Nicoll (HM Inspector of Taxes) v Austin
| Jurisdiction | England & Wales |
| Judgment Date | 10 April 1935 |
| Date | 10 April 1935 |
| Court | King's Bench Division |
NO. 968-HIGH COURT OF JUSTICE (KING'S BENCH DIVISION)-
Income Tax, Schedule E - Emoluments of office - Deduction - Payments by company of expenses of upkeep, etc., of managing director's residence - Income Tax Act, 1918 (8 & 9 Geo. V, c. 40), Schedule E, Rules 1 and 9.
The Respondent, who was a life governing director of and held a controlling interest in a company, entered into an agreement with the company which provided (a) that he should be appointed managing director of the company for ten years (or until prior determination of the agreement by the Respondent at twelve months' notice) at a specified salary, together with any bonus and director's fees voted to him; and (b) that, during the continuance of the agreement, the Respondent, who had intimated that, owing to the cost of upkeep, he might have to vacate the house which he owned and occupied as a residence, should (as requested by the company for the convenience and prestige of its business) continue to reside in the house, the company undertaking to pay all outgoings in respect of the house (including rates, taxes and insurance, and the cost of gas, electric light and telephone) and to maintain the house and gardens in proper condition.
The Respondent was assessed to Income Tax under Schedule E in respect, inter alia, of the amount actually expended by the company on the upkeep, etc., of the house and gardens. On appeal he contended that the payments by the company did not constitute money nor were they capable of being converted into money or income chargeable to him as an emolument of his office as managing director of the company; and that, even if they were part of his income, he was entitled to have them deducted as expenses wholly, exclusively and necessarily incurred in performing his duties as managing director. The General Commissioners decided that the sums expended by the company were not in the nature of additional salary of the Respondent or an emolument of his office liable to Income Tax under Schedule E, and they discharged the assessment.
Held, (i) that the sums in question were income of the Respondent and were profits of his office as managing director of the company assessable to Income Tax upon him under Schedule E, and
(ii) that no deduction was admissible in respect of them under Rule 9 of Schedule E.
Stated under the Statute 8 & 9 Geo. V, Cap. 40, Sec. 149, by the Commissioners for the General Purposes of the Income Tax for the Division of Beacontree in the County of Essex for the opinion of the King's Bench Division of the High Court of Justice.
1. At a meeting of the Commissioners for the General Purposes of the Income Tax acting in and for the Division of Beacontree in the County of Essex held at the County Justices' Courts, Great Eastern Road, Stratford, in the said County on the 12th day of April, 1934, for the purpose of hearing appeals, John Giles Austin (hereinafter called "the Respondent") appealed against an additional first assessment under Schedule E of the Income Tax Acts for the year ending 5th April, 1933, in the sum of £314 made upon him under the provisions of the Income Tax Acts in the circumstances hereinafter appearing.
2. The Respondent was not present on the hearing of the appeal nor was any evidence given on his behalf but he was represented thereat by his Accountant.
3. The Respondent is a Life Governing Director of John G. Austin (Ilford), Limited, (hereinafter called "the Company") in which Company he holds a controlling interest. He resides at Debden Hall, Loughton, Essex.
4. An agreement dated the 28th day of November, 1931, was entered into between the Company and the Respondent and was adduced in evidence and a copy of it is annexed hereto marked "A" and forms part of this Case. The material provisions of this agreement are (shortly stated) as follows:-
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(a) The agreement recites (inter alia) that owing to the cost of upkeep of Debden Hall, Loughton, of which property he (the Respondent) is the owner he may be obliged to discontinue his residence there and that the Company has requested him (for the convenience and prestige of the business of the Company) to continue to reside at Debden Hall which he has agreed to do during the continuance of the agreement upon the terms and conditions therein mentioned.
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(b) By clauses 1 and 4 the Respondent is appointed Managing Director of the Company for a term of ten years at a salary of £1,500 per annum in addition to any bonus or director's fees which may be voted or awarded to him.
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(c) By clause 5 it is agreed that the Respondent shall continue to reside at Debden Hall and not without the consent of the Company at any time during the continuance of the agreement to part with the possession of the said premises or any part thereof but to retain the same in his own possession as a residence for himself and his family and not to use the said premises for any other purpose whatsoever and the Company agree to pay all rates (including water rate) taxes and insurance cost of gas electric light and the telephone and all other outgoings payable in respect of the said messuage dwellinghouse and premises and at its own expense keep the same and the roofs walls fences sewers and drains thereof and all roads and footpaths abutting thereon in a proper condition doing such repairs and decorations as may from time to time be necessary and also at its own expense keeping the grounds and gardens thereof in a neat and tidy condition and well stocked.
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(d) By clause 6 power is reserved to the Respondent to determine the agreement on giving twelve months' notice.
5. For some years prior to the said agreement Respondent had been the owner and occupier of Debden Hall and had been assessed to Income Tax under Schedule A and to rates in respect thereof. After the said agreement no change took place in his title to the said premises, and he continued to be assessed as before to Income Tax and rates in respect thereof.
6. The amount actually expended by the Company in pursuance of and in compliance with clause 5 of the said agreement for the year ended the 31st March, 1932, was £314 6s. 1d. made up as follows:-
| Rates, Water, &c. | £58 | 12 | 2 |
| Light, Heat, &c. | 51 | 8 | 9 |
| Telephone, &c. | 8 | 0 | 3 |
| Upkeep of Gardens | 196 | 4 | 11 |
| £314 | 6 | 1 |
7. The additional first assessment under appeal was made upon the Respondent in respect of the sum of £314.
8. The Company charged the said sum...
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