Cull v Cowcher (HM Inspector of Taxes)
| Jurisdiction | England & Wales |
| Judgment Date | 09 March 1934 |
| Date | 09 March 1934 |
| Court | King's Bench Division |
NO. 916.-HIGH COURT OF JUSTICE (KING'S BENCH DIVISION).-
Income Tax, Schedule D - Interest on money on deposit - Payment of interest waived for year of assessment - ".... ceases "to possess any particular source...." - Income Tax Act, 1918 (8 & 9 Geo. V, c. 40), Schedule D, Case III; Finance Act, 1926 (16 & 17 Geo. V, c. 22), Sections 22 and 30.
The Appellant was one of the four shareholders of an unlimited liability company carrying on the business of bankers, the management being conducted by a "board of partners" consisting of the shareholders.
For several years the company declared dividends, but none of the shareholders drew the whole amount due to him, the excess over what each required being left on deposit with the company. Interest on the sums on deposit was, under a mutual understanding, allowed by the company and credited to the shareholders quarterly. The Appellant's deposit account was credited with interest for the year ending 31st March, 1930.
During the year ending 31st March, 1931, the "board of "partners" resolved, in view of the financial conditions then existing, to forgo interest on their deposit accounts for the time being. No interest on the Appellant's deposit was accordingly paid or credited or became due in the year ending 31st March, 1931.
The Appellant was assessed to Income Tax, under Case III of Schedule D, for the year 1930-31, on the basis of the amount of deposit interest arising to him within the year preceding. On appeal, he contended that the particular source of profits or income arising to him in the preceding year was the contract whereby interest was payable on the moneys deposited by him with the company and that, when it was agreed that the payment of interest on the shareholders' deposits should be discontinued, he ceased to possess the particular source of profits or income. The Special Commissioners confirmed the assessment.
Held, that the source of profits or income had not ceased in the year of assessment.
Stated under the Income Tax Act, 1918, Section 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 6th December, 1932, for the purpose of hearing appeals, Mr. A. E. K. Cull (hereinafter called "the Appellant") appealed against an assessment to Income Tax in the sum of £18,754 for the year ending 5th April, 1931, made upon him by the Additional Commissioners of Income Tax for the City of London under the provisions of the Income Tax Acts, in respect of interest on deposits with Messrs. Cull & Co. (herein- after referred to as "the company").
2. The company is an unlimited liability company incorporated on 27th April, 1922, and carries on the business of bankers in the City of London. It has been admitted by the Board of Inland Revenue that the company is carrying on a bonâ fide banking business within the meaning of Section 36 of the Income Tax Act, 1918.
3. The share capital of the company is at present £800,000, divided into 100,000 ordinary shares of £1 each and 700,000 preference shares of £1 each. The Appellant holds 20,000 ordinary shares and 209,750 preference shares. The remaining shares are held in different amounts by three other shareholders who, together with the Appellant, form the "board of partners" by whom, in accordance with the company's articles of association, the management of the business is conducted.
4. For several years the company declared large dividends, which were credited to the account of each shareholder, but none of the shareholders drew the whole of the dividends due to him, the excess over what each required being left on deposit account with the company, upon which, although there was no written agreement as to the terms of deposit, interest at the rate of six per cent. per annum on the amount from time to time outstanding, without deduction of Income Tax, was, under a mutual understanding, allowed by the company and credited to the shareholders quarterly. The amounts thus left on deposit depended upon the personal requirements of the respective shareholders, and bore no relation to the number of shares held by them.
5. For the year...
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Hart (HM Inspector of Taxes) v Sangster
...to the provisions of Section 21 of the Finance Act, 1951. We were referred, inter alia, to the following authorities:-Cull v. Cowcher, 18 T.C. 449.Simpson v. Executors of Bonner Maurice, 14 T.C. 580.St. Lucia Usines and Estates Co. v. St. Lucia (Colonial Treasurer), [1924] A.C. 508.Dewar v.......
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Hart (Inspector of Taxes) v Sangster
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