Commissioners of Inland Revenue v Scottish Central Electric Power Company
| Jurisdiction | England & Wales |
| Judgment Date | 13 March 1931 |
| Date | 13 March 1931 |
| Court | House of Lords |
NO. 780.-COURT OF SESSION, SCOTLAND (FIRST DIVISION).-
HOUSE OF LORDS.-
Income Tax, Schedule D - Deduction in computing profits - Owner's rates (Scotland) in respect of property occupied for purpose of trade - Income Tax Act, 1918 (8 & 9 Geo. V, c. 40), Schedule A, No. V, Rule 4 and Schedule D, Cases I and II, Rule 3(a).
The Respondent Company owned land and buildings in Scotland which it occupied for the purpose of its trade. Relief had been claimed and allowed from the Schedule A assessments on the property under Rule 4(1) of No. V of Schedule A in respect of the owner's rates charged on and paid by the Company. The Company contended that the rates so paid should be deducted in computing its profits for purposes of assessment under Schedule D.
Held, that the owner's rates were not an admissible deduction in computing the Company's profits under Schedule D.
At a meeting of the Commissioners for the Special Purposes of the Income Tax Acts held at Glasgow on 4th March, 1929, for the purpose of hearing appeals, the Scottish Central Electric Power Company of Melville Street, Edinburgh, hereinafter called the Company, appealed against two assessments totalling £44,673, less £16,390 for wear and tear, made upon it under Schedule D of the Income Tax Acts for the year ended 5th April, 1928, by the Additional Commissioners of Income Tax for the division of Falkirk.
I. The following facts were admitted or proved:-
-
(2) The said assessments were made upon the basis of the Company's accounts for its trading year ended 31st December, 1926. The balance of the said accounts after deduction of all expenses of the Company including rates and charges and assessments on lands, tenements and heritages owned and occupied by it for the purpose of its trade and the whole cost of the repairs and
maintenance thereof, but inclusive of the profits and gains arising from the said lands, tenements and heritages deductible under Rule 5 of Cases I. and II. of Schedule D of the Income Tax Act, 1918, was £48,897. The said balance does not make any provision for wear and tear of machinery and plant, such provision being calculated separately. (3) It is agreed that the lands and heritages owned and occupied by the Company are "mills, factories and "other similar premises" within the meaning of the proviso to Sub-section (2) of the said Rule 5, and that by the effect of the said proviso the operation of the said Sub-section is excluded in the present case.
(4) The amount deductible under the said Rule 5 from the said balance of profits and gains in respect of the annual value of the said lands, tenements and heritages was £5,976, in accordance with the assessments made under Schedule A and the decision in the previous case taken by the Crown against the Company reported in 1928 S.C. 260; 13 T.C. 331.
(5) Under Rule 4 of No. V. of Schedule A the Commissioners of Inland Revenue gave relief by abatement from the said assessments under Schedule A of a sum of £1,752 for the year 1926, and the said assessments were also for the purpose of collection reduced by certain allowances in respect of repairs, totalling £1,014 17s.6d. for the year 1926.
(6) The said assessments under Schedule D appealed against were made by deducting the full amount of the said assessments under Schedule A (namely £5,976) from the said balance of the Company's profits (namely £48,897) but adding thereto the sum of £1,752 being the amount paid by the Company in the year 1926, in respect of owner's rates, allowed in the Schedule A assessments.
II. It was contended on behalf of the Company that the addition of £1,752 for owner's rates was wrongly made and that this sum was a proper deduction in arriving at the balance of its profits and gains; and the Company relied upon the decision of the Court of Session upon the case brought before the Court for the previous year.(1)
III. H.M. Inspector of Taxes (Mr. D. Cram), on behalf of the Crown, contended that the owner's rates were paid by the Company in its capacity of property owner, and not qua trader, and that the deduction should not be allowed.
IV. We, the Commissioners who heard the appeal, had listened to arguments in support of the same method of assessment upon the appeal of the Company for the previous year, and for reasons given in the Case stated for the opinion of the Court of Session we had rejected them. We were confirmed in our previous opinion by the judgment of the Court of Session, and we accordingly allowed the present appeal and reduced the assessments under Schedule D upon the Company by £1,752.
V. The Inspector, immediately upon our so determining the appeal, declared to us his dissatisfaction therewith as being erroneous in point of law and having duly required us to state and sign a Case for the opinion of the Court of Session, as the Court of Exchequer in Scotland, this Case is stated and signed accordingly.
VI. The question of law for the opinion of the Court is whether the Company is entitled to deduct the said sum of £1,752 in arriving at the balance of the profits and gains of its trade.
W.J. BRAITHWAITE, P. WILLIAMSON, Commissioners for the Special Purposes of the Income Tax Acts.
York House,
23, Kingsway,
London, W.C.2.
30th September, 1929.
The case came before the First Division of the Court of Session (the Lord President and Lords Sands, Blackburn and Morison) on the 4th and 5th December, 1929, when judgment was reserved. On the 13th December, 1929, judgment was given against the Crown, with expenses (Lord Morison dissenting).
Edinburgh, 13th December, 1929. The Lords having considered the Case and having heard Counsel for the parties, Answer the Question of Law in the Case in the Affirmative; Affirm the determination of the Commissioners and Decern; Find the Respondents entitled to expenses of the Stated Case and remit the Account thereof to the Auditor to tax and to report.
(Signed) J.A. CLYDE, I.P.D.
The Lord President (Clyde).-Two years ago we decided a similar case between the same parties (Inland Revenue v. Scottish Central Electric Power Company(1), 1928 S.C.260). The Company is the occupying owner of its premises, and is thus taxable under both Schedule A and Schedule D. Both the previous case and this year's case are concerned with the question whether an abatement from the amount of the assessment of the Company's premises to tax under Schedule A-equivalent, I understand, to what is known in Scotland as the owner's share of the public rates paid by the Company, and given to it in accordance with Rule 4 of No. V of that Schedule- has any effect, and (if so) what effect, on the adjustment of the estimate of the balance of the Company's profits and gains for the purpose of assessment to Income Tax under Schedule D. But, in order to understand the relation of the previous case and this year's case (and of this year's case in particular) to that question, it is necessary to attend to the precise point decided in the previous case and to the precise point submitted for our decision in this year's case.
The decision in the previous case was that the whole annual value of the Company's premises formed a permissible deduction from its gross trading returns for the purposes of Income Tax under Schedule D.
The question put to us was of a much more general character, namely:-What sums are properly deductible under Rule 5 of Cases I and II of Schedule D for the purpose of the assessment of the Company's profits to tax under that Schedule? Our answer was, and was advisedly, limited to the above finding. On one view the question as put might be regarded as committing to us the function of adjusting or re-adjusting the whole assessment so far as depending on or affected by any deduction from gross trading returns. But the case was not framed in such a way as to submit to us any question except one, namely-whether the whole or only a part of the annual value of the premises was deductible. The assessment as originally made by the assessing Commissioners allowed the usual deductions for all public rates paid by the Company as occupying owner, including (that is to say) both owner's and occupier's shares thereof, for repairs and maintenance, and so on, but docked the usual deduction in respect of the annual value of the premises, by subtracting from the said annual value the abatement made upon it for the purpose of assessment to Schedule A tax under Rule 4 of No. V. of that Schedule-in other words, by subtracting from the said annual value the amount of the owner's share of the total public rates paid by the Company as occupying owner. It was this method of docking the deduction in respect of the annual value of the premises which we held, for the reasons given in the
report of the previous case, to be warranted neither by Rule 5 of Cases I and II of Schedule D (from which mills and factories such as that of the Company are expressly excepted), nor by anything else in the Income Tax Acts.There was presented to us, at the same time, some argument as to the permissibility (in view of the grant of an abatement on the assessed annual value for the purposes of Schedule A) of the deduction from gross trading returns of the whole public rates paid by the Company as occupying owner; but this deduction was not an open question before us; it had already been allowed and indeed formed the basis of the assessment as it came before us. We were accordingly not in a position to do more than answer the question put to us as we did.
The question in this year's case has nothing to do with the permissibility of any of the deductions made from gross returns. The assessment allows, as before, deduction of all public rates paid by the Company as occupying owner of its premises, and of the cost of repairs and maintenance, and so on. It also allows deduction ofthe whole annual value of the...
To continue reading
Request your trial
-
Southern (HM Inspector of Taxes) v Borax Consolidated, Ltd
... ... The Respondent Company held all the shares in an American company whose ... Case I of Schedule D the General Commissioners found that the legal expenses in question were ... Commissioners of Inland Revenue v. Scottish Central Electric Power ... ...
-
Hughes (HM Inspector of Taxes) v Bank of New Zealand
...T.C. 725;Strong & Co., Ltd. v. Woodifield, [1906] A.C. 448(2), and Commissioners of Inland Revenue v.Scottish Central Electric Power Co., 15 T.C. 761. In none of these cases do I find any help for the problem now put before the Court. The expenses which are dealt with here by the Commission......
-
Collyer (HM Inspector of Taxes) v Hoare and Company, Ltd
... ... Tax Act, 1918, Section 149, by the Commissioners for the Special Purposes of the Income Tax Acts ... as mortgagee in exercise of its statutory power of sale and in consideration of £7,700 paid to ... 169 Commissioners of Inland Revenue v. The Scottish Central Electric Power ... ...