Commissioners of Inland Revenue v Whitworth Park Coal Company, Ltd ((in Liquidation))
| Jurisdiction | England & Wales |
| Judgment Date | 05 November 1959 |
| Date | 05 November 1959 |
| Court | Chancery Division |
HIGH COURT OF JUSTICE (CHANCERY DIVISION)-
COURT OF APPEAL-
HOUSE OF LORDS-
Income Tax, Schedule D - When income arises - Income Tax Act, 1918, Schedule D, Case III, Rule 2, and Case VI, Rule 2; Finance Act, 1922, Section 17.
In consequence of the vesting of its trading assets in the National Coal Board the first Respondent Company was entitled under the Coal Industry Acts, 1946 and 1949, to receive from the Minister of Fuel and Power, out of moneys issued from the Consolidated Fund, "interim income" for the period from 1st January, 1947, to the date when the compensation was fully satisfied. In the years 1948-49 to 1950-51 it received in satisfaction of this right, at irregular intervals and in respect of varying periods, (a) "revenue payments" under the 1946 Act, computed by reference to past profits and liable to eventual adjustment; (b) further revenue payments under the 1949 (No. 2) Act, similarly computed and liable to repayment in respect of any excess over an amount equal to interest at rates prescribed by the Treasury for the corresponding period on the eventual compensation; (c) amounts added to money compensation for stocks and stores equal to interest
thereon at rates so prescribed. These payments were made under deduction of tax at the standard rate in force at the time of payment, and were correspondingly treated as income of the year of receipt in apportionments of the Company's actual income among the members made by virtue of automatic Surtax directions for the years in question under Section 14, Finance Act, 1939. No interim income was received by the Company in 1947-48 and no direction was given for that yearOn appeal against the apportionments and consequential sub-apportionments the Companies contended that the payments were chargeable to Income Tax under Case VI of Schedule D only and were income of the periods in respect of which they were paid. For the Crown it was contended, inter alia, that they were annual payments chargeable under Case III of Schedule D and were properly made under deduction of tax as aforesaid; alternatively, that if chargeable under Case VI they were income of the year of receipt. The Special Commissioners held that all the payments were chargeable under Case VI as income of the periods for which they were stated to have been paid, accruing from day to day.
Held, in the Court of Appeal, that the payments were chargeable under Case VI, and that income arose, within the meaning of Rule 2 of Case VI, when it was received.
in the House of Lords,
(1) that Rule 21 did not apply to payments by the Crown out of moneys provided by Parliament;
(2) (Lord Radcliffe dissenting) that the payments were annual payments within Case III, Rule 1 (a), and were income arising at the date of receipt.
Commissioners of Inland Revenue v. Whitworth Park Coal Co., Ltd. (in liquidation)
CASE
Stated under the Income Tax Act, 1952, Section 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 28th July, 1955, Whitworth Park Coal Co., Ltd. (hereinafter called "the Company"), appealed against directions made upon it under the provisions of Section 21 of the Finance Act, 1922, as extended by Section 14 of the Finance Act, 1939, for the years of assessment 1948-49, 1949-50 and 1950-51 and against the apportionments of the actual income of the Company made for each of the said three years in consequence of the said directions.
(a) The sole question for our determination was whether, in computing the actual income of the Company for the purpose of the said apportionments, interim income received by the Company under the provisions of the Coal Industry Nationalisation Act, 1946 (hereinafter called "the 1946 Act"), and the Coal Industry (No. 2) Act, 1949 (hereinafter called "the 1949 Act"), should be included in the actual income of the year in which it was received or, as the Company contended, of the year or period in respect of which it is paid, it being, for the purpose of the hearing before us, conceded by the Company that authorities binding on us would preclude us from holding that the sums received were of the nature of capital and should not be included in the Company's actual income at all.
(b) The facts proved or admitted before us are set out in paragraphs 3 to 6 hereof.
3. The Company carried on the trade of colliery proprietor until 1st January, 1947, when its colliery assets vested in the National Coal Board under the provisions of the 1946 Act. At all material times the Company was one to which Section 21 of the Finance Act, 1922, applied and was an investment company within the meaning of Section 20 (1) of the Finance Act, 1936.
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(2) The Company received from time to time payments from the Ministry of Fuel and Power (hereinafter called "the Ministry") for or in respect of interim income under the provisions, in the case of some of such payments, of the 1946 Act and, in the case of others of such payments, of that Act and of the 1949 Act. The said payments are set out in tabular form below, and were made under deduction of Income Tax; each payment was accompanied by a letter from the Ministry and a certificate of deduction of Income Tax in the form of, or in a form similar to, the letter and certificate both dated 26th January, 1949, copies of which are annexed hereto, marked "A1" and "A2" respectively, and form part of this Case(1). The other letters and tax deduction certificates which were produced to us are not annexed hereto but are available for reference if required. Each such letter states that the payment relates to a claim by the Company for interim income for a stated period.
Serial
Date of
Gross
Net
Period for which it is stated to
number
receipt
amount of
amount
be paid in accompanying letter
payment
paid
£
£
(1)
7th August, 1948
9068
4987
18 months ended 30th June, 1948
(2)
26th January, 1949
2733
1503
Half-year ended 31st December, 1948
(3)
12th September, 1949
68
37
From 1st January, 1949, to 12th September, 1949
(4)
28th March, 1950
1837
1011
Year ended 31st December, 1949
(5)
14th July, 1950
1616
889
Half-year ended 30th June, 1950
(6)
11th August, 1950
5
3
From 1st July, 1950, to 11th August, 1950
(7)
13th November, 1950
7
4
From 1st July, 1950, to 13th November, 1950
(8)
21st February, 1951
1519
835
Half-year ended 31st December, 1950
(9)
25th May, 1951
1343
705
Two years ended 31st December, 1948
(10)
9th August, 1951
810
425
Half-year ended 30th June, 1951
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(3)
(4) The payments numbered 3, 6 and 7 in the above table were payments of the interest addition under Section 22 (2) (a) of the 1946 Act made on the occasions of payment under Section 21 (1) (b) of the 1946 Act of partial compensation for transferred assets. No special arguments were addressed to us concerning these payments, and neither party to the appeal sought to distinguish them from the other payments in question.
(5) The payments numbered 1 and 2 in the above table were made under Section 22 (3) of the 1946 Act, after deductions of £7 and £86 respectively in respect of adjustments for compensation already satisfied made under the provisions of Regulation 21 of S.R. & O. 1947 No. 1946. The accompanying letters state, in the case of payment no. 1,
It should be noted that the gross amount allowed is an instalment subject to audit. Any adjustment necessary will be made in a future payment,
(6) and in the case of payment no. 2,
It should be noted that the gross amount allowed is a provisional instalment subject to audit of the Statutory Revenue Payment. Any adjustments in respect of overpayments or underpayments will be payable forthwith to or by the Minister.
(7) An adjustment to the said two payments was made by deducting a sum of £1,394 in calculating the gross amount of payment no. 4. This deduction, referred to as an "overpayment (provisional)", was based on an estimate of the comparable ascertained revenue, and a further and final adjustment was made by payment no. 9, the accompanying letter to which states that the comparable ascertained revenue had been approved by the Minister.
(8) The payments nos. 4, 5, 8 and 10 in the above table were made under the 1949 Act. In the case of nos. 4, 5 and 8 the accompanying letters show that the payments were calculated with reference to a provisional calculation of the comparable ascertained revenue, and each such letter states:
It should be noted…that where the amount now payable is based on provisional comparable ascertained revenue, any necessary adjustment will be made later, after the comparable ascertained revenue has been finally approved by the Ministry.
(9) Payment no. 10 was based on the comparable ascertained revenue as approved by the Ministry.
(10) The payments nos. 4, 5, 8 and 10 were each expressed to be subject to the provision contained in Section 1 (5) of the 1949 Act to the effect that, if the said payments should exceed the interim income towards satisfaction of which they were paid, the excess would be repayable by the Company.
(11) The letter accompanying payment no. 5 (dated 14th July, 1950, and in respect of the half-year to 30th June, 1950) shows that in arriving at the gross sum of £1,616 a deduction was made in respect of interest at 3 per cent. per annum for the half-year in respect of compensation satisfied before 30th June, 1950. A footnote to the letter states that
Any necessary adjustments as a result of S.I. 1950, No. 967, dated 12th June, 1950, which prescribes an interest rate of 3 per cent. per annum for the period 1st January, 1949, to 30th June, 1949...
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