Commissioners of Inland Revenue v Butterley Company, Ltd
| Jurisdiction | England & Wales |
| Judgment Date | 19 April 1956 |
| Date | 19 April 1956 |
| Court | Chancery Division |
HIGH COURT OF JUSTICE (CHANCERY DIVISION)-
COURT OF APPEAL-
HOUSE OF LORDS-
Profits Tax - Computation of profits - Company carrying on a number of trades - Nationalisation of colliery undertaking - Interim income payments under Coal Industry Acts, 1946 and 1949 - Finance Act, 1937 (1 Edw. VIII & 1 Geo. VI, c. 54), Sections 19 and 20 (1) and Fourth Schedule, Paragraph 7; Finance Act, 1947 (10 & 11 Geo. VI, c. 35), Section 32 (1).
The Respondent Company carried on a number of trades, including coal-mining; none of these trades was exclusively ancillary to the Company's main trade of ironfounding. On 1st January, 1947, the colliery trade ceased and its assets were vested in the National Coal Board under the terms of the Coal Industry Nationalisation Act, 1946. Under this Act and the Coal Industry (No. 2) Act, 1949, the Company became entitled to compensation for the assets so transferred and to certain "revenue payments" and "interim income" for the period between the vesting date and the date on which the compensation was fully satisfied.
On appeal to the Special Commissioners against assessments to Profits Tax for the chargeable accounting periods from 1st January, 1947, to 31st December, 1950, in amounts which included the interim payments, it was contended on behalf of the Company that the payments were not income but part of the compensation payable; alternatively, that the payments were not profits of the trades or businesses carried on by the Company during the relevant chargeable accounting periods; or, alternatively, that the payments were not "income received from investments or other property" within the meaning of Paragraph 7 (1) of the Fourth Schedule to the Finance Act, 1937, as amended by Section 32 (1) of the Finance Act, 1947. The Commissioners rejected the Company's first contention but upheld the other two and allowed the appeals.
Held, that the Commissioners' decision was correct.
Stated under the Finance Act, 1937, Fifth Schedule, Part II, Paragraph 4, and the Income Tax Act, 1952, Section 64, by the Commissioners for the Special Purposes of the Income Tax Acts for the opinion of the Chancery Division of the High Court of Justice.
At a meeting of the Commissioners for the Special Purposes of the Income Tax Acts held on 10th June, 1953, the Butterley Co., Ltd. (hereinafter called "the Company"), appealed against the following assessments to Profits Tax, viz.:
Chargeable accounting |
|||||
period |
|||||
1.1.47 to 31.12.47 |
… |
… |
… |
… |
£62,300 |
1.1.48 to 31.12.48 |
… |
… |
… |
… |
£63,450 |
1.1.49 to 30.9.49 |
… |
… |
… |
… |
£48,750 |
1.10.49 to 31.12.49 |
… |
… |
… |
… |
£19,000 |
1.1.50 to 31.12.50 |
… |
… |
… |
… |
£44,000 |
on the grounds that in computing its profits for the purposes of Profits Tax certain sums received by the Company under Section 22 (2) and (3) of the Coal Industry Nationalisation Act, 1946 (hereinafter called "the Coal Act, 1946"), and under Section 1 (2) of the Coal Industry (No. 2) Act, 1949 (hereinafter called "the Coal Act, 1949"), were wrongly included by the Commissioners of Inland Revenue.
2. At the hearing of this appeal evidence was given before us by Mr. E.F. Wright, chairman and managing director of the Company, and by Mr. L.R. Honeywill, director and chief accountant of the Company.
The following documents were produced in evidence before us, and are attached to and form part of the Case stated by us(1);
Statement of compensation received by the Company under the Coal Acts, 1946 and 1949 |
Exhibit A |
Directors' report and accounts of the Company for the year ended 31st December, 1947 |
Exhibit B1 |
Directors' report and accounts of the Company for the year ended 31st December, 1948 |
Exhibit B2 |
Directors' report and accounts of the Company for the year ended 31st December, 1949 |
Exhibit B3 |
Directors' report and accounts of the Company for the year ended 31st December, 1950 |
Exhibit B4 |
The memorandum and articles of association of the Company was put in evidence before us and may be referred to if necessary as part of this Case.
The facts found by us on this evidence or agreed between the parties are as stated in the following paragraphs numbered 3 to 10 inclusive.
3. The Company was formed on 9th April, 1888, to carry on, and did in fact carry on thereafter, a number of trades including coalmining, ironfounding, structural steel manufacturing, wagon building, wrought iron production, brickmaking, civil engineering and dairy farming. The said trades were none of them carried on exclusively as ancillary to the Company's main trade of ironfounding, and in particular, although the ironfounding trade used as much of the coal acquired in the Company's colliery trade as it required, a large surplus of coal remained and was sold to outside customers of the Company.
4. On 1st January, 1947, the colliery trade of the Company ceased entirely and the assets of this trade vested in the National Coal Board under the terms of the Coal Act, 1946 (exhibit B1). Certain assets ancillary to the collieries, including some brickworks, railway wagons, land and houses, also vested in the National Coal Board on that date. The Company, however, continued after 1st January, 1947, to carry on all the other trades, except that of colliery proprietors, mentioned in paragraph 3 above, and since that date has acquired other engineering businesses as well as further brickworks and quarries. The Company's balance sheet at 31st December, 1947 (exhibit B1), shows that out of total assets of £4,474,332, a sum of £2,071,746 represented assets owned by the Company on 31st December, 1946, but vesting, subject to compensation, in the National Coal Board on 1st January, 1947; the balance of £2,402,586 represented assets of the trades still carried on by the Company after 1st January, 1947.
5. The profits of the various trades carried on by the Company before and after 1st January, 1947, have always been brought together into one profit and loss account of the composite business carried on by the Company, and one assessment to Income Tax and Profits Tax was made upon the total profits of the Company derived from all its separate trades. For Income Tax purposes, however, it was admitted at the relevant time that the trade of colliery proprietors was a trade separate from its other trades, and the provisions of Section 31 (1) (a), Finance Act, 1926, were applied when that colliery trade ceased to be carried on by the Company on 1st January, 1947. At the hearing before us it was, however, contended on behalf of the Crown that only one part of the Company's business ceased on 1st January, 1947, and that the said provisions of Section 31 (1) (a), Finance Act, 1926, were wrongly applied at that time. As appears from our decision in paragraph 12 below, we accepted the evidence of the chairman and chief accountant of the Company, which was not challenged on behalf of the Crown at the hearing of this appeal, that the colliery concern of the Company constituted a trade separate from its other trades and that that trade ceased entirely on 1st January, 1947.
6. The Coal Act, 1946, reached the Statute Book on 12th July, 1946, and by Section 5 (1) the assets of the Company hitherto employed in its colliery undertaking vested in the National Coal Board on the "primary vesting date" appointed by the Minister, which, as stated in paragraph 4 above, was 1st January, 1947. Compensation in respect of the assets so transferred on 1st January, 1947, was provided for by Sections 10 to 25 of the said Act; and by Section 19 was declared to be
due on the primary vesting date, subject to determination of the amount thereof.
By Section 19 (2) there was provided, in the following terms, a right to interim income:
For the period between the primary vesting date and the date on which any such compensation is fully satisfied, there shall be a right to interim income, to be satisfied in accordance with the provisions of section twenty-two of this Act.
(i) The Company received from the National Coal Board, in addition to compensation payable under Sections 10 to 17 of the Coal Act, 1946, interim income as provided under the said Section 19 (2), satisfied in accordance with the provisions of Section 22. These payments are set out in the tabular statement exhibit A (in addition to compensation paid under Sections 10 to 17 of the Coal Act, 1946, not otherwise material to this Case), and arose to the Company mainly under the provisions of Section 22 (2) and (3).
(ii) Section 22 (2) (a) is as follows:
Subject to the provisions of subsections (3) and (4) of this section as to the revenue payments therein mentioned,-(a) the said right conferred by subsection (2) of section nineteen of this Act shall be satisfied, so far as regards interim income for the period between the primary vesting date and the time when any amount of compensation in respect of a transfer of transferred interests or of an overhead expenses increase is satisfied, by making, in addition to the issue of the stock then issued in satisfaction of that amount of compensation or to the making of the money payment then made in satisfaction of that amount of compensation, as the case may be, a money payment of an amount equal to interest for that period on that amount of compensation at such rate or rates as may be prescribed as respects that period or different parts thereof by order of the Treasury".
(iii) Under the said Section 22 (2) (a) the Company received on 14th January, 1949, £415 13s. 6d., net £228 12s. 5d.; on 15th February, 1950, £64 3s.5d., net £35 5s. 11d.; on 17th March, 1950, £353 7s. 2d., net £194 6s. 11d.; on 5th July, 1950, £27,123 5s. 8d., net £14,917 16s. 1d.; and on 2nd January, 1951, £1,882 18s., net £1,035 11s. 11d. (items 6, 7, 8, 10 and 11 in tabular statement A). These payments were all in respect of a broken period from the end of the year down to the date when compensation under Sections 10 to 17 of the Coal Act, 1946...
To continue reading
Request your trial
-
Henry Briggs, Son & Company, Ltd ((in Liquidation)) v Commissioners of Inland Revenue
...carried on by the Appellant in the relevant chargeable accounting periods (see Commissioners of Inland Revenue v.Butterley Co., Ltd., 36 T.C. 411). (3) Having reviewed the evidence, we are of opinion that since 1939 the parent Company has been one the functions of which have consisted mainl......
-
Henry Briggs, Son & Company, Ltd ((in Liquidation)) v Commissioners of Inland Revenue
...carried on by the Appellant in the relevant chargeable accounting periods (see Commissioners of Inland Revenue v.Butterley Co., Ltd., 36 T.C. 411). (3) Having reviewed the evidence, we are of opinion that since 1939 the parent Company has been one the functions of which have consisted mainl......
-
Commissioners of Inland Revenue v J. B. Hodge & Company (Glasgow) Ltd
... ... The reasoning in this House in Commissioners of Inland Revenue v. Butterley Co., Ltd. (1956) 36 T.C. 411 shews that profits tax in respect of the profits of any trade can never be assessable except for a chargeable accounting period during which that trade is in fact being carried on. So, it is argued, both the general scheme of the Act and the express terms of section ... ...
-
Nuclear Electric Plc v Bradley
... ... J PEACOCK & MR. R SINGH (Instructed by Inland Revenue Solicitors, WC2R 1LB) appeared on behalf of the ... He reversed a decision of the Special Commissioners and held that interest earned on bank deposits made by the ... -(1) Where in any accounting period a company carrying on a trade incurs a loss in the trade, the loss ... Radcliffe adverted to this question in IRC v Butterley Co. Ltd ... (1954) 36 TC 411 ... In that case the question ... ...