Grahamston Iron Company v Inland Revenue
| Jurisdiction | Scotland |
| Judgment Date | 25 February 1915 |
| Date | 25 February 1915 |
| Docket Number | No. 65. |
| Court | Court of Session |
Lord President, Lord Johnston, Lord Skerrington.
Revenue—Income-tax—Profits of trade—Deductions—Money wholly expended for purposes of trade—Voluntary association of traders for maintaining prices—Deduction of contributions paid by member to association—Proof of how contributions expended by association—Income-Tax Act, 1842 (5 and 6 Vict. cap. 35), sec. 100, Sched. D, 1st and 2nd Cases, Rule 1, and secs. 120 and 123.
A firm of ironfounders, members of a trade association whose object under its rules and regulations was to keep up and raise the prices of the products sold by its members, claimed the right to deduct from the return of the profits of their business for the purpose of income-tax their contributions to the association, as being moneys wholly and exclusively expended by them for the purposes of their trade.
Held that, in order to establish that the contributions were moneys so expended, it was not sufficient for the firm to prove that they had paid the contributions to the association and to produce the rules and regulations of the association, but that they must produce to the Special Commissioners the accounts of the association in order that the Special Commissioners might ascertain from them how the contributions had, in fact, been expended.
On 28th January 1915 the Special Commissioners of Income-Tax stated a case for the opinion of the First Division of the Court of Session, as the Court of Exchequer in Scotland, in an appeal by the Grahamston Iron Company against an assessment for income-tax which had been made upon them by William Crawford, Surveyor of Taxes.
The case set forth:—
‘The Grahamston Iron Company of Falkirk (hereinafter called the appellants) appealed against an assessment of £3141 for the year ended 5th April 1914, made upon them under section 100, Schedule D, of the Income-Tax Act, 1842 (5 and 6 Vict. cap. 35), as amended by the Income-Tax Act, 1853 (16 and 17 Vict. cap. 34), in respect of the profits of the concern, viz., that of ironfounders, carried on by them.*…
‘The assessment appealed against was based on the average profits of the three years ended 31st December 1912, and in arriving at such assessment the Additional Commissioners for the division of Falkirk had disallowed a claim on the part of the appellants to deduct the sum of £923, being one-third part of the sum of £2770 debited in the profit and loss account of the appellants for the year ended 31st December 1912—the last of the three years entering into the average on which the assessment was based—in respect of payments consisting of contributions and levies (hereinafter referred to as “payments”) to the National Light Castings Association, of which they are members.
‘The disallowance by the Additional Commissioners of the said sum of £923 as a deduction from the income of the appellants for the purposes of the income-tax is the only point on which the opinion of the Court of Session is sought. In the event of the decision of the Special Commissioners with respect to such deduction being held to be erroneous in point of law, it is agreed that the case is to be referred back to them for such adjustment of the appellants' liability as may be necessary.
‘I. The following facts were admitted or proved:—(1) The
National Light Castings Association (N.L.C.A.) (hereinafter called the association), was formed for the purpose of raising and keeping up the price to the buyer of goods and articles made and/or supplied by its members. During the year 1912 payments amounting to £2770 were made by the appellants to the association under the rules and regulations after mentioned. (2) On 26th June 1914 the Special Commissioners addressed to the appellants a precept in the following terms*:—“The Commissioners for the Special Purposes of the Income-Tax Acts having received notice of appeal against the above assessment do hereby require you to forward to them at their office, 49 Wellington Street, Strand, London, W.C., on or before the 3rd day of July 1914, a schedule containing the following particulars, namely:—1. A copy of the Rules and Regulations of the National Light Castings Association. 2. A copy of the accounts of the said association for each of the three years 1910, 1911, and 1912. If the association was set up and commenced within the three years, accounts should be furnished for the period from the date of first setting up the same. Given under our hands this 26th day of June 1914. Signed by two of the Commissioners for the Special Purposes of the Income-Tax Acts.” (3) In response to the said precept the appellants produced a copy of the rules and regulations of the association, which is printed in the appendix hereto and forms part of this case.† The appellants did not produce the accounts of the
association called for in the said precept on the ground that the said accounts were not in the possession or under the control of the appellants. The appellants, however, tendered the...
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Adam Steamship Company v Inland Revenue
...1913 S. C. 810. 2 1915 S. C. 536. 3 Lochgelly Iron and Coal Co. v. Inland Revenue, 1913 S. C. 810; Grahamston Iron Co. v. Inland Revenue, 1915 S. C. 536; Rhymney Iron Co. v. FowlerELR, [1896] 2 Q. B. 4 Income-Tax Act, 1842 (5 and 6 Vict. cap. 35), sec. 120. 5 Inland Revenue v. Stewarts & Ll......
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