Commissioners of Inland Revenue v National Coal Board
| Jurisdiction | England & Wales |
| Judgment Date | 29 May 1957 |
| Date | 29 May 1957 |
| Court | House of Lords |
HIGH COURT OF JUSTICE (CHANCERY DIVISION)-
COURT OF APPEAL-
HOUSE OF LORDS-
Profits Tax - Capital allowances - Industrial building or structure - Miners' dwelling-houses - "likely to have little or no value to the person carrying on the trade when the mine…is no longer worked" - Income Tax Act, 1945 (8 & 9 Geo. VI, c. 32), Section 8 (3); Finance Act, 1947 (10 & 11 Geo. VI, c. 35), Eighth Schedule, Part I, Paragraph 1.
The National Coal Board owned dwelling-houses which were built for, and occupied at the relevant times by, persons employed at a colliery. It was agreed that the houses would have a substantial value to the Board if mining operations at the colliery ceased in the near future but that they would have little or no value some fifty years before the year 2141, when the seams were expected to be exhausted.
On appeal against an assessment to Profits Tax for the chargeable accounting period ended 31st December, 1951, the Board claimed annual allowances in respect of these houses as being industrial buildings within the proviso to Section 8 (3), Income Tax Act, 1945, on the ground that they were likely to have little or no value when the mine was no longer worked. The Crown contended that the eligibility of a house for allowance depended on its being valueless upon the supposition of a cessation of mining operations. The Special Commissioners allowed the appeal, holding that the eligibility for allowance depended on the likely value of the houses at the time when mining was expected to cease.
Held, that the Board was not entitled to the allowances claimed.
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 High Court of Justice.
1. At a meeting of the Commissioner for the Special Purposes of the Income Tax Acts held on 21st March, 1955, the National Coal Board (hereinafter called "the Board") appeared against an assessment made upon it to Profits Tax for the chargeable accounting period beginning on
1st January, 1951, and ending on 31st December, 1951, in the sum of £1,150,000.2. -
(2) The only question which we were asked to determine was whether or not the Board was entitled to annual allowances under Part I of the Income Tax Act, 1945 (which relates to industrial buildings and structures), and consequently under Paragraph 1 of Part I of the Eighth Schedule to the Finance Act, 1947 (which applies those allowances for the purposes of the Profits Tax), in respect of certain dwelling-houses at Edwinstowe, Nottinghamshire, owned by the Board and occupied by persons employed by the Board at Thoresby Colliery.
(3) It was common ground between the parties (a) that the said dwelling-houses would qualify for the annual allowances claimed unless they were buildings to which Sub-section (3) of Section 8 of the Income Tax Act, 1945, applied, and (b) that the said Sub-section (3) would apply to the said buildings unless its application were excluded by the terms of the proviso thereto, which reads as follows:
Provided that this subsection shall not apply to, or to part of, a building or structure which was constructed for occupation by, or for the welfare of, persons employed at, or in connection with the working of, a mine, oil well or other source of mineral deposits, or for occupation by, or for the welfare of, persons employed on, or in connection with the growing and harvesting of the crops on, a foreign plantation, if the building or structure is likely to have little or no value to the person carrying on the trade when the mine, oil well or other source or the plantation is no longer worked, or will cease to belong to such person on the coming to an end of a foreign concession under which the mine, oil well or other source, or the plantation, is worked.
3. -
(2) The houses to which the appeal relates are 124 houses in 4th Avenue, Edwinstowe, comprising 29 pairs and 22 terraces of three each. They were built for, and were occupied at the relevant times by, persons employed at Thoresby Colliery. Fifty-three are of the "parlour type" and 71 of the "non-parlour type" (see exhibit A(1) ).
(3) The aggregate maximum yearly rents of the houses permitted by the Rent Restriction Acts (exclusive of rates and water charges) is £2,555 16s. (see exhibit A), from which the Board has to meet the annual cost of repairs, fire insurance and management.
(4) The houses were constructed between 1926 and 1928.
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(5) It was agreed between the parties-
(a) that if mining operations had ceased or should cease at Thoresby Colliery during 1951 or 1952 or in any of a number of years following the houses would have a substantial value and would not have "little or no value" within the meaning of Section 8 (3) of the Income Tax Act, 1945, and
(b) that some 50 years before 2141, at which time it was estimated that the coal seams at Thoresby Colliery would be exhausted, the houses would have "little or no value" within the meaning of the said Section 8 (3).
(6) The agreement recorded in the immediately preceding sub-paragraph was subject to the following reservation made by the Solicitor of Inland Revenue in a letter dated 16th March, 1955, to the Board's Solicitor:
The Revenue agree that if working continues at the colliery in the manner expected it will probably be exhausted in 188 years. But mining operations may, in the meanwhile, cease for other reasons and the Revenue do not agree that it is possible to forecast the reason for which, or the time at which, they will cease.
4. -
(2) A statement of facts agreed between the parties concerning Edwinstowe village and houses therein was produced to us, and is annexed hereto, marked "A", and forms part of this Case(1).
(3) A statement of facts agreed between the parties concerning the coal seams at Thoresby Colliery and the estimated life thereof was produced to us, and is annexed hereto, marked "B", and forms part of this Case(1).
(4) A bundle of correspondence agreed between the parties concerning the appeal was produced to us; it is not annexed hereto, but is held available for the use of the Court if required.
5. It was contended on behalf of the Board:
(2) that the said houses were not buildings to which Section 8 (3) of the Income Tax Act, 1945, applies, being excluded from the application thereof by the proviso thereto;
(3) that the said houses were industrial buildings qualifying for annual allowances under Part I of the Income Tax Act, 1945;
(4) that the assessment under appeal should be reduced accordingly.
6. It was contended on behalf of the Commissioners of Inland Revenue:
(2) that on the true construction of the proviso to Section 8 (3) of the Income Tax Act, 1945, the houses in question were not buildings to which the said proviso applies;
(3) that the said houses were buildings to which the said Sub-section (3) applies and were not industrial buildings qualifying for annual allowances under Part I of the Income Tax Act, 1945;
(4) that the assessments should, in principle, be upheld.
7. We, the Commissioners who heard the appeal, gave our decision as follows:
(2) We find that, on the suppositions (i) that coal continues to be extracted from the mine at the present rate of extraction and (ii) that nothing happens to result in a premature closing of the mine before the seams are exhausted, the mine will cease to be worked in or about the year 2141. In our view these two suppositions are reasonable and no evidence of any sort was produced to contradict or throw doubt upon them; for these reasons we find that the mine is likely to be no longer worked in or about the year 2141 and not earlier. In so far as it may be necessary for the purpose of the present appeal to decide when the mine will in fact be no longer worked, we find that it will be no longer worked in or about the year 2141, for the same reasons. We find that until the year 2091 the houses in question are likely to have some substantial value, and that after the year 2091 they are likely to have little or no value.
(3) The question for our decision is whether the houses are eligible for annual allowances under Part I of the Income Tax Act, 1945; this depends upon whether they fall within the proviso to Section 8 (3) of that Act, and in particular whether they are
likely to have little or no value to the person carrying on the trade when the mine, oil well or other source or the plantation is no longer worked.
(4) It was contended on behalf of the Crown that on the true construction of the phrase quoted above the eligibility of a house for the allowance depends upon its being valueless upon the supposition of a cessation of working. We are unable to agree with this. We do not
think that the language of the phrase indicates that we are to suppose that the mine is no longer worked and to consider the value of the houses on that supposition. The words "is likely to" and the use (in two places) of the indicative "is" suggests to our minds that we are to address ourselves to a real situation which may be expected to arise in the future and not to a supposed situation which could be supposed to exist now or at any other time. We have borne in mind that there may be a practical difficulty in determining, as a question of fact, when any particular mine or plantation will cease to be worked, and in this connection we have considered carefully whether the words "is likely to" govern the whole of the phrase or not-in other words, whether we have to determine the likely time or the exact time of cessation. Upon the whole, we think that it is the likely time of cessation which is referred to but even if we are wrong as to this we do not think that the difficulty of making a finding as to the exact time provides a compelling reason for departing from what we think is the natural...To continue reading
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