Ellerker v Union Cold Storage Company Ltd
| Jurisdiction | England & Wales |
| Judgment Date | 14 November 1938 |
| Year | 1935 |
| Date | 14 November 1938 |
| Court | King's Bench Division |
NO. 1087-HIGH COURT OF JUSTICE (KING'S BENCH DIVISION)-
Income Tax, Schedule D - Profits of trade - Deduction - Mills, factories, etc. - Income Tax Act, 1918 (8 & 9 Geo. V, c. 40), Schedule D, Cases I and II, Rule 5; Finance Act, 1926 (16 & 17 Geo. V, c. 22), Fourth Schedule.
The Companies in these two cases owned and occupied cold storage premises for the purpose of their trade. The majority of these premises were purely cold stores, but a number were also used for the manufacture of ice for sale and contained separate machinery for that purpose.
On appeal against certain assessments to Income Tax under Schedule D the Companies contended that the premises in question were "mills, factories or other similar premises" within the meaning of the proviso to Rule 5 (2) of Cases I and II of Schedule D, and that they were entitled to a deduction of the gross Schedule A assessments on such premises in computing their trading profits for Income Tax purposes.
Held, that the premises in question were "mills, factories or "other similar premises" within the meaning of the proviso to Rule 5 (2) of Cases I and II of Schedule D.
(1) Ellerker (H.M. Inspector of Taxes) v. Union Cold Storage Co., Ltd.
CASE
Stated by the Commissioners for the Special Purposes of the Income Tax Acts under the Income Tax Act, 1918, Section 149, 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 the 3rd, 4th and 5th days of November, 1937, the Union Cold Storage Co., Ltd. (hereinafter
called "the Company") appealed against a number of assessments to Income Tax for the years 1927-28 to 1934-35 inclusive under Case I of Schedule D of the Income Tax Act, 1918.2. Three separate grounds of appeal were raised before us, two of which (decided by us in favour of the Inspector of Taxes) form the subject of a separate Case stated at the instance of the Company(1). The third ground (the subject of the present Case) upon which the decision of the Court is sought is whether or no the Company's cold storage premises are "mills, factories or other "similar premises" within the meaning of Rule 5 of the Rules applicable to Cases I and II of Schedule D.
3. The Company was incorporated in the year 1897 and carries on (inter alia) a large cold storage business for the purpose of which it owns numerous cold storage premises throughout Great Britain, as hereinafter mentioned.
4. Rule 5 (2) of the Rules applicable to Schedule D, Cases I and II reads as follows:-
"Where, in estimating the amount of annual profits or "gains arising or accruing from any trade, profession, "employment, or vocation and chargeable to tax under this "Schedule, any sum is deducted on account of the annual "value of the lands, tenements," etc., "..... the sum so "deducted shall not exceed the amount of the assessment "..... . for the purpose of tax under Schedule A as "reduced for the purpose of collection: Provided that this "provision shall not apply in the case of any premises being "mills, factories or other similar premises."
5. The Company owns twenty-five cold stores situate in various parts of Great Britain. Twenty of these are purely cold stores and no ice is manufactured therein. In the remaining five cold stores ice is also manufactured for sale.
One of the cold stores which is purely a cold store and in which no ice is manufactured is situate at 60, Miller Street, Manchester. A statement marked "A"(2) is annexed hereto and forms part of this Case, which gives a detailed description of these premises (the description being extracted from the Special Case the subject of Union Cold Storage Co., Ltd. v. Bancroft & Others, [1931] A.C., at page 489).
These premises (60, Miller Street, Manchester) can be taken as typical of all the twenty premises which are purely cold stores, and in which no ice is manufactured and also of the other five premises apart from the space appropriated for the manufacture of ice.
One of the cold stores in which ice is also manufactured is situate at George Street, Glasgow. A statement marked "B"(1) is annexed hereto and forms part of this Case which gives a description of these premises (the description being taken from the case of Union Cold Storage Co., Ltd. v. Assessor for Glasgow, 1929 S.C. 296).
These premises (George Street, Glasgow) can be taken as typical of the five cold stores in which ice is also manufactured.
In the five cold stores where ice is also manufactured there is extra and additional machinery for the ice making, namely, an additional compressor and an ice-making tank. It is separate auxiliary plant. The ice-making machinery is similar in power to the cold storage machinery, but the amount of space taken up by the machinery, and ice tank is about one-sixth of the whole premises.
At these five premises the total turnover for storage for the years 1928 to 1933 was £367,848 and for ice over the same period £199,015, the average over the six years being:-
Storage |
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£61,308 |
Ice |
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£33,169 |
6. Whether the premises are used for the manufacture of ice or not the damage to them from the processes there carried on is very much greater than in the case of ordinary warehouses or store-houses and is moreover greater than in the case of ordinary factories.
The reasons for this were stated to be:-
(i) That the premises which are insulated contain a heavy type of machinery which causes vibration throughout the building: this machinery for compressing ammonia which is circulated through refrigerating chambers works continuously in Summer.
(ii) That the temperature inside is kept at 14° to 15° Faht. with the result that condensation and moisture from the outside air is continually taking place damaging by expansion the brickwork and joists.
(iii) That the buildings are fitted with heavy lifts which are also a cause of damaging vibration, and
(iv) That iron trucks weighing up to 500 lbs. are used for carrying the frozen meat and cannot be prevented from causing great damage to the floors.
7. It was contended on behalf of the Company:-
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(a) That the Company was entitled to deductions of the gross Schedule A assessments in respect of such of their cold storage premises as came under review in this Case,
the said premises being mills, factories, or other similar premises within the meaning of the proviso to Rule 5 of the Rules applicable to Cases I and II of Schedule D of the Income Tax Act, 1918. (b) That in the case of William Milne, Ltd. v. Assessor for Glasgow(1) and the other rating cases upon which reliance was placed on behalf of H.M. Inspector of Taxes it was decided only that stores are not mills or factories for rating purposes whether or not ice is manufactured there unless the premises are used wholly or mainly for manufacturing ice, but there never has been a decision that cold storage premises are not "other similar premises" within the meaning of Rule 5 of the Income Tax Acts.
(c) That five of the Union Cold Storage premises at which ice was in fact manufactured were either factories or "similar premises" and those at which ice was not manufactured were similar premises within the meaning of those words in the proviso to Rule 5 of the Rules applicable to Cases I and II of Schedule D of the Income Tax Act, 1918.
8. It was contended on behalf of the Inspector of Taxes:-
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(a) That as regards the twenty premises which are purely cold stores, none of these were mills, factories, or other similar premises.
(2) That as regards the five cold stores in which ice was also manufactured regard should be had to the primary character and purpose of each of the premises as a whole.
(3) That each of these premises was primarily and mainly a cold store, and was only used to a comparatively small extent for the purpose of manufacture of ice.
(4) That regarded as a whole none of these five cold stores were mills, factories or other similar premises.
(b) That the deduction to be allowed the Company under Rule 5 of Cases I and II of Schedule D in respect of each of the twenty-five cold stores should not exceed the amount of the assessments of the respective premises for the purpose of tax under Schedule A as reduced for the purpose of collection.
In support of these contentions the following cases were relied on:-
Whitbread & Co., Ltd. v. Assessor for Edinburgh,1928 S.C. 425; 1928 S.L.T. 256.
William Milne, Ltd. v. Assessor for Glasgow andUnion Cold Storage Co., Ltd. v. Assessor for Glasgow,1929 S.C. 296; 1929 S.L.T. 200.
Union Cold Storage Co., Ltd. v. Inland Revenue Officer, 1930 S.C. 337; 1930 S.L.T. 146.
Union Cold Storage Co., Ltd. v. Bancroft, [1931] A.C. 459 and 488, at page 492.
Cadbury Bros., Ltd. v. Sinclair (H.M. Inspector of Taxes), 18 T.C. 157.
9. We, the Special Commissioners who heard the appeal gave our decision as follows:-
The Company claims under Rule 5 of the Rules applicable "to Cases I and II, Schedule D, to be entitled to deductions "of the gross Schedule A assessments in respect of their cold "storage premises on the ground that the said premises are "mills, factories or other similar premises.
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