Commissioners of Inland Revenue v Wood Bros. (Birkenhead)Ltd ((in Liquidation))
| Jurisdiction | England & Wales |
| Judgment Date | 18 December 1958 |
| Date | 18 December 1958 |
| Court | Chancery Division |
HIGH COURT OF JUSTICE (CHANCERY DIVISION)-
COURT OF APPEAL
HOUSE OF LORDS-
Surtax - Undistributed income of trading company - Computation of actual income - Balancing charge - Income Tax Act, 1952 (15 & 16 Geo. VI & 1 Eliz. II, c. 10), Sections 245, 248, 255 (3), 292, 301 (1) and 323 (4).
The amount assessed to Income Tax by way of a balancing charge on the excess of the sale price of machinery and plant over the Respondent Company's unallowed capital expenditure on the provision thereof was included in the Company's actual income for the period ending 16th April, 1952 (the commencement of the winding-up), apportioned for Surtax purposes among the members under Sections 245 and 248, Income Tax Act, 1952. On appeal the Special Commissioners held that the amount of the balancing charge did not fall to be included in the actual income of the Company.
Held, that the Commissioners' decision was correct.
Stated under the Income Tax Act, 1952, Sections 247 (1), 248 (3) and 64, by the Commissioners for the Special Purposes of the Income Tax Acts for the opinion of the High Court of Justice.
I. At a meeting of the Commissioners for the Special Purposes of the Income Tax Acts held on 12th June, 1956, Wood Bros. (Birkenhead), Ltd. (in liquidation), hereinafter called "the Respondent", appealed against a direction and apportionment made by the Special Commissioners of Income Tax dated 11th March, 1955, in pursuance of powers conferred on them by Sections 245 and 248, Income Tax Act, 1952, directing that the actual income of the Respondent from all sources, as computed for the purposes of Chapter III of Part IX of the Income Tax Act, 1952, for the period 30th April, 1950, to 16th April, 1952, inclusive, should be apportioned among its members. The actual income of the Respondent, so computed by the Special Commissioners of Income Tax, amounted to £76,264, and the apportionments were as follows:
£ |
s. |
d. |
|||||
To preference shareholders |
… |
… |
… |
… |
9732 |
0 |
0 |
To ordinary shareholders |
|||||||
A. E. Wood |
… |
… |
… |
… |
22,168 |
9 |
0 |
E. le V. Wood |
… |
… |
… |
… |
22,168 |
9 |
0 |
S. le V. Wood |
… |
… |
… |
… |
22,168 |
10 |
0 |
E. Randle |
… |
… |
… |
… |
26 |
12 |
0 |
The grounds of the appeal were that the amount of the actual income of the Respondent so computed by the Special Commissioners of Income Tax was excessive inasmuch as it included £18,675 in respect of a balancing charge as hereinafter appeareth.
II. The following documents were produced and admitted at the hearing of the appeal:
(2) Trading and profit and loss account and profit and loss appropriation account for the year ended 28th April, 1951, and balance sheet of that date.
(3) Profit and loss account and profit and loss appropriation account for the period 29th April, 1951, to 16th April, 1952, and balance sheet at that date.
(4) Direction and apportionment by the Special Commissioners of Income Tax dated 11th March, 1955.
The above documents are not attached and do not form part of this Case but are available for the use of the High Court if required.
III. We found the following facts admitted or proved on evidence adduced at the hearing of the appeal :
(2) The Respondent was formerly known as Woodson Stores, Ltd., and had an issued capital of £65,000 and carried on a wholesale grocery business. It sold its business and ceased trading on 28th April, 1951, and on 25th April, 1951, it changed its name to that by which it was known at present. On 16th April, 1952, the Respondent went into voluntary liquidation.
(3) It was common ground between the parties that a balancing charge fell to be made on the Respondent in respect of sales of plant and machinery, on cessation of its business, under the provisions of Section 292 (1) and Section 323 (4), Income Tax Act, 1952, which was correctly computed at £18,675.
(4) The accounts of the Respondent for the year ended 28th April, 1951, and the period 29th April, 1951, to 16th April, 1952, were not certified by the auditors, Alfred G. Deacon & Co., chartered accountants, 395 Corn Exchange Buildings, 27 Fennel Street, Manchester 4, until 7th May, 1952. It was common ground between the parties that the whole of the period from 29th April, 1950, to 16th April, 1952, inclusive, was the period from the end of the last year for which accounts of the Respondent had been made up to the time of the commencement of the winding-up, within the meaning and for the purposes of Section 253, Income Tax Act, 1952.
(5) It was also common ground between the parties that the actual income of the Respondent from all sources, as computed for the purposes of Chapter III of Part IX of the Income Tax Act, 1952, for the said period, fell to be apportioned among its members under the provisions of Sections 245 and 248, Income Tax Act, 1952. Excluding the balancing charge of £18,675, this amounted to £57,589.
IV. It was contended by the Respondent:
(2) that the amount which fell to be apportioned among its members under the provisions of Sections 245 and 248, Income Tax Act, 1952, was its actual income from all sources for the period 30th April, 1950, to 16th April, 1952 ;
(3) that the amount of the assessment on the Respondent in respect of the balancing charge of £18,675 as aforesaid did not fall to be included in the actual income of the Respondent for the purposes of the said Sections 245 and 248, Income Tax Act, 1952 ;
(4) that the appeal should be allowed and that the direction and apportionment of the Special Commissioners should be amended by reducing the amount of the actual income of the Respondent included therein for apportionment to £57,589, and the amounts apportioned to its members in proportion thereto.
V. It was contended on behalf of the Appellants:
(2) that the amount which fell to be apportioned among the members of the Respondent under the provisions of Sections 245 and 248, Income Tax Act, 1952, was the actual income from all sources for the period 30th April, 1950, to 16th April, 1952, inclusive, which amounted to £76,264 ;
(3) that the amount of the balancing charge of £18,675 assessed on the Respondent was correctly included in the computation for the purpose of arriving at the actual income from all sources within the meaning of Chapter III of Part IX of the Income Tax Act, 1952 ;
(4) that the appeal should be dismissed and the direction and apportionment amongst the members of the Respondent be confirmed.
VI. We, the Commissioners who heard the appeal, upon consideration of the evidence adduced and the arguments addressed to us on behalf of the parties, decided that the amount of the balancing charge assessed upon the Respondent under the provisions of Sections 292 and 323 (4), Income Tax Act, 1952, did not fall to be included in the actual income of the Respondent from all sources for the purposes of Chapter III of Part IX of the Income Tax Act, 1952. Accordingly, we allowed the appeal and amended the said direction of the Special Commissioners of Income Tax, dated 11th March, 1955, by reducing the amount of the actual income of the Respondent to be apportioned among its members from £76,264 to £57,589. We adjourned the appeal for agreement of figures between the parties on the basis of this our decision in principle. On 28th August, 1956, the figures having been agreed between the parties, we determined the appeal by reducing the amounts apportioned to the members of the Respondent as follows:
£ |
s. |
d. |
|||||
To preference shareholders |
… |
… |
… |
… |
9732 |
0 |
0 |
To ordinary shareholders: |
|||||||
A. E. Wood |
… |
… |
… |
… |
15,945 |
19 |
0 |
E. le V. Wood |
… |
… |
… |
… |
15,945 |
19 |
0 |
S. le V. Wood |
… |
… |
… |
… |
15,945 |
19 |
0 |
E. Randle |
… |
… |
… |
… |
19 |
3 |
0 |
57,589 |
0 |
0 |
VII. The Appellants immediately after the communication to them of our determination of the appeal expressed to us their dissatisfaction therewith as being erroneous in point of law, and in due course required us to state a Case for the opinion of the High Court pursuant to the Income Tax Act, 1952, Sections 247 (1), 248 (3) and 64, which Case we have stated and do sign accordingly.
VIII. The point of law for the opinion of the High Court is whether on the facts found by us there was evidence upon which we could properly arrive at our decision and whether on the facts so found our determination of the appeal was correct in law.
F. Gilbert, N. Rowe Commissioners for the Special Purposes of the Income Tax Acts.
Turnstile House,
94-99, High Holborn,
London, W.C.1.
23rd April, 1957.
The case came before Harman, J., in the Chancery Division on 15th and 16th July, 1957, when judgment was given against the Crown, with costs.
Harman, J.-This case raises a complicated point, and but for the date I should have wished to consider my judgment ; but I have formed a view, and therefore, though no doubt in halting words, I propose to give voice to it.
This was a company to which Section 245 of the Income Tax Act, 1952, applies. That repeats Section 21 of the Finance Act, 1922, which imposed Surtax on the undistributed income of certain companies, of which this was one. The question between the parties is whether, for the purpose of calculating what I may call the Surtax income of the Respondent Company, a balancing charge of some £19,000 ought to be treated as part of the Company's actual income. The Crown says it should, and therefore should be treated as part of that income for apportionment among the members of the Company in order that they may be surtaxable on it. The Company says it should not, and with that view the Special Commissioners agreed. They do not give any reasons : I envy them, but must give reasons for what I decide.
The facts are extremely small in compass and plain. The Company ceased trading in 1951 and sold its plant and machinery. It went into liquidation on 16th April, 1952. At that time no accounts had been made up within the meaning of the Income Tax Acts since 30th April, 1950. Therefore, the...
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