Jennings (HM Inspector of Taxes) v Middlesbrough Corporation
| Jurisdiction | England & Wales |
| Judgment Date | 20 May 1953 |
| Date | 20 May 1953 |
| Court | Chancery Division |
HIGH COURT OF JUSTICE (CHANCERY DIVISION)-
Income Tax, Schedule D - Town Hall used for trading activities - Whether portion of profits referable to ownership of the property and covered by Schedule A assessment.
The Corporation made use of their Town Hall by (a) hiring it out for meetings, (b) organising and running public dances in the hall, and (c) providing roller skating facilities in the crypt. Assessments to Income Tax were made in respect of these activities on the footing that the whole of the profit was assessable under Schedule D, subject only to a deduction in respect of the net annual value of the hall assessed under Schedule A.
On appeal to the Special Commissioners, the Corporation contended that the profits fell to be apportioned between those referable to the provision of chattels and services and those referable to the exploitation of the Corporation's right of property in the hall; and that the latter were covered by the Schedule A assessment on the hall and should be excluded from assessment under Schedule D.
The Commissioners accepted the Corporation's contention and apportioned the profits accordingly. The Crown demanded a Case.
Held, that no apportionment of the profits of the trade carried on in the Town Hall should be made.
Stated under the Income Tax Act, 1952, Section 64, by the Commissioners for the Special Purposes of the Income Tax Acts for the opinion of the High Court of Justice.
1. At meetings of the Commissioners for the Special Purposes of the Income Tax Acts held on 18th and 19th January, 1949 and 25th and 26th September, 1951, the Mayor, Aldermen and Burgesses of the County Borough of Middlesbrough (hereinafter called "the Corporation") appealed against assessments to Income Tax for the years 1938-39 to 1946-47, both inclusive,
made upon it under Schedule D of the Income Tax Act, 1918, in respect of profits arising from activities in relation to its Town Hall, the amounts of the assessments being:-1938-39 |
… |
… |
£740 |
1943-44 |
… |
… |
£6,500 |
1939-40 |
… |
… |
£675 |
1944-45 |
… |
… |
£6,000 |
1940-41 |
… |
… |
£250 |
1945-46 |
… |
… |
£9,000 |
1941-42 |
… |
… |
£1,663 |
1946-47 |
… |
… |
£1,411 |
1942-43 |
… |
… |
£3,473 |
2. The question at issue in the appeal arises in the following way. The Corporation owns a Town Hall, which (when not in use for civic purposes) it uses in three ways, namely:-
(a) it hires the hall out to other persons for meetings and other gatherings;
(b) it organises and runs public dances in the hall;
(c) it organises and runs roller skating for the public in the crypt.
In connection with all three activities the Corporation provides the necessary services, such as seating, lighting, heating, a dance band, refreshments and cloak room facilities, as more particularly hereinafter described.
In connection with all three activities the Corporation makes charges to the persons hiring the hall, or the members of the public admitted thereto for dancing and roller skating (as the case may be), and in each of the years before us the total charges (after deducting all expenditure) resulted in a profit.
The assessments before us were made on the footing that the whole of this profit was assessable to Income Tax under Schedule D, subject only to a deduction in respect of the net annual value of the hall assessed under Schedule A. The ground of appeal of the Corporation was that this profit fell to be apportioned as between (a) so much thereof as was attributable to the Corporation's right of property in the hall, and (b) so much thereof as was attributable to the rendering of services, that the former was covered by the Schedule A assessments on the hall, and that only the latter fell to be assessed to Income Tax under Schedule D.
At the hearings on 18th and 19th January, 1949, the facts set out in the following paragraphs 3 to 7 were proved or admitted.
3. The Town Hall was built under powers conferred by the Municipal Corporations Act, 1877. It was completed in 1887 and opened in 1889. It was intended principally for the holding of municipal functions and for the discharge of municipal business (other than use as municipal offices, the municipal offices being in a separate building). When not required for municipal purposes it is let to various societies, charitable and religious, for events which they wish to hold there or meetings which they desire to convene there. It is also let for such things as school speech days, police socials, and to political parties who wish to hold meetings there. For those purposes the persons hiring the hall pay a fee to the Corporation. This fee varies according to the purposes for which the Town Hall is required, and it varies further, in the case of such things as orchestral entertainments and the like, according to the prices which the hirers themselves are going to ask for the seats. The various charges are set out in a scale of charges, a print of which (and of the form of agreement for the hiring of the hall) is hereto annexed marked "A", and forms part of this Case(1). The scale
charges include the provision of chairs and heating. The Corporation also provides lighting and (if so required by the hirer) staff, such as stewards and cloak room attendants. For lighting and any staff required separate charges are made. There are also other further charges as specified under the head "Additional Charges" in the said print. On some occasions refreshments are provided by the Corporation and separate charges are made for these.4. Up to the year 1924 the Town Hall was used exclusively for the purposes hereinbefore mentioned. From time to time the Corporation was asked to let the hall for purposes such as variety entertainments, but it always declined to do so. In September, 1924, in view of the need for providing recreational facilities for the young people in the town, the Corporation passed a resolution resolving that, as an experiment, dances should be held on Saturday nights until the end of that year (1924), the admission charge to be two shillings per person. The experiment was successful and it was continued without a break until September, 1938; but from September, 1938, until September, 1939, the Town Hall was wanted for A.R.P. work, and the dances were suspended. It was found possible to resume them in September, 1939, and that was done, as a sort of antidote to the blackout, and without interfering in any way with the municipal functions which the Town Hall had to discharge.
In September, 1939, and for the next few years during the war, the demand increased, and instead of holding dances on Saturday nights only, they were held on three nights during the week, that is to say, on Tuesdays, Thursdays and Saturdays. That practice still continues, although it is always subject to the Town Hall not being required for municipal or other public purposes.
The charges for admission are 3s. on Saturdays, and 1s. 6d. on other nights, per person, and the arrangements under which those dances are held are these: The band is provided by the Corporation, also the lighting and heating, and also the caretaker and the stewards, together with seats round the hall for use during and between the dances. All those things are included in the admission charge. Light refreshments are available to be purchased, and the cloakroom is available on payment of the usual fee of a few pence. The result is that for the fee of 1s. 6d., or 3s. on Saturdays, members of the public can go in and dance and have all the facilities for dancing, but they pay extra for any refreshments that they have, and they pay for the use of the cloakroom.
5. Below the Town Hall there is a crypt, and in 1933 the Corporation decided to use it for the purposes of allowing roller skating there. Some two years before 1933 a maple floor had been put in, not in anticipation of roller skating taking place there, but because of the overflow meetings which were sometimes held there. The crypt had a stone floor, which was rather cold and chilly, and a maple floor was put in to make it more cheerful.
After going into the question as to whether roller skating would damage the floor, and having ascertained that it would not, the Corporation commenced to allow roller skating there in 1933. The crypt is a suitable place for that, because there are no pillars (as are sometimes seen in a crypt), but simply arches, and so there is a clear run. The crypt has been used for that purpose since 1933 on Monday and Wednesday evenings, subject always to the crypt not being required for any other purpose, and subject also to there being no meeting going on above, because a meeting cannot be held in the hall while roller skating is going on in the crypt, on account of the noise made by the roller skating.
The arrangements are these: The admission fee is 1s.6d., the lighting, heating and music from an electric amplifier and records is provided for that fee, and refreshments are provided at a charge, and the cloakroom is available at a separate charge, and there is a caretaker in charge during the session.
In addition to that, the Corporation hires out skates to those who want them, at a charge of 6d. per pair; and it is estimated that some 60 per cent. of the skaters hire those skates.
6. The following statements put in evidence before us at the hearings on the 18th and 19th January, 1949, are hereto annexed, marked respectively as under, and form part of this Case(1), namely:-
Exhibit B-particulars of the number of sessions of dancing and roller skating and the gross receipts therefrom for the years 1939-40 to 1947-48.
Exhibit C-particulars of the hire of the Town Hall, and of the free use thereof, for the years 1939-40, 1940-41, 1946-47 and 1947-48.
7. Evidence (which we accepted) was given before us by Mr. Robert Sutcliffe, the Borough Treasurer and Valuation Officer of Middlesbrough, who testified to the facts hereinbefore found, the particulars referred to in...
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