Commissioners of Inland Revenue v Lloyds Bank, Ltd, and Another (Executors of Hector H. Scott)
| Jurisdiction | England & Wales |
| Judgment Date | 24 July 1963 |
| Date | 24 July 1963 |
| Court | Chancery Division |
HIGH COURT OF JUSTICE (CHANCERY DIVISION)-
Surtax - Total income - Balancing charge - Income Tax Act, 1952 (15 & 16 Geo. VI & 1 Eliz. II, c. 10), sections 292(1), 301, 323(4) and 524.
In consequence of the sale of his farming plant and machinery in 1953, S (whose executors were Respondents in the High Court) was assessed to Income Tax under Schedule D for the year 1953-54 in respect of a balancing charge on £3,250. This sum was included in the Surtax assessment made on him for 1953-54. On appeal against the Surtax assessment, the Special Commissioners held that, in the light of the opinions of the majority of the House of Lords in Commissioners of Inland Revenue v. Wood Bros. (Birkenhead), Ltd., 38 T.C. 275, a balancing charge could not be included in total income for Surtax purposes.
Held, that the amount on which the balancing charge was imposed must be included in total income for Surtax purposes.
Commissioners of Inland Revenue v. Wood Bros. (Birkenhead), Ltd.,38 T.C. 275, distinguished.
Stated under the Income Tax Act, 1952, Sections 229(4) and 64, by the Commissioners for the Special Purposes of the Income Tax Acts for the opinion of the High Court of Justice.
1. At a meeting of the Commissioners for the Special Purposes of the Income Tax Acts held on 9th March, 1961, Hector H. Scott(1)(hereinafter called "the Respondent") appealed against an additional assessment to Surtax for the year 1953-54 in the sum of £3,932. The grounds of appeal were that this assessment was excessive inasmuch as it included £3,250 in respect of a balancing charge.
2. We found the following facts admitted or proved in evidence adduced at the hearing of the appeal:
(2) The Respondent was formerly a farmer. In June, 1953, he sold his farm together with his farming plant and machinery.
(3) It was common ground between the parties that a balancing charge fell to be made on the Respondent in respect of the sale of the farming plant and machinery under the provisions of Sections 292(1), 301 and 323(4), Income Tax Act, 1952, which was correctly computed at the said sum of £3,250.
3. It was contended on behalf of the Crown:
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(2) that the sum of £3,250 was assessed upon the Respondent and charged at the standard rate of Income Tax in accordance with
the provisions of the Income Tax Act, 1952, and accordingly fell to be included in his total income by virtue of the provisions of Section 524(1) of that Act; (3) that, as the assessment of £3,250 had become final and conclusive for the purposes of tax at the standard rate, that assessment was also final and conclusive in estimating total income (i.e., for the purposes of Surtax) under the provisions of Section 524(4) of the Income Tax Act, 1952;
(4) that the amount of the balancing charge of £3,250 assessed on the Respondent was correctly included in the additional assessment to Surtax of £3,932 made upon him for the year 1953-54, and that Section 524(5) supported this view;
(5) that Commissioners of Inland Revenue v. Wood Bros. (Birkenhead), Ltd., 38 T.C. 275, was distinguishable;
(6) that the appeal should be dismissed and the assessment to Surtax of £3,932 be confirmed.
4. It was contended by the Respondent:
(2) that, having regard to Commissioners of Inland Revenue v.Wood Bros. (Birkenhead), Ltd., the amount of the assessment on the Respondent in respect of the balancing charge of £3,250 was not income assessed upon him at the standard rate of Income Tax in accordance with the provisions of the Income Tax Act, 1952, and, accordingly, did not fall to be included in his "total income" by virtue of the provisions of Section 524(1) of that Act;
(3) that as such charge was not income as aforesaid, Section 524(4) of that Act was not applicable thereto;
(4) that the amount of the balancing charge of £3,250 was therefore incorrectly included in the said additional assessment to Surtax of £3,932 for the year 1953-54, and that the provisions of Section 524(5) of the said Act did not assist the Crown;
(5) that the appeal should be allowed and the assessment to Surtax of £3,932 be reduced to £682.
5. We, the Commissioners who heard the appeal, considered the evidence adduced and the arguments addressed to us on behalf of the parties and we decided that, in the light of the majority opinions in the House of Lords in the case of Commissioners of Inland Revenue v. Wood Bros. (Birkenhead), Ltd., 38 T.C. 275, a balancing charge cannot be treated as income of the year for which the charge was made, or indeed of any other year. In our view, unless the balancing charge is income it cannot be included in the computation of the Respondent's total income for Surtax purposes.
We also consider that Section 524(4) of the said Act does not assist the Crown unless a balancing charge is in fact income which should be included in estimating the total income of any person.
With regard to...
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