Moore & Company v Inland Revenue
| Jurisdiction | Scotland |
| Judgment Date | 13 November 1914 |
| Date | 13 November 1914 |
| Docket Number | No. 12. |
| Court | Court of Session |
Lord President, Lord Johnston, Lord Skerrington.
RevenueIncome-taxProfits of tradeDeductionsCapital or revenue expenditureMoney wholly expended for purposes of the tradeExpense of promoting Parliamentary bill for construction of railway to increase traffic facilitiesProperty and Income-Tax Act,1842 (5 and 6 Vict. cap. 35), sec. 100, Sched. D,1st Case, Rules 1 and 3,1st and 2nd Cases, Rule1.
Coalmasters owning mines in a certain district, having failed to obtain satisfactory railway facilities from the only railway company owning lines in that district, promoted two parliamentary bills for authority to construct a line to serve the coalfield. The bills were opposed by the railway company, and, upon that company giving a parliamentary obligation to provide the facilities required by the promoters, the bills were thrown out of consent. In estimating profits for income-tax purposes, one of the coalmasters claimed as a deduction the expenses incurred by him in connection with the promotion of these bills.
Held (diss. Lord Johnston) that these expenses did not fall to be deducted; per the Lord President, in respect that they were capital, and not revenue, expenditure;per Lord Skerrington, in respect that they were not money wholly and exclusively laid out or expended for the purposes of the coalmaster's trade.
A. G. Moore & Company, coalmasters, Glasgow, appealed by way of stated case against a decision of the Commissioners for the general purposes of the Income-Tax Acts, assessing the appellants, for the year ending 5th April 1914, on a sum of 21,896, 10s., in respect profits arising from their trade of coalmasters.*
The case set forth:
The assessment appealed against was based on the average profits of the five years ended 31st December 1912, and in arriving at such assessment the Additional Commissioners for the Division of the Middle Ward of Lanark had disallowed a claim on the part of the appellants to deduct the sum of 360, being one-fifth part of the appellants' total contribution of 1801, as shown in Art. I. (2) of this case, towards the promotionin conjunction with certain other personsof two bills known as the Lothian Railways Bills.
The disallowance by the Additional Commissioners of the said sum of 360 as a deduction from the income of the appellants for the purposes of the income-tax is the only point upon which the opinion of the Court of Session is sought, and in the event of the determination of the Special Commissioners with respect to such sum being held to be erroneous in point of law, the assessment will fall to be correspondingly reduced.
I. The following facts were admitted or proved:
(1) The object of the billswhich were thrown out in Committee was to promote a railway from the Lothian coalfields to Leith
Docks, so as to get rid of certain rates, charges, and conditions which had been imposedsome of them recentlyby the North British Railway Company on mineral traffic from the Lothian coalfields.
Prior to the presentment of the bill the position of the matter was(a) That prior to 1901 the North British Railway Company charged a high rate for the carriage of coal from the Lothians coalfields to Leith Docks, and that they claimed to increase the said rate. In 1901 they did increase the said rate, but the coal-masters contested the legality of any increase and obtained a judgment of the Railway and Canal Commission disallowing any increase. Subsequently the North British Railway Company have again threatened to increase these rates. (b) That, notwithstanding that the supply of railway wagons by the said Railway Company was very inadequate, the Railway Company had withdrawn a facility which had for many years been afforded to traders, namely, the right to put traders' wagons on the line for the carriage of their traffic. In 1909 the appellants, along with other traders, took part in applications to the Railway and Canal Commission against this withdrawal of facilities, but their contention was not upheld. (c) That the said Railway Company had in 1909 imposed new charges on the traffic of the promoters, namely, a charge of demurrage in respect of detention of wagons, and a charge for siding rent for occupation of sidings which had never been previously charged; the appellants along with other traders objected to said charges, but the Railway and Canal Commission upheld them; and (d) That the railway facilities generally were extremely bad, and, on account of the increase in the traffic, the manner in which the traffic was conducted by the Railway Company was getting worse. The appellants repeatedly negotiated with the North British Railway Company for some improvement, but without practical result.
In connection with these matters the appellants expended sums of money which appeared in their profit and loss accounts for the years in which they were incurred under the heads of Law Expenses and Management.
Although the said bills were thrown out by a Parliamentary Committee, this was only done after the North British Railway Company had given a Parliamentary obligation to the following effect:(e) That they would construct a new railway in the Lothians to be used solely for mineral and goods traffic; and (f )That the traders could put as many wagons of their own as they chose upon the railway line provided they did not call upon the Railway Company to provide wagons for their traffic.
As a consequence of the promotion of the said bills the railway facilities were much improved, the supply of wagons became more satisfactory, and the Railway Company are at present constructing the new railway for the coalmasters' traffic in terms of the said obligation.
(2) The sums contributed towards that project by the appellants in the period of five years ended 31st December 1912 were as follows:
| In the year ended 31st December 1911, ... | 130 |
| In the year ended 31st December 1912, ... | 1671 |
| viz., | 1801 in all, |
one-fifth part of which, on the five years' average, is the sum of 360 mentioned above.
(3) The sums in question were contributed by the appellants as their share of the total expense, pursuant to clauses 4 and 53 of the Lothian Railways Bill, 1912, and clauses 4 and 64 of the Lothian Railways Bill, 1913, copies of which were put in evidence and referred to at the hearing of the appeal.
(4) The aforementioned sum of 130 was debited under the head of Law Expenses in the appellants' profit and loss account for the year ended 31st December 1911, and the...
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