McIntosh (HM Inspector of Taxes) v Manchester Corporation
| Jurisdiction | England & Wales |
| Judgment Date | 14 July 1952 |
| Date | 14 July 1952 |
| Court | Court of Appeal |
HIGH COURT OF JUSTICE-
COURT OF APPEAL-
Income Tax, Schedule D - Excavation expenditure incurred in connection with water-works undertaking - Whether annual allowances due in respect of such expenditure - Income Tax Act, 1945 (8 & 9, Geo. VI, c. 32), Sections 2 and 14 (1).
The Corporation, which carried on a water-works undertaking, had incurred certain excavation expenditure in connection with that undertaking. In assessments to Income Tax made on the Corporation under Case I of Schedule D for the years 1946-47, 1947-48 and 1948-49 no annual allowances under Part I of the Income Tax Act, 1945, were made in respect of this expenditure on the ground that it was excluded from qualifying for such allowances by Section 14 (1) of that Act.
On appeal by the Corporation against the assessments, the Special Commissioners came to the conclusion that the expression "cutting" in Section 14 (1) of the Act meant making an open way through land which rises above the level of the way to be made through it. They held that the expenditure in question was not accordingly prohibited by the Subsection from ranking for annual allowances, and allowed the appeal. The Crown demanded a Case.
Held, that the expenditure in question did not qualify for annual allowances.
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 High Court of Justice.
1. At a meeting of the Commissioners for the Special Purposes of the Income Tax Acts held on 20th April, 1950, the Manchester Corporation (hereinafter called "the Corporation") appealed against three assessments to Income Tax for the years ended 5th April, 1947, 1948 and 1949, respectively, made upon it under the provisions of Case I, Schedule D, of the Income Tax Act, 1918.
2. These assessments were made on the Corporation in respect of its water-works undertaking and are in the following sums:-
1946-47 £410,333 less £111,885 Capital allowances and £1,632 Exceptional depreciation.
1947-48 £358,564 less £140,384 Capital allowances.
1948-49
(2) £260,000 less £124,000 Capital allowances.
(3) Additional assessment £40,376 less £11,987 Capital allowances.
3. The question raised by this appeal is whether annual allowances should be given in respect of certain expenditure on buildings or structures, incurred by the Corporation as regards its water-works undertaking, under the provisions of Part I of the Income Tax Act, 1945, and in particular under Sections 2 and 14 of that Act, by reason of the matters hereinafter set out. The total sum on which such allowances are claimed amounts to £98,353.
4. The facts in this Case are not in dispute and are set out in the next succeeding nine paragraphs.
5. All the expenditure with which this Case is concerned was incurred before 1946-47 and consists of expenditure on buildings or structures. It is disputed, however, by the Appellant that this expenditure is expenditure incurred on the construction of buildings or structures within the meaning of Part I of the Income Tax Act, 1945, having regard to the provisions of Section 14 thereof.
6. The Corporation, through its water-works undertaking, supplied water to the extent of 75 million gallons a day to a population of about 2 million persons.
The water was obtained from three sources;
(2) in the East, at the foothills of the Pennines, from the Longdendale system of reservoirs constructed in 1848;
(3) Thirlmere Lake, in the Lake District, which was connected by aqueduct to Manchester;
(4) Haweswater Lake also connected to Manchester at present by the Thirlmere acqueduct, and which will be directly connected to Manchester when the Haweswater aqueduct, which is in the course of construction, is completed.
7. The following table (table no. 1) contains a summary of the expenditure on buildings or structures, including the amount on which allowances were given in the said assessments and the amount on which no allowances were given, forming the subject of this appeal. It also contains amounts of expenditure forming part of the total but not connected with this appeal:-
Expenditure |
Expenditure |
Expenditure |
|||
Total |
on which |
on which |
not forming |
||
Expenditure |
allowances |
no |
part of |
||
have been |
allowances |
this appeal |
|||
given |
were given |
||||
£ |
£ |
£ |
£ |
||
Longdendale |
… |
56,567 |
48,470 |
8097 |
- |
Thirlmere |
… |
643,238 |
554,007 |
37,084 |
52,147 |
Haweswater |
… |
475,900 |
202,334 |
53,172 |
220,394 |
£1,175,705 |
£804,811 |
£98,353 |
£272,541 |
The total of £804,811, £98,353 and £272,541 equals the amount of the total expenditure £1,175,705.
8. The following table (table no. 2) sets out the reservoir or lakes in respect of which the expenditure was incurred, the year in which it was so incurred, the total expenditure and the expenditure on which allowances had been given in the said assessments:-
Expenditure |
|||
Year in which |
on buildings |
||
original |
Total |
&c. on which |
|
expenditure |
Expenditure |
allowances |
|
incurred |
have been |
||
given in the |
|||
assessments |
|||
Longdendale |
£ |
£ |
|
1941-42 |
50,326 |
42,970 |
|
Woodhead Reservoir |
|||
Torside Reservoir |
|||
Rhodes Wood Reservoir |
|||
Vale House Reservoir |
|||
Bottoms Reservoir |
|||
50,326 |
42,970 |
||
Woodhead Reservoir |
1942-43 |
6241 |
5500 |
Thirlmere |
|||
Grasmere Settling Pools |
1902-03 |
4500 |
3900 |
" " " Extension |
1922-23 |
13,503 |
12,003 |
Heaton Park Reservoir |
1934-35 |
625,235 |
538,104 |
Haweswater |
|||
Mardale Tunnel and Aqueduct |
1941-42 |
475,900 |
202,334 |
£1,175,705 |
£804,811 |
9. The following table (table no. 3) contains details of the amounts on which no allowances were granted in respect of each item of expenditure and the total amount expended in each case, excluding expenditure not material to this appeal which is included in column 4 (table no. 1).
Total |
||
Expenditure |
expenditure |
|
for which no |
(see Table |
|
allowances |
no. 2) |
|
were made |
excluding |
|
in the |
expenditure |
|
assessments |
not material |
|
to this appeal |
||
Longdendale |
£ |
£ |
Woodhead Reservoir-Excavation for exten- |
||
sion by a small tongue |
2549 |
50,326 |
Torside Reservoir-Excavations (a) for con- |
646 |
|
struction of a new weir in the form of a |
||
re-entrant tongue, and (b) for deepening |
||
flood channel |
212 |
|
Rhodes Wood Reservoir-Excavation for |
||
deepening flood channel |
2584 |
|
Vale House Reservoir-Excavation for |
||
deepening overflow channel |
1158 |
|
Bottoms Reservoir-Excavation for deepening |
||
flood channel |
207 |
|
Carried forward |
7356 |
Total |
||
Expenditure |
expenditure |
|
for which no |
(see Table |
|
allowances |
no. 2) |
|
were made |
excluding |
|
in the |
expenditure |
|
assessments |
not material |
|
to this appeal |
||
£ |
£ |
|
Brought forward |
7356 |
|
Woodhead Reservoir-Excavation for reconstruction of outfall |
741 |
6241 |
Thirlmere |
||
Grasmere Settling Pools-Excavation for construction and later extension |
600 |
4500 |
Grasmere Settling Pools-Extension-Excavation into hillside |
1500 |
13,503 |
Heaton Park Reservoir-Excavation to obtain greater depth |
34,984 |
573,088 |
Haweswater |
||
Manchester Tunnel and Aqueduct-Excavation for "cut and cover" portions |
53,172 |
255,506 |
£98,353 |
The sum of £98,353 represents the expenditure on which allowances are claimed and forms the subject matter of this appeal.
10. The following paragraph contains details of the work done in connection with reservoirs forming part of the Longdendale system.
Woodhead Reservoir
It was found necessary to make more adequate provision for flood water. The reservoir and overflow weir were lengthened, the flood channel deepened and the outfall altered. The reservoir was lengthened by constructing a new tongue which entailed cutting through a road and making part of the roadway into a bridge. The weir was extended and the flood channel was deepened to carry away more water. To lengthen the reservoir the new tongue was excavated and the bottom thereof was levelled and concreted, and stone setts and sills were then placed on the top. For the new chute, steps had to be dug and concrete foundations made. No allowances had been given in respect of the cost, amounting to £3,290, of excavation work necessary to extend the reservoir, deepen the channel and make the new chute. Allowances had been granted in respect of the cost, amounting to £610, of excavations for extending the weir and of excavations necessary for converting part of the said roadway into a bridge.
Torside Reservoir
The original bow type overflow weir was completely removed about 1941 and was replaced by a re-entrant weir and a deepened flood channel. Part of the floor of the reservoir had been excavated to make the tongue of the flood channel. Allowances had not been granted for the cost, amounting to £858, of the excavations entailed in the construction of the said tongue and the deepening of the flood channel.
Rhodes Wood Reservoir
Part of the embankment was cut away and the flood channel deepened necessitating excavation and the making of concrete foundations. No allowances were made for the...
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McIntosh (HM Inspector of Taxes) v Manchester Corporation
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