Fitzleet Estates Ltd v Cherry

JurisdictionUK Non-devolved
JudgeLord Wilberforce,Viscount Dilhorne,Lord Salmon,Lord Edmund-Davies,Lord Keith of Kinkel
Judgment Date09 November 1977
Judgment citation (vLex)[1977] UKHL J1109-1
Date09 November 1977
CourtHouse of Lords
Fitzleet Estates Limited
Cherry (Inspector of Taxes)

[1977] UKHL J1109-1

Lord Wilberforce

Viscount Dilhorne

Lord Salmon

Lord Edmund-Davies

Lord Keith of Kinkel

House of Lords

Upon Report from the Appellate Committee, to whom was referred the Cause Fitzleet Estates Limited against Cherry (Inspector of Taxes), That the Committee had heard Counsel, as well on Monday the 10th as on Tuesday the 11th, days of October last, upon the Petition and Appeal of Fitzleet Estates Limited whose registered office is situate at Berkeley Square House, Berkeley Square, London, W1, praying, That the matter of the Order set forth in the Schedule thereto, namely, an Order of the Chancery Division of Her Majesty's High Court of Justice of the 3rd of December 1976, so far as therein stated to be appealed against, might be reviewed before Her Majesty the Queen, in Her Court of Parliament, and that the said Order, so far as aforesaid, might be reversed, varied or altered, and that the Petitioners might have the relief prayed for in the Appeal or such other relief in the premises as to Her Majesty the Queen in Her Court of Parliament, might seem meet; as also upon the Case of Colin Cherry, one of Her Majesty's Inspectors of Taxes, lodged in answer to the said Appeal; and due consideration had this day of what was offered on either side in this Cause:

It is Ordered and Adjudged, by the Lords Spiritual and Temporal in the Court of Parliament of Her Majesty the Queen assembled, That the said Order of the Chancery Division of Her Majesty's High Court of Justice of the 3rd day of December 1976, in part complained of in the said Appeal, be, and the same is hereby, Affirmed, and that the said Petition and Appeal be, and the same is hereby, dismissed this House: And it is further Ordered, That the Appellants do pay, or cause to be paid, to the said Respondent the Costs incurred by him in respect of the said Appeal, the amount thereof to be certified by the Clerk of the Parliaments.

Lord Wilberforce

My Lords,


The appellant, a properly holding company, borrowed sums of money in connection with its business and paid interest upon them. The sums of interest payable were charged to its profit and loss account. If nothing more had happened, the appellant would have been entitled, under section 169 of the Income Tax Act 1952, to retain income tax deducted from such interest as it in fact paid, if it had taxed profits equal to or greater than the interest. What the company did, however, was to transfer sums equivalent to the (net) interest payable in the years in question (1961–2, 1962–3) and add them to the cost of land and buildings acquired as shown in the balance sheet. This process is called "capitalising" the interest. There were no doubt sound business reasons for doing so and this course was approved by the company's auditors. It led however to a claim by the Revenue for the company to account to it for income tax on the interest paid in each year, on the basis that section 170 of the Act applied.


That section 170 does apply in such a case was held by this House in Chancery Lane Safe Deposit & Offices Co. Ltd. v. C.I.R. [1966] A.C.85, by majority from which Lord Reid and Lord Upjohn dissented.


There were certain issues raised in the present case which might have enabled it to be distinguished from the Chancery Lane case, but these have disappeared, and it is now conceded that the present case is, on the facts, indistiinguishable from the earlier decision. In particular it is true of both cases that in each of the years in question the taxed fund of the company's profits was sufficient to cover the interest and any dividend paid in that year. The appellant therefore had to challenge directly the Chancery Lane case. The present appeal comes direct to this House from the High Court of Justice in accordance with the Administration of Justice Act 1969 section 13, and we are invited to depart from the earlier decision in accordance with the Practice Statement reported [1966] 1 W.L.R. 1234.


My Lords, two points are clear:

1. Although Mr. Bates, Q.C., for the appellant company developed his argument with freshness and vigour, it became clear that there was no contention advanced or which could be advanced by him which was not before this House in 1966. The very full report of the arguments of cousel on that occasion leaves no doubt as to this. In particular, the appellant's main contention which is that all that is necessary in such cases as these is to draw up a simple account showing the interest payments on one side and the fund of taxed profits on the other, and to see whether the latter covers the former, was clearly before the House and, for reasons then thought good, by the majority rejected. The desperate argument of "per incuriam" is certainly not available here.

2. There has been no change of circumstance such as some of their Lordships found to exist in the case of Miliangos [1976] A.C. 443 such as would call for or justify a review of the 1966 decision. The fact, if it be so, that the 1966 decision works hardly upon property companies is not such a change of circumstance.


There is therefore nothing left to the appellant but to contend—as he frankly does—that the 1966 decision is wrong. This contention means, when interpreted, that three or more of your Lordships ought to take the view which appealed then to the minority.


My Lords, in my firm opinion, the 1966 Practice Statement was never intended to allow and should not be considered to allow such a course. Nothing could be more undesirable, in fact, than to permit litigants, after a decision has been given by this House with all appearance of finality, to return to this House in the hope that a differently constituted committee might be persuaded to take the view which its predecessors rejected. True that the earlier decision was by majority: I say nothing as to its correctness or as to the validity of the reasoning by which it was supported. That there were two eminently possible views is shown by the support for each by at any rate two members of the House. But doubtful issues have to be resolved and the law knows no better way of resolving them than by the considered majority opinion of the ultimate tribunal. It requires much more than doubts as to the correctness of such opinion to justify departing from it.


My Lords, it may be—I do not know—that a result which causes property companies, which as advised by their accountants capitalise interest on investments or development, to suffer fiscally as compared with those who charge their interest payments to revenue, or, perhaps more accurately, do not decide to capitalise them, is unjust or economically unsound. But the remedy for this does not lie here. It is for the Revenue, not merely to rest upon its victory, but to consider the broad merits or otherwise of the result, after such representations as the affected taxpayers may make. I suggest that your Lordships have no alternative but to dismiss the appeal.

Viscount Dilhorne

My Lords,


After hearing Mr. Bates' forceful argument for the appellants, I am disposed to come to the same conclusion as that reached by the majority of the House in Chancery Lane Safe Deposit & Offices Co. Ltd. v. C.I.R. [1966] A.C. 85 where the issues raised in this appeal were considered and decided.


The interest paid by the appellants on monies borrowed by them was originally charged to their profit and loss account. In the year 1961/62 the interest paid was £39 and was exceeded by the profits or gains brought into charge to tax. In the year 1962/63 the interest paid was equal to the amount of profits or gains brought into tax. If the matter had rested there, it is clear that the appellants would not have had to account to the Revenue for...

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