Grosvenor Place Estates Ltd v Roberts
| Jurisdiction | England & Wales |
| Judge | THE MASTER OF THE ROLLS,LORD JUSTICE HARMAN,LORD JUSTICE DONOVAN |
| Judgment Date | 20 December 1960 |
| Judgment citation (vLex) | [1960] EWCA Civ J1220-3 |
| Court | Court of Appeal |
| Date | 20 December 1960 |
[1960] EWCA Civ J1220-3
In The Supreme Court of Judicature
Court of Appeal
The Master of the Rolls
(Lord Evershed)
Lord Justice Harman and
Lord Justice Donovan
MR F. HEYWORTH TALBOT, Q.C. and Mr C.N. Beatt (instructed by Messrs Stanley Attenborough & Co.) appeared as Counsel for the Appellant
MR F.H. BUCHER, Q.C. and MR ALAN ORR (instructed by the Solicitor of Inland Revenue) appeared as Counsel for the Respondent.
: In this case I have had the advantage of reading in advance the Judgment to be delivered by Lord Justice Donovan. I agree with my Brother's conclusions and with his reasons for them. Out of respect, however, for the opposite conclusion which Lord Justice Harman has reached and for the arguments of the learned Counsel for the Appellants, I state shortly my own reasons for thinking that this appeal should be dismissed.
The case is indeed a remarkable one. The Appellants granted to the National Coal Board a long lease (as that phrase is defined by Section 172 of the Income Tax Act, 1952) of premises known as Hobart House, the lease being for a term of eighty-one years from the 25th March, 1955, at an annual rent of £96,177. The National Coal Board proceeded to pay to the Appellants in respect of each of the first six quarters under their lease the rent in full, i.e. sums on each occasion of £24,044. 5s.0d., without any deduction in respect of income tax, Why the Coal Board omitted to make the deductions which it was their duty under Section 170 of the Act to make is not explained and is irrelevant for present purposes. The Appellants appear to have accepted these quarterly payments - perhaps naturally enough - without demur. The Additional Commissioners for Income Tax have now proceeded to assess the Appellants in respect of these quarterly sums of rent as being profits or gains liable to tax under Schedule D of the Income Tax legislation. That they are such profits and gains was not disputed by Mr Ileyworth Talbot but it is contended by him that the inevitable effect of the statutory language in the relevant sections of the Act is such that the Appellants cannot now be assessed for income tax in respect of them. Mr Heyworth Talbot also submitted, in opening his case, that the Coal Board remained liable to assessment in respect of their various payments, that it was indeed the duty of the Special Commissioners so to assess the Board, but that the Board could not now claim to deduct from any future payment of rent any tax which they would be made liable to pay upon such assessments. I am glad to say that for the purposes of this appeal it is unnecessary for the Court to express any view upon any part of this submission.
That the sums of rent in question are profits and gains in the hands of the Appellants is not in doubt: and Mr Heyworth Talbot also conceded that if the Appellants were surtax: payers they would have to pay such tax in respect of the total sums so received by them. It was, however, the main burden of Mr Key-worth Talbot's argument that the effect of the amendment made in 1927 to what is now Section 170 of the Income Tax Act, 1952 (formerly Rule 21 of the All Schedules Rules) has been inevitably to liberate persons in the position of the Appellants from any liability to assessment for income tax in such circumstances as have occurred in the present case. In the end of all the question turns, as I think, upon the short and single question: are the words of sub-section 1 of Section 36 of the present Act -"Statements of profits or gains under Schedule 'D' shall, unless an assessment thereon is required to be made by the Special Commissioners, be laid before the Additional Commissioners" - such as to produce the effect, when road in conjunction with Section 170 of the Act, that the only assessment which may now lawfully be made in respect of rent payable under a long loase is an assessment to be made by the Special Commissioners upon the lessee and so to disable the Additional Commissioners from themselves making any assessment in any circumstances upon the recipient? A similar point arises from the effect of Section 170 upon Section 6 of the Act; but the main argument has revolved round Section 36 and I do not desire to add anything to what Lord Justice Donovan says in his Judgment in regard to Section 6.
If such is the effect of Section 170 it was not suggested by Mr Heyworth Talbot that the result was other than an oblique effect of an amendment to the law intended only to relate to the mechanics of income tax collection. Lord Justice Donovan has in his Judgment, traced the history of the relevant sections. Prior to the year 1888 liability for assessment to income tax in respect of annual payments made otherwise than out of the profits or gains of the payer rested exclusively upon the recipient as being part of his profits or gains subject to the general charge for income tax. In the year 1888 what later became Rule 21 of the All Schedules Rules was introduced in terms which corresponded to the first part of the first sub-section of the present Section 170. In the year 1927 it emerged as a result of the Lang Propeller Company Limited's case ( 1927, 1 Chancery, 120) that the debt to the Crown thereby created, not being an assessed tax, gave to the Crown no priority in a winding up of the debtor. As a result Rule 21 was, by the Finance Act, 1927, amended and has since been in the form now represented by Section 170. It will be observed that Parliament, in making this amendment, though it had before them the language of Rule 19 of the All Schedules Rules (now Section 169 of the Act of 1952) did not think fit to introduce into the amended Rule 21 the language of the sub-section 1(a) of Section 169: "No assessment shall be made on the person entitled to the interest, annuity or annual payment". It has, been consistently hold by the Courts that the amendments introduced by the Acts of 1888 and 1927 were intended as changes only in the machinery of collection - sec for example the Judgment, of Mr Justice Finlay in the case of Rye and Eyre v. C.I.R., 19 Tax Cases, p. 164, and the observations of Mr Justice Upjohn in Stokes v. Bennott, 34, Tax Cases, p. 337. It is also not indoubt as a result of the case of Glamorgan Quarter Sessions v. Wilson, 5, Tax Cases, p. 537, that under the law as It then stood (in 1910) failure on the part of a lessee to make the deduction in respect of tax required by the terms of Rule 21 (now found in Section 170(1)) did not have the effect that the lesser was not himself liable to be assessed in respect of the gross sum of rent which he had received. It is, however, now contended - and I return to the fundamental question in the case to which I have already adverted - that the references to assessment by the Special Commissioners introduced into what are new the later sub-sections of Section 170 have, when read in conjunction with the terms of Section 36 of the present Act, not only altered the machinery of tax collection by getting rid of the difficulty encountered in the Lang Propeller case but have materially altered the policy and substance of the law itself by making no longer possible, in circumstances such as: the present, assessment of the lesser in respect of rents received by him without deduction by the lessee.
If the purpose of the amendments to the statute was to alter only the machinery for collection, then I apprehend that the Court should not give to such amendment the much wider effect now contended for unless such conclusion is inevitable according to the strict construction of the material language of the statute. As Lord Dunedin observed in Whitney v. Inland Revenue Commissioners, 1926 Appeal Cases, p. 52; "A statute is designed to be workable and the interpretation thereof should be to seek that object unless critical omission or clear direction makes that end unobtainable".
The general scheme or policy of income tax may be discerned, so far as relevant to this appeal, from Sections 1, 122 and 148 of the Act of 1952. By the first of those sections tax is charged in respect of "all property profits or gains" described in Section 122 (that is, Schedule D) including (by paragraph 1(a)(1)) "the annual profits or gains arising or accruing to any person residing in the United Kingdom from any kind of property whatever….". By Section 148 the tax under Schedule D "shall be charged on and paid by the persons receiving or entitled to the income in respect of which tax under" the Schedule is directed to be charged. Rents under long leases are brought within the scope of Schedule D by Section 177 of the Act. To such rents, if paid by a lessee wholly out of profits or gains brought by him into tax, Section 169 of the Act (formerly Rule 19 of the All Schedules Rules) is applicable. Where, however, and to the extent that such rents are not payable out of profits or gains brought into charge, sub-section (1) of Section 170 requires the lessee, on making the payment, to deduct out of it a sum representing the amount of the tax thereon at the standard rate in force at the time of the payment. Sub-sections (2) and (3) of the Section, so far as relevant, provide: "Where any such payment as aforesaid is made by or through any person, that person shall forthwith deliver to the Commissioners of Inland Revenue, for the use of the Special Commissioners, an account of the payment and of the tax deducted out of the payment, and the Special Commissioners shall assess and charge the payment for which an account is so delivered on that person. (3) The Special Commissioners may, where any person has made default in delivering an account required by this section, make an assessment according to the best of their judgment".
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