Fry v Salisbury House Estate Ltd ; Jones v City of London Real Property Company Ltd

JurisdictionEngland & Wales
CourtHouse of Lords
JudgeViscount Dunedin,Lord Warrington of Clyffe,Lord Atkin,Lord Tomlin,Lord Macmillan,.
Judgment Date04 Apr 1930
Judgment citation (vLex)[1930] UKHL J0404-1

[1930] UKHL J0404-1

House of Lords

Viscount Dunedin.

Lord Warrington of Clyffe.

Lord Atkin.

Lord Tomlin.

Lord Macmillan.

Fry (Inspector of Taxes)
and
Salisbury House Estate Limited.
Jones (Inspector of Taxes)
and
City of London Real Property Company Limited.

After hearing Counsel, as well on Monday the 3d, as on Thursday the 6th and Friday the 7th, days of March last, upon the Petition and Appeal of Cecil Fry, of 554, Salisbury House, London, E.C.2, one of His Majesty's Inspectors of Taxes, praying, That the matter of the Order set forth in the Schedule thereto, namely, an Order of His Majesty's Court of Appeal of the 26th of June, 1929, might be reviewed before His Majesty the King, in His Court of Parliament, and that the said Order might be reversed, varied, or altered, and that the Petitioner might have the relief prayed for in the Appeal or such other relief in the premises as to His Majesty the King, in His Court of Parliament, might seem meet; as also upon the printed Case of Salisbury House Estate, Limited, 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 His Majesty the King assembled, That the said Order of His Majesty's Court of Appeal, of the 26th day of June, 1929, 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 Appellant do pay, or cause to be paid, to the said Respondents the Costs incurred by them in respect of the said Appeal, the amount thereof to be certified by the Clerk of the Parliaments.

Viscount Dunedin .

My Lords,

1

This is an important case with probably far-reaching consequences, and we had the benefit of a very full and able argument from the Attorney-General on behalf of the Crown, but in the end I have come to the conclusion, though not without difficulty, that the judgment appealed from is right and should be affirmed. The facts which give rise to the question are as follows:—

2

Salisbury House is a building of considerable size in the City of London and is owned by a limited company which was formed for the express purpose of acquiring the property known as Salisbury House, and utilising it. The house contains about 800 rooms. These rooms are let to tenants as offices. There is no residential occupation. No furnishings are provided. The company maintain a staff of servants to operate the lifts and act as porters and look after the building, and there is also a large staff of cleaners all under the orders of a housekeeper paid by the company. The tenants have the exclusive use of the rooms let, but are bound to leave the keys at night with the housekeeper so as to allow access in the case of fire breaking out. The company retain certain rooms as an office. By the terms of the leases the company have to pay all rates and taxes. The company were assessed to income tax under Schedule A upon the gross value of the premises as appearing in the Valuation Roll in accordance with the Valuation (Metropolis) Act, 1869. This assessment was imposed on the company as landlords, instead of on the various individual tenants who are the occupiers, in accordance with Rule 8 ( c) (i) of Section 7 of Schedule A of the Income Tax Act, 1918, which provides for the assessment of landlords instead of tenants in the case of any house or building let in different apartments and tenements and occupied by different persons severally, and the amount of the assessment was duly paid by the company. The Inspector of Taxes then served on the company a notice of assessment under Schedule D. He arrived at the assessment by calculating the amount of profit as brought out in the profit and loss account of the company, after deducting expenses of management and upkeep, and then he proposed to deduct from the assessment so brought out the amount of assessment already paid under Schedule A. The company admitted that they had to pay under Schedule D upon the amount of profits which they made from the cleaning and other services, but contended that, so far as the proceeds of the property were concerned, that had already been taxed under Schedule A and could not again be brought in computo under Schedule D and demanded a case. A case was stated by the Commissioners which sets out the above facts. The figures, apart from the question of principle, have been agreed on.

3

Rowlatt, J. took the view that the Commissioners had decided the case rightly and dismissed the appeal. He thought the case was ruled by the judgment of the Court of Session, given in the case of Rosyth Building Co. v. Rogers 1921 Sess. Cas. p. 372. The appeal being taken to the Court of Appeal, that Court unanimously reversed the judgment, and the Crown now appeals to your Lordships.

4

My Lords, this is one of those cases which may be approached, so to speak, from very different angles, and according as you approach it from one angle or another a different conclusion may seem to be the one that is right to follow. I can only say that, after the best consideration I could give it my opinion is that the angle from which I now approach it is the right one. Now, the cardinal consideration in my judgment is that the income tax is only one tax, a tax on the income of the person whom it is sought to assess, and that the different Schedules are the modes in which the Statute directs this to be levied. In other words, there are not five taxes which you might call income tax A, B, C, D, and E, but only one tax. That tax is to be levied on the income of the individual whom it is proposed to assess, but then you have to consider the nature, the constituent parts, of his income to see which Schedule you are to apply. Now, if the income of the assessee consists in part of real property you are, under the Statute, bound to apply Schedule A. Schedule A may, so to speak, get in touch with the assessee in different ways according to the condition of affairs. It may touch property in occupation which actually brings in no money return. A good example will be found in the case decided within the last few weeks in this House in the case of Lady Miller. There a lady enjoyed the use of a mansion house under the provisions of the will of her deceased husband which was feudally vested in trustees. The mansion house brought her in no money but she was reckoned as for income tax, in order to arrive at super-tax, on the yearly value of the house. In this matter it differs from all the other Schedules, all of which only deal with actual return. When, as in the present case, a subject is let, the rent, if it represents a fair bargain, is taken as the measure of that part of the income of the lessor, and he suffers the tax by way of deduction by his tenant from the rent due or as in the present case by paying it himself. The result is that by the operation of the assessment under Schedule A which is made imperative by the Statute, and was in fact applied here, the income of the assessee is so far dealt with and cannot be dealt with again. Of course that does not mean that the assessee may not be liable in respect of other income under other Schedules. He might be liable under Schedule B, which says in terms that the amount there is to be in addition to the assessment made under Schedule A, though the underlying subject is the same. But he might be liable under any of the other Schedules if he has income to which they apply, and in particular he might be liable under Schedule D. It is a mere commonplace to remark that a man who possesses real property and is assessed under Schedule A, may also have investments and other forms of property which will be assessed under Schedule D.

5

Now, turning to this case. The income of the respondents, as represented by rents, is admittedly assessed and properly assessed under Schedule A. "But then," says the appellant, "you are carrying on a business, and a business falls to be assessed under Schedule D." To which the respondent replies. "Quite so, and I am willing to pay on the profits which I make on the cleaning and other services." To this the appellant replies, "No, that is not enough. Your business is one business not a congeries of businesses, and if I estimate your profits from your own profit and loss account, I will get the higher figure which I ask." The answer to that is—"You cannot bring out that balance of profit without taking the rents I receive in computo. Now, these rents are also part of my income or property and the Statute says that any income which represents the value of real property is to be assessed in the manner directed under Schedule A". My Lords, I think the final answer is good. The rents, having been assessed under Schedule A, are, so to speak, exhausted as a source of income, and the so-called concession made by the appellant that there should not be double taxation, and that therefore he would be willing to allow deduction of the sum paid under Schedule A is a concession which is beside the mark. It is a concession to avoid double taxation, but the concession cannot come into being where double taxation does not exist, and here it does not exist because, it being imperative to deal with the rents under Schedule A, there is no possibility of subsequently dealing with them under Schedule D.

6

My Lords, I have preferred to consider this question on the Statute alone, without reference to authority, but I am far from anxious to put my judgment on a mere ipse dixit, and I will therefore analyse my own argument to see if it is supported by authority. Now, the cardinal proposition is that income tax is one tax, and the Schedules merely the different means of collecting it, and that there are not so many taxes as there are Schedules. This...

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