Jones & Company v Inland Revenue
| Jurisdiction | Scotland |
| Judgment Date | 13 December 1951 |
| Date | 13 December 1951 |
| Docket Number | No. 12. |
| Court | Court of Session (Inner House - First Division) |
1ST DIVISION.
RevenueIncome taxMode of assessmentDeductionsCapital or revenue expenditureErection of new factory chimney and demolition of oldWhether a repairIncome Tax Act, 1918 (8 and 9 Geo. V, cap. 40), Sched. D, Cases I and II, Rule 3 (d)Finance Act, 1926 (16 and 17 Geo. V, cap. 22), sec. 36 (1) and Fourth Sched.
The Income Tax Act, 1918, Sched. D, by Rule 3 of the Rules applicable to Cases I and II (as amended by the Finance Act, 1926, sec. 36 (1) and Fourth Sched.), enacts that, in computing the amount of the profits or gains to be charged to income tax, no sum shall be deducted in respect of "(d) any sum expended for
repairs of premises occupied for the purposes of the trade beyond the sum actually expended for those purposes."A company expended over 4000 in erecting a new factory chimney alongside their existing chimney, which they then demolished at a cost of 260. They claimed to deduct both sums from their profits assessable to income tax, as being expenditure chargeable to revenue. The old chimney had become dangerous. The new chimney, like the old one, supplied a draught to two boilers which provided steam for the various processes carried out in the factory. It was not an appreciable improvement on the old one, so far as function was concerned, and the cost of the work amounted to only 2 per cent of the value of the factory.
Held that the chimney fell to be regarded as an inseparable part of an entirety consisting of the whole factory, and that the sums expended were a revenue expenditure on repairs, admissible as a deduction in computing the company's profits.
O'Grady v. Bullcroft Main CollieriesTAX, (1932) 17 T. C. 93, and Margrett v. Lowestoft Water and Gas Co.TAX,(1935) 19 T. C. 481, distinguished.
AT a meeting of the Commissioners for the Special Purposes of the Income Tax Acts, Samuel Jones & Co. (Devonvale), Limited, appealed against an assessment made upon them under Case I of Schedule D of the Income Tax Act, 1918,1 for the year 19491950 in an estimated amount of 60,000 less 5000 capital allowances.
The ground of the appeal was the company's claim that a sum of 4363 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. The Special Commissioners decided that the 4103 expended on the erection of the new chimney was capital expenditure, but that the expenditure of 260 on removing the old chimney was properly to be regarded as incurred on revenue account, and they accordingly allowed the latter sum as a deduction. At the request of both parties they stated a case for the opinion of the Court of Session.
The case set forth that the following facts were admitted or proved:"(1) The company carries on the business of processing paper at a factory known as Devonvale Mills in Tillicoultry, Clackmannanshire. (2) In the year forming the basis of assessment under Schedule D of the Income Tax Acts for the year 19491950 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. [Here followed an explanation relating the photographs to the findings in fact.] (3) 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. (4) 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. (5) The old chimney had been in existence and operation for some eighty or ninety years. It had got into a dangerous condition, inter alia, through a sinking of its foundations which caused it to lean some 3 feet 6 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. (6) The company's expert advisers had considered the possibility of straightening the old chimney and had rejected it on the ground of safety. (7) The factory as a whole was insured for 165,936. (8) The sum of 4363 expended in replacing the old chimney included 260 in respect of the cost of removing the old chimney. The 4103 spent on the erection of the new chimney included 300 for the foundations and 525 for the piling. (9) The new chimney is not an appreciable improvement as far as function is concerned. Its suitability for boiler draught is...To continue reading
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Brown (HM Inspector of Taxes) v Burnley Football and Athletic Company Ltd
...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 was not CA......
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Brown (HM Inspector of Taxes) v Burnley Football and Athletic Company Ltd
...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 was not CA......
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...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. 94. 3 [1956] A.C. ...
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