London County Freehold and Leasehold Properties Ltd v Sweet
| Jurisdiction | England & Wales |
| Judgment Date | 13 May 1942 |
| Date | 13 May 1942 |
| Court | King's Bench Division |
NO. 1217-HIGH COURT OF JUSTICE (KING'S BENCH DIVISION)-
Income Tax - Investment company not assessable under Case I of Schedule D - Claim for relief in respect of expenses of management - Income Tax Act, 1918 (8 & 9 Geo. V, c. 40), Section 33 (1).
The Appellant Company was an investment company deriving its income from rents received from freehold and leasehold properties. During the years 1933 to 1938 it issued new debenture stock for the purpose of repaying existing debentures, specific mortgages, bank loans and other charges, both its own and those of its subsidiary companies whose undertakings had been amalgamated in 1934 with the Appellant Company's. The Special Commissioners decided that the expenses incurred in the issue of the new stock were not expenses of management within the meaning of Section 33 (1) of the Income Tax Act, 1918, and that the Company was not therefore entitled to repayment of Income Tax in respect of them.
Held, that the Commissioners' decision was correct.
Stated under the Income Tax Act, 1918, Section 149, by the Commissioners for the Special Purposes of the Income Tax Acts for the opinion of the King's Bench Division of the High Court of Justice.
1. At a meeting of the Commissioners for the Special Purposes of the Income Tax Acts held on 23rd August, 1940, London County Freehold and Leasehold Properties, Ltd. (hereinafter called "the Appellant Company") claimed under Section 33 of the Income Tax Act, 1918, repayment of so much of the Income Tax paid by it for the years ending 5th April, 1935, to 5th April, 1938, respectively, as was equal to the amount of the tax on sums disbursed as expenses of management for those years. The claim was objected to by the Inspector of Taxes to the extent that among the expenses of management claimed there were included sums which the Appellant Company disbursed in respect of the conversion, redemption and issue of certain debentures as hereinafter appears. The claim accordingly fell to be heard and determined by the Special Commissioners in like manner as in the case of an appeal under Schedule D.
2. The Appellant Company was incorporated on 12th July, 1909, as a private company with a capital of £100,000. It was converted into a public company in 1925. It had undertaken the purchase (either by itself or through the medium of four wholly owned subsidiary companies) of freehold and leasehold property.
The share capital had been modified and increased from time to time and on 12th June, 1933, stood at the figure of £3,000,000 of which £2,246,435 had been issued and was fully paid. At that date £968,050 6 per cent. first mortgage debenture stock redeemable in March, 1935, at 1011/2 per cent. had been issued and was outstanding. In addition the Appellant Company had mortgages outstanding to an amount of £937,771 at varying rates of interest secured by specific mortgages upon properties owned by it, and there was also outstanding £523,200 in respect of mortgages on properties owned by its subsidiary companies.
On 12th June, 1933, the Appellant Company with its subsidiary companies owned some 607 flats, 400 shops and offices and other real property. It derived its income from rents received.
It was admitted that its business consisted mainly in the making of investments.
3. In order to reduce the annual charge for interest on the said debentures and mortgages and to consolidate and convert the mortgages and charges of the Appellant Company and its subsidiaries into one uniform long term security, the Appellant Company issued in...
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