Jones & Company v Inland Revenue
| Jurisdiction | Scotland |
| Date | 1952 |
| Court | Sheriff Court |
No. 1483-COURT OF SESSION (FIRST DIVISION)-
Income Tax, Schedule D - Deduction - Cost of replacement of factory chimney.
The Company carried on a trade of processing paper. A chimney of its factory was replaced because of its dangerous condition but the replacement did not constitute an appreciable improvement. The Company claimed a deduction in computing its profits for Income Tax purposes of the cost of removing the old chimney and building the new one.
On appeal before the Special Commissioners it was contended for the Company that the chimney was an integral part of a unit, which unit was the factory as a whole; that the expenditure on the new chimney was to maintain the revenue-earning capacity of the factory; and that removal of the old chimney was in the nature of a repair. It was contended on behalf of the Crown that the replacement of the chimney was capital expenditure; that the expenditure incurred should be borne by the owner as such and not by the trader; and that any deduction should be given under Rule 8 (a) of No. V of Schedule A, and not under Schedule D. The Commissioners held that the cost of replacement of the chimney was capital expenditure but allowed the cost of removing the old chimney.
Held, that the whole cost of replacing the chimney (including the cost of removing the old chimney) was an admissible deduction.
Stated for the opinion of the Court of Session as the Court of Exchequer in Scotland under Section 149 of the Income Tax Act, 1918.
At a meeting of the Commissioners for the Special Purposes of the Income Tax Acts held at Edinburgh on 12th October, 1950, for the purpose of hearing appeals, Samuel Jones & Co. (Devonvale), Ltd. (hereinafter called "the Company") appealed against an assessment made upon it under Case I of Schedule D, Income Tax Act, 1918, for the year 1949-50 in an estimated amount of £60,000 less £5,000 capital allowances.
The ground of the appeal was the Company's claim that a sum of £4,363 expended in replacing its factory chimney (which sum included £260 for the cost of removing the old chimney) was revenue expenditure which should be allowed as a deduction in the computation of the Company's trade profits for the purpose of assessment to Income Tax.
I. The following facts were proved or admitted.
(2) The Company carries on the business of processing paper at a factory known as Devonvale Mills in Tillicoultry, Clackmannanshire.
(3) In the year forming the basis of assessment under Schedule D of the Income Tax Acts for the year 1949-50 the Company incurred expenditure in the erection of a new chimney to replace an old chimney in the factory and in removing the old chimney. The new chimney was sited close to the old in the middle of the factory in a block of buildings which also contains furnaces and boilers. The new chimney is about the same height as the old one (approximately 100 feet), and projects through an aperture (rather larger than in the case of the old chimney) in the roof. Seen from inside the building, the bottom part of the chimney resembles a pillar with the roof running into its sides. Two photographs are annexed, marked A and B respectively, and form part of this Case(1). The photograph marked A gives a general view of the factory and shows the central position of the chimney. That marked B was taken after the erection of the new chimney but before the demolition of the old: it shows them side by side. It is the old chimney which is smoking, as the flues had not then been connected to the new structure.
(4) The new chimney, like the old, supplies a draught to two Lancashire boilers, which supply steam for the various processes carried out in the factory.
(5) The flues, which are of indestructible material, were connected with the old chimney, and took the form of a brick tunnel joining the chimney above ground and running from the back of the boilers. The flues were extended to meet the new chimney.
(6) The old chimney had been in existence and operation for some 80 or 90 years. It had got into a dangerous condition, inter aliathrough a sinking of its foundations which caused it to lean some three feet six inches out of plumb. The lean is shown in the said photograph marked B. The lean and the risk of collapse were increased by open cast coal blasting operations in the vicinity.
(7) The Company's expert advisers had considered the possibility of straightening the old chimney and had rejected it on the ground of safety.
(8) The factory as a whole was insured for...
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...of the new stand was not a "repair" of any larger entity; dicta in Samuel Jones & Co. (Devonvale) Ltd. v. Commissioners of Inland Revenue 32 TC 513; 1952 SC 94 and Hodgins v. Plunder & Pollak (Ireland) Ltd. [1957] IR 58 explained; (6)the Commissioners were correct in deciding that the stand......
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Abbott Laboratories Ltd v Carmody
...879. 1 1950 S.C. 331. 1 33 T.C. 213. 1 33 T.C. 213, at p. 219. 2 Samuel Jones & Co. (Devonvale) Ltd. v.Commissioners of Inland Revenue 32 T.C. 513; 1952 S.C. 3 [1956] A.C. 14. ...
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Brown (HM Inspector of Taxes) v Burnley Football and Athletic Company Ltd
...of the new stand was not a "repair" of any larger entity; dicta in Samuel Jones & Co. (Devonvale) Ltd. v. Commissioners of Inland Revenue 32 TC 513; 1952 SC 94 and Hodgins v. Plunder & Pollak (Ireland) Ltd. [1957] IR 58 explained; (6)the Commissioners were correct in deciding that the stand......
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Abbott Laboratories Ltd v Carmody (HM Inspector of Taxes)
...879. 1 1950 S.C. 331. 1 33 T.C. 213. 1 33 T.C. 213, at p. 219. 2 Samuel Jones & Co. (Devonvale) Ltd. v.Commissioners of Inland Revenue 32 T.C. 513; 1952 S.C. 3 [1956] A.C. 14. ...