Commissioners of Inland Revenue v Sneath
| Jurisdiction | England & Wales |
| Judgment Date | 08 February 1932 |
| Date | 08 February 1932 |
| Court | King's Bench Division |
No. 837.-HIGH COURT OF JUSTICE (KING'S BENCH DIVISION).-
COURT OF APPEAL.-
Super-tax - Computation of lunatic's income - Deductions - Res judicata.
By Order in Lunacy dated the 25th November, 1913, the Respondent was appointed committee of the estate of D.G.M., a lunatic. He acted as committee at all times from that date and was allowed remuneration by the Court. Under the Lunacy Act, 1890, and the Rules made thereunder, a "lunacy percentage" at the rate of 4 per cent. of the clear annual income of the lunatic was payable to the Crown.
On an appeal by the Respondent, in 1918, against assessments to Super-tax made upon him as committee of the lunatic's estate for the years 1914-15 to 1917-18 the Special Commissioners allowed as deductions in computing the lunatic's income for Super-tax purposes the amounts of the lunacy percentage and the committee's remuneration paid out of the gross income of the appropriate basis years. The Crown acquiesced in this decision and similar deductions were allowed by the assessing commissioners in each of the years 1918-19 to 1927-28.
In assessing the Respondent to Super-tax (as committee) for the year 1928-29 the assessing commissioners disallowed similar amounts claimed as deductions for that year. The Respondent appealed to the Special Commissioners who held that the matter was res judicata (the same question between the same parties having been decided by the Special Commissioners on appeal in 1918) and allowed the appeal.
Held, that the matter was not res judicata.
Stated under the Income Tax Act, 1918, Sections 7 (6) and 149, by the Commissioners for the Special Purposes of the Income Tax Acts for the opinion of the King's Bench Division of the High Court of Justice.
1. At a meeting of the Commissioners for the Special Purposes of the Income Tax Acts held on 24th July, 1929, for the purpose of hearing appeals, William Cecil Sneath (hereinafter called the Respondent), as Committee for D.G. Macrae, a person of unsound mind, hereinafter called the patient, appealed against an assessment to Super-tax in the sum of £4,885 for the year ending 5th April, 1929, made upon him under the provisions of the Income Tax Acts.
2. By Order in Lunacy dated 25th November, 1913, a copy of which is attached hereto and forms part of this Case(1), the custody, regulation, occupation, disposition and receipt of the estate of the patient were committed and granted to the Respondent, and from that date the Respondent has at all times acted as committee of the said estate. The committee has been allowed by the Court remuneration at the rate of £50 per annum for so acting and, by the above-mentioned order, he is required to give security in the sum of £6,000. Such security is given by way of a guarantee bond, the premium on which, amounting to £18 per annum, is also paid out of the income of the patient's estate.
3. Under the provisions of Section 148 of the Lunacy Act, 1890, and the rules made thereunder (which, so far as material, are set out in the case of the Committee of A.B. v. Simpson, 14 T.C. 29) a lunacy percentage at the rate of 4 per cent. per annum on the clear annual income is payable to the Court. The percentage paid in respect of the patient's estate for the year ending 5th April, 1928, amounted to £136.
4. On 21st October, 1918, the Respondent appealed to the Special Commissioners against the assessments to Super-tax made upon him as committee of the patient's estate for the years 1914-15, 1915-16, 1916-17 and 1917-18 on the ground that the lunacy percentage and committee's remuneration paid for the years material to those assessments did not form part of the patient's income for the purposes of Super-tax and ought to be allowed as deductions from the gross income of the estate in computing the patient's income for the purposes of Super-tax. The Commissioners who heard the appeal on that occasion held that the lunacy percentage and committee's remuneration did not form part of the patient's income, and reduced the assessments by the amounts of those
payments. The representative of the Crown expressed his dissatisfaction with that decision as being erroneous in point of law, but did not demand a case to be stated for the opinion of the High Court.5. For each of the years 1918-19 to 1927-28; inclusive, the Respondent claimed similar deductions from the gross income of the estate in making his returns of the patient's income for the purposes of Super-tax, and these deductions were allowed by the assessing Commissioners in making the assessments to Super-tax for those years.
6. In making his return of the patient's income for the purpose of Super-tax for the year ending 5th April, 1929, the Respondent claimed that the following sums did not form part of the patient's income for the purposes of Super-tax and ought to be allowed as deductions from the gross income of the estate:-
£ |
|
Lunacy percentage |
136 |
Committee's remuneration |
50 |
Committee's guarantee premium |
18 |
Law costs |
28 |
Total |
£232 |
In making the assessment under appeal, the assessing Commissioners disallowed the whole of the deductions claimed, upon the ground that they were payments made out of the income after it had become the income of the patient.
7. At the hearing of the appeal, the claim for a deduction in respect of law costs was not pursued, but in regard to the other payments claimed as deductions it was contended on behalf of the Respondent:
(a) That such payments did not form part of the income of the patient for purposes of Super-tax.
(b) That the case of the The Committee of A.B. v.Simpson which dealt with the question of the liability of the Committee, as the person in control of the fund and receiving the income, to assessment to Income Tax, was not conclusive as to the computation of the patient's income for purposes of Super-tax.
(c) That the matter was res judicata, as the same question between the same parties (so far as regards the claim to deduct the lunacy percentage and the committee's remuneration) had already been finally determined by the Special Commissioners on the appellant's previous appeal.
8. It was contended on behalf of the Crown, inter alia:
(a) That the case was concluded by the decision in the case of theCommittee of A.B. v. Simpson, 14 T.C. 29.
(b) That the payments claimed as deductions were payments made out of the patient's income after it had become his income, and that they were not admissible as deductions in computing his income for the purposes of Super-tax.
(c) That the previous decision of the Special Commissioners only applied to the particular years to which the appeals then before them related, and that in determining the appeal now before them they were bound to follow the direction given by the High Court in a subsequent case, which had shown that their decision on the appellant's earlier appeal had been wrong in law.
9. We, the Commissioners who heard the appeal, gave our decision in the following terms:-
Although the question actually decided in the case of the "Committee of A.B. v. Simpson was a different one, we "consider, in view of the language used in the judgment in "that case, that if we were dealing with the present case "de novo we should be bound to hold that both the lunacy "percentage and the committee's remuneration were expenses "made out of the lunatic's income after it has become his "income, and not payments by which his income was "diminished, and that they could not be deducted in computing "his income for the purposes of Super-tax.
"But the point is taken that the matter is res judicata, as "the same question was raised in the case of the same Appellant "on appeal before the Special Commissioners against "assessments for the years 1914-15 to 1917-18, inclusive, in "October, 1918, when it was decided in the Appellant's favour, "and it was held that the lunacy percentage and the committee's "remuneration paid for the years then under review did "not form part of the Appellant's income. Having regard to "the decisions in the cases of Hoystead v. Commissioner of "Taxation, [1926] A.C. 155, and Aylmer v.Mahaffy, "10 T.C. 594, we feel that we have no alternative but to "admit this plea and to allow the appeal as regards the lunacy "percentage and the committee's remuneration.
"The claim for the guarantee premium and law costs is not "covered by the previous decision and we hold that these payments "are not admissible deductions in computing the "Appellant's income for Super-tax.
We accordingly reduced the assessment by the amount of the lunacy percentage and the committee's remuneration to the sum of £4,699.
10. The Appellants, immediately after the determination of the appeal, declared 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, 1918, Sections 7 (6) and 149, which Case we have stated and do sign accordingly.
P. WILLIAMSON, J. JACOB, Commissioners for the Special Purposes of the Income Tax Acts.
York House,
23, Kingsway,
London, W.C.2.
30th May, 1930.
The case came before Rowlatt, J., in the King's Bench Division on the 12th and 13th March, 1931, and on the latter date judgment was given against the Crown, with costs.
Rowlatt, J.-This is a most interesting case and an interesting point, and it is with great personal regret that I feel bound to take the course that I am about to take, but it seems to me that I have really no authority to go into the matter. I have listened to an argument, which at present strikes me as a formidable one, to the effect that the proceedings in assessing a person to tax, including the proceedings on a revision of the assessment upon appeal to the Special Commissioners, are nothing more than an operation by officials, and an operation which those officials are bound to undertake...
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