John Hudson & Company, Ltd v Kirkness (HM Inspector of Taxes)

JurisdictionEngland & Wales
CourtCourt of Appeal
Judgment Date02 December 1953
Judgment citation (vLex)[1953] EWCA Civ J1202-3
Date02 December 1953

[1953] EWCA Civ J1202-3

In The Supreme Court of Judicature

Court of Appeal


Lord Justice Singleton

Lord Justice Birkett

Lord Justice Hodson

John Hudson & Co., Ltd.
E. A. Kirkness (H.M. Inspector of Taxes) Appeal of the Respondent (H.M. Inspector of Taxes)

MR JOHN SENTER, Q.C. and MR ANTHONY BARBER (instructed by Messrs. Willis and Willis, 51 and 52, Chancery Lane, London, W.C.2.) appeared as Counsel on behalf of John Hudson & Co., Ltd.

MR CYRIL KING, Q.C. and SIR REGINALD P. HILLS (instructed by the Solicitor of Inland Revenue, Somerset House, London, W.C.2.) appeared as Counsel on behalf of H.M. Inspector of Taxes.


The Transport Act of 1947 by Section 1 set up a public authority to be called the British Transport Commission, referred to in the Act as "the Commission". Part II of the Act provided for the acquisition by the Commission of railway and canal undertakingsand of certain railway wagons. The acquisition of railway wagons is dealt with in Sections 29 to 32 of the Act, and as we are directly concerned with those sections I think it is right that I should read them, as far as is material.


Section 29 reads: "Where, immediately before the date of transfer, any privately owned railway wagon is under requisition by virtue of an exercise of the powers in that behalf conferred by Regulation 53 of the Defence (General) Regulations, 1939 — (a) the property in that wagon shall vest in the Commission on the date of transfer, free from any mortgage or other like incumbrance, and the requisition shall then cease; and (b) the Crown shall not be liable for any compensation under the Compensation (Defence) Act, 1939, or otherwise in respect of any damage to the wagon occurring during the period of requisition."


Section 30: "(1) Where under the last preceding section the property in any wagon vests in the Commission, the Commission shall, subject to the provisions of the three next succeeding subsections, pay as compensation in respect thereof an amount determined, by reference to the type of wagon and the year in which the wagon was first built, in accordance with the Table set out in the Sixth Schedule to this Act."


Section 31 subsection (1): "Subject to the provisions of this section, the compensation payable by the Commission in respect of a privately-owned wagon vesting in them on the date of transfer shall be paid to the person who, immediatelybefore the date of transfer, was the owner of the wagon."


Section 32 subsection (1): "The amount payable by way of compensation in respect of a wagon the property in which vests in the Commission on the date of transfer shall be satisfied in the manner provided by Part VI of this Act by the issue to the person entitled thereto of British transport stock". The amount which was to be paid for railway wagons which were acquired by the Commission under those sections was subject to subsections (2), (3) and (4) of Section 30, which I have not thought it necessary to read.


The amount specified in the Sixth Schedule to the Act, which is headed "Compensation for Acquisition of Privately-owned wagons", which shows the amount payable for the different types of railway wagons, varies according to the year in which the wagon was built without reference to its condition, and the payment was to be made in British transport stock.


The company, John Hudson and Company, Limited, had 663 wagons to which Section 29 of the Transport Act applied, and on the 1st January, 1948, the property in those wagons was transferred to and vested in the Commission under that section. Paragraph 9 of the Case shows that "The Company in due course received compensation for its wagons the property in which had vested in the Commission. The amount of the compensation was substantially higher than the written down value of the wagons for Income Tax purposes as appearing in the Company's books. This written down value was substantially lower than the original cost of the wagons. The balancing charge of £29,021, given effect to in the assessment to Income Tax for 1948/49 under appeal, represents, with the exception of £963 referable to other matters and not in dispute, the excess of the original cost over thesaid written down value. For reasons hereinafter appearing it was said for the Company that it was not subject to any balancing charge in respect of the said excess."


Next I must refer to Section 17, subsections (1) and (3) of the Income Tax Act, 1945. Section 17 subsection (1), as far as material, reads: "Subject to the provisions of this section, where, on or after the appointed day, any of the following events occurs in the case of any machinery or plant in respect of which an initial allowance or a deduction under Rule 6 of the Rules applicable to Cases I and II of Schedule D has been made or allowed for any year of assessment to a person carrying on a trade, that is to say, either — (a) the machinery or plant is sold, whether while still in use or not;" — I omit (b), (c) and (d) — "and the event in question occurs before the trade is permanently discontinued, an allowance or charge (in this Part of this Act referred to as 'a balancing allowance' or a 'balancing charge') shall, in the circumstances mentioned in this section, be made to, or, as the case may be, on, that person for the year of assessment in his basis period for which that event occurs". Subsection (3) is: "If the sale … moneys" (I leave out certain words which are unnecessary for this purpose) "exceed the amount, if any, of the said expenditure still unallowed as at the time of the event, a balancing charge shall be made, and the amount on which it is made shall be an amount equal to the excess or, where the said amount still unallowed is nil, to the said moneys".


The object of this section is this: if plant and machinery have been depreciated in the company's books and Income Tax allowances have been made, and the plant or machinery is subsequently sold at a higher, price than itsdepreciated price, then the excess of the one over the other is subject to a balancing charge upon which Income Tax may be levied. If the price for which the plant or machinery is disposed of is less than its written down price, there is to be a balancing allowance. Although, so far as I know, no case of a balancing allowance has reached this Court as yet, we have had one or two cases in which a balancing charge has been made.


It is claimed by the Crown that a balancing charge of £29,021 falls to be made upon the company on the basis that the wagons which were acquired by the Commission under Section 29 of the Transport Act of 1947 were sold to the Commission within the meaning of the words in Section 17 (1)(a) of the Income Tax Act of 1945. The real question for decision is as to whether, by reason of Sections 29 to 32 of the Transport Act, 1947, there was a sale to the Transport Commission of the wagons which I have already mentioned.


The Special Commissioners held that the assessment upon the company was properly made. I read from paragraph 14 subparagraph (4) of the Case: "However this may be, what took place was in our opinion a 'transfer of the ownership 'of a thing from one person to another for a money price'" — then they refer to Volume 29 of Halsbury's Laws of England, page 5, paragraph 1, and they say: "and we hold that it was a sale. We do not doubt that the wrongful confiscation of a chattel, although accompanied by a subsequent payment of a sum called 'compensation' would not constitute a sale, In. this case, however, Section 29 of the Transport Act, 1947, vested the property in the Company's wagons, which were already lawfully in the possession of the Minister of Transport under S.R. & O. No. 1085 of 1939, in the Commission, and the same enactment, by Section 30, providedcompensation, to be computed under the provisions of the Sixth Schedule, which we hold was a money price. We think also that, if assent is necessary to the conclusion of a valid sale, it must be assumed to be present when a Statute, such as the Transport Act, 1947, becomes law, since the Company as a person living within the jurisdiction of the British Crown must assent to all such laws as are duly enacted, including the enactments contained in Sections 29 and 30 aforesaid". The last part of that finding was not sought to be supported by learned Counsel, Mr King and Sir Reginald Hills, who appear for the Crown in this appeal.


The Company appealed, and Mr Justice Upjohn allowed their appeal, holding that there was no sale. The Inspector of Taxes appeals to this Court.


It is desirable that I should say a little more as to the Transport Act of 1947. The first thing to notice is that the word "sale" is not used in relation to the acquisition by the Commission of property of one kind or another. Sections 12 to 16 provide for the acquisition by the Commission of railway and canal undertakings. I read subsection (1) of Section 12: "Subject to the provisions of this Act, the whole of the undertakings of the bodies of persons specified in the Third Schedule to this Act, being the bodies who fall within the class described in the next succeeding section, shall, on the first day of January, nineteen hundred and forty-eight (hereafter in this Part of this Act, and in the other provisions of this Act so far as they refer to the acquisition by the Commission of the said undertakings, referred to as 'the date of transfer'), vest by virtue of this Act in the Commission." It is in Section 12 that you get the date of transfer of the 1st January, 1948, which is the date for all purposes of the Act.


Section 16 of the Act provides for compensation for the acquisition of the railway and canal undertakings whichare acquired "by reference to the values of the securities specified in the Fourth Schedule", which, by Section 16(2), ...

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