All Schedules the sum of £7202.15.6d. for income tax in respect of the contribution made for the year ended 31st March 1949 of £16,006.3.4d. paid by the Corporation to the Conservators of Epping Forest. The facts, including the relevant history of Epping Forest, have been fully stated in the Case and were further referred to in the Judgment under Appeal. It will, therefore, suffice for the purposes of this Judgment if we refer to certain Sections of the Epping Forest Act of 1878.
By Section 3 of that Act it was provided that Epping Forest should be "regulated and managed under and in "accordance with this Act by the Corporation of London "acting by the Mayor Aldermen and Commons of the said City in "Common Council assembled as the Conservators of Epping "Forest".
Section 7 subsection (1) provided that the Conservators should at all times keep Epping Forest unenclosed and unbuilt on as an open space for the recreation and enjoyment of the public. For the purposes of the management of the Forest the Act specified (by Section 30) that there should be four Verderers and (by Section 31) that there should be a Committee called The Epping Forest Committee consisting of persons selected by the Court of Common Council of the City of London together with the Verderers: and that such Committee should have authority to exercise the powers and discretions vested by the Act in the Conservators. For the purposes of the present Appeal the most important Sections are Sections 39 and 41. The former, so far as relevant, is as follows:- "39. - (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 ……."
Sub-section (2) provided that the fund should consist of first capital (the further details of which are not relevant for the present Appeal) and, second:
"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 making 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."
Section 41(2) is in these terms:- "41 - (2) The Conservators shall apply the income of the "Fund in payment of rents, salaries, taxes, "insurances, and other current expenses attending "the execution of their powers and duties, and the "making of the register of commoners and the "elections of verderers, and in payment of or "provision for any annual sums of money, allowances "for compensation, annuities, pensions, or retiring "allowances, and such other charges as they are not "empowered to discharge out of capital."
Two matters of the first importance may now be stated.
(1) Although, as appears from the Act, the Conservators of Epping Forest (who are the Appellants before us) acting, through the Epping Forest Committee are in fact an emanation of the Corporation, it has been agreed on both sides in the Court below and in this Court – and we do not suggest that it was otherwise than properly agreed – that for the purpose of the question involved in this Appeal the Conservators should be treated as though they were a body entirely separate and distinct from the Corporation.
(2) The functions and duties of the Conservators constitute a charitable object, as that phrase is understood in our law. Pursuing, therefore, the analogy above indicated we must determine the present case as though we were dealing with a body of independent trustees managing a charitable foundation – whether the maintenance of a public park or of a hospital or of a religious or educational establishment – and bound accordingly to apply all their funds, and particularly the income of such funds, exclusively in furtherance of such charitable purposes.
As appears from the citation of Section 39 of the Act certain revenues accrue to the Conservators in the due course of the management of the Forest – for example, certain rents which they obtain for the letting of sporting rights, and certain fees for the use of the Chingford Golf Course. For many years, however, the revenues from the various sources specified in the paragraphs we have cited from Section 39(2), other than the last, have fallen far short of the sums required for the proper upkeep and management of the Forest. In accordance, therefore, with its obligations under the Act (for it is agreed that such is its effect) the Corporation has each year paid over to the Conservators (or into the Conservators' Account) the sum required to bring up the revenues for that year to the total of the expenses. For many years these sums have in fact been paid out of the income which the Corporation receive from considerable properties belonging to the Corporation, both real property and investments, which properties constitute the private fortune of the Corporation corresponding in all respects to the private fortune of an individual; and this income, out of which the contribution to the Conservators has been made, is income which has suffered tax by deduction at its source before receipt by the Corporation. As a matter of machinery, until the final figures for any year are ascertained, the Conservators draw upon the City Chamberlain the sums required fromtime to time to meet current obligations, the City Chamberlain being in fact the Banker of the Conservators. Nothing turns on the very special position in relation to the affairs of the Corporation or of the Conservators occupied by the City Chamberlain; but it follows that the sums eventually paid over in any year to the Conservators are the sums required and used in fact for either one or both of the following purposes, namely, (1) to meet any outstanding obligations in respect of that year on the part of the Conservators, and (2), to discharge the debit balance in account with the City Chamberlain of the Conservators which has arisen as a result of the excess of the Conservators' drawings during the year over the sums derived from other sources and paid into their account.
In the year in question the sum required to make good the deficit was, as we have stated, £16,006,3.4d., and this sum, in accordance with previous practice for many years, was, as we have also stated, paid out of the taxed income of the private properties of the City which are known as "City's "cash". But whereas, in previous years, the Corporation has in fact paid over, out of this fund of taxed income, the full amount required to equate the Conservators' account, in the year in question for the first time, the Corporation deducted from the sum of £16,006.3.4d. the appropriate sum (£7200.15.6d.) in respect of income tax, paying over to the Conservators or into their account the net figure of £8.803.7.10d. This the Corporation has sought to justify on the ground that for tax purposes the Corporation's contribution to the income of the Conservators, in accordance with the statutory obligation imposed by the Act of 1878, falls within the scope of the language and intendment of Case III of Schedule D of the Income Tax Act 1918, and also – and consequentially – within the scope of Rule 19(1) of the All Schedules Rules. If this claim is well founded the consequences are not in doubt; since the management of Epping Forest is a charitable purpose the Conservators are exempt from income tax and can, accordingly, reclaim the amount of tax (£7202.15.6d.) which has been deducted by the Corporation and which, on this view, must be treated as having been paid by the Corporation on the Conservators' behalf. If, on the other hand, as the Crown say, the payment is not within the proper interpretation of Case III or Rule 19 then it is equally clear that no claim to repayment of the amount of tax on the part of the Conservators can be sustained, and the Corporation will have to make up, out of their own funds, the equivalent of the sum which they have deducted in order to fulfil their obligations under the Statute.
The facts of the case are plainly of a special character. In the course of the argument our attention was drawn, and properly drawn, to many decided cases, both as illustrations of the principles involved and by way of providing useful analogies. But, as so often happens in cases of this character, the question, as we think, turns in the end upon a short point which may be at least simply stated, viz. What is the quality for tax purposes of the sum paid over, when examined both in the hands of the Corporation as Payer immediately before payment and in the...
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