Glenboig Union Fireclay Company Ltd v Commissioners of Inland Revenue
| Jurisdiction | England & Wales |
| Judgment Date | 23 February 1922 |
| Date | 23 February 1922 |
| Docket Number | No. 10. |
| Court | House of Lords |
Lord Buckmaster, Ld. Atkinson, Lord Sumner, Ld. Wrenbury, Lord Carson.
RevenueExcess profits dutyProfitsCapital or incomeCompensation paid for minerals left unworked to support railwayFinance (No. 2) Act, 1915 (5 and 6 Geo. V. cap. 89), sec. 40 (1) (2), and Fourth Schedule, Part I. par. 1, Part II. par. 1.
In 1913 a fire-clay company, whose assets included leasehold rights in fire-clay seams, and whose business consisted in mining for fireclay, some of which they sold raw and some manufactured, received payment from a railway company of a sum of 15,316, 11s. 4d. as compensation in respect of the fire-clay in an area reserved by the railway company, under the powers contained in the Railways Clauses Act, 1845, for the support of its line. This sum was credited to the Company's revenue account for the year 1913, and income-tax was paid upon it.
In a question as to whether, for the purposes of excess profits duty, this sum fell to be included in computing the Company's profits for the pre-war trade year 1913
Held (aff. judgment of a Court of seven Judges) that it was not profits within the meaning of the Finance (No. 2) Act, 1915, in respect that it was paid to the Company as the consideration for a capital asset which had been rendered unavailable for the purposes of its business.
(In the Court of Session, 5th February 19211921 S. C. 400.)
The Glenboig Union Fireclay Company appealed to the House of Lords.
The case was heard on 21st and 23rd February 1922.
Argued for the appellants;Both sums, the sum of 15,316, lls. 4d. and the sum of 4500, fell to be treated as profits. As regarded the first sum, it was paid to the Company as a surrogatum for the profits which would have been secured under a normal system of working; it was therefore a proper revenue Receipt. It was not payment made in respect of a capital asset of the Company, for the Company had no right of property in the mineral field or in any portion of the fire-clay in situ; the only right they had was to sever, remove, and sell.1 As regarded the second sum, it was paid to recoup the Company for mining expenditure incurred during the periods when the interdicts were in operation. That expenditure was necessary in order to secure a future profit, and as it had been regularly debited against income, the sum of 4500 had been properly credited to income.2 Further, it had to be noted that the payment of 4500 had been made in respect of expenditure upon the whole area of the fire-clay field which the appellants had been interdicted from working, although. eventually only a very small part of it, about one-thirtieth, had been reserved. In any event, therefore, it would be necessary to remit the case to the Court of Session to determine what portion of the 4500 referred to the portion of the field which eventually was not reserved by the Caledonian Railway Company.
Counsel for the respondents was called upon to deal only with the second point in the case, the 4500. The Lord Advocate argued that that payment was in no sense part of the income of the Company, being damages for a wrongous use of diligence. In reply to a question by one of their Lordships he admitted that the case would have to be remitted back to the Court of Session as had been suggested by the appellants' counsel. The House thereupon invited the parties to come to an agreement which would avoid the necessity for the remit, and, after consultation, the Lord Advocate intimated that he agreed that 4000 of the 4500 should be regarded as profits.
Lord Buckmaster.The Finance Act of 1915 imposed a duty known as excess profits duty to be levied and paid upon profits...
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