Pearl Assurance Company, Ltd v O'Callaghan (HM Inspector of Taxes)
| Jurisdiction | England & Wales |
| Judgment Date | 16 April 1943 |
| Date | 16 April 1943 |
| Court | King's Bench Division |
No. 1251-HIGH COURT OF JUSTICE (KING'S BENCH DIVISION)-
COURT OF APPEAL-
Income Tax, Schedule A - "Building let in different apartments" - Ascertainment of gross annual value - Deduction in respect of services provided by landlord - Income Tax Act, 1918 (8 & 9 Geo. V, c. 40), Schedule A, No. I; No. V, Rules 7 and 8; and No. VII, Rule 8.
The Appellant Company was the owner of a building containing a number of offices let to several tenants who used in common the entrance, staircase and landings, and a passenger lift, for the upkeep and cleaning of which, as well as for the repairs of the whole building, the Company was responsible.
It was agreed between the Company and the Inspector of Taxes that the gross annual value of the building for the purpose of assessment to Income Tax under Schedule A should be computed on the basis of the rents received from tenants, less the cost of services provided by the Company for its tenants and the amount of the tenants' rates borne by it. It was not disputed that the cost of running the lift should be deducted, but the Company claimed in addition a deduction in respect of the cost of repairs to it. The Crown contended that the lift was part of the hereditament and that the cost of the repairs was therefore covered by the statutory allowance provided by Rules 7 and 8 of No. V of Schedule A. On appeal, the General Commissioners refused the deduction.
Held, that the Crown's contention was correct and that the deduction claimed was accordingly inadmissible.
Stated under the Income Tax Act, 1918, Section 149, by the Commissioners for the General Purposes of the Income Tax for the Division of Newcastle City in the County of Northumberland 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 for the Division of Newcastle City in the County of Northumberland held on Monday, 9th December, 1940, at Cathedral Buildings, Dean Street, Newcastle-upon-Tyne, the Pearl Assurance Co., Ltd. of High Holborn, London, W.C.1. (hereinafter called "the Appellant Company") appealed against an assessment made upon it under the provisions of Schedule A of the Income Tax Act, 1918, for the year ended 5th April, 1940, in the sum of £2,000 gross, £1,664 net, in respect of the hereditament No. 4 Northumberland Street, Newcastle-upon-Tyne in the Division of Newcastle City.
2. The following facts were admitted or proved:-
(a) The hereditament No. 4 Northumberland Street, Newcastle-upon-Tyne, is owned by the Appellant Company and consists of a building let by it in a number of offices to several tenants.
(b) There is a common user of the entrance, staircase and landings by all tenants.
-
(c) There is also a lift in the well of the staircase for the common user of the tenants.
(d) The Appellant Company undertakes to pay for the upkeep of the lift, lighting and cleaning of the staircase, etc., in addition to the upkeep and repair of the structure.
(e) The Appellant Company also provides the services of a caretaker and a lift attendant.
(f) The sums paid by the tenants of the several offices to the Appellant Company under the name of rent are gross sums which include rent and payment for the services rendered by the Appellant Company.
(g) It was agreed that the gross annual value of the hereditament should be computed for the year 1939-40 on the basis of the rents after deducting therefrom the cost of the services provided by the Appellant Company for the tenants and the amount of the tenants' rates borne by the Appellant Company, and would be correctly stated in the sum of £1,302 if the two items of expenditure hereafter mentioned were admissible as deductions, or in the sum of £1,433 if the two said items were not so admissible.
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(h) The cost of those services provided by the Appellant Company, as to the admissibility of which there is no dispute, together with the tenants' rates borne by the Appellant Company amounted in the year 1939 to the sum of £423, arrived at as follows:-
Analysis of Expenses-1939-40
Caretaker and Lift Attendant
£
s.
d.
£
s.
d.
Wages and National Health Insurance
…
199
9
10
Coal Gas and Light
…
14
4
2
Cleaning Materials
…
4
0
0
Rates
…
6
9
10
224
3
10
Lift
Electric Light and Power
…
19
15
10
Servicing
…
4
10
0
Insurance
…
4
10
0
Inspection
…
7
3
4
Oiling
…
1
4
3
37
3
5
Servicing
Electric Light and Lamps
…
52
2
10
Stairs and Passage
…
6
9
0
Corridor
…
39
13
5
Cleaning Drains
…
5
5
0
A.R.P.
…
30
6
0
133
16
3
Rates
Water
…
17
9
0
Tenants
…
10
3
9
27
12
9
422
16
3
(i) In addition to these expenses the Appellant Company in 1939 incurred two items of expenditure, viz., £29 2s. 0d. for repairs to the lift itself, and £102 for new landing gate and guides for the lift, which it claimed as deductions in arriving at the amount of the gross annual value.
(j) These two items were the only items in dispute.
(k) It was agreed that the services could be regarded as having been rendered to the tenants without either profit or loss to the Appellant Company.
3. It was contended on behalf of the Appellant Company:-
(a) That the provision of the lift was a service provided by the Company.
(b) That the cost of its repairs was just as much a service as the cost of providing lighting and cleaning of the staircase.
(c) That, therefore, the cost of repair and upkeep of the lift was a deduction in arriving at the gross annual value for assessment and was not covered by the statutory allowance for repairs and other outgoings-Income Tax Act, 1918, Schedule A, No. V, Rule 7 (3).
(d) That the gross assessment, after taking into account certain adjustments not in dispute, should be reduced to £1,302.
(e) The case of Bell Property Trust, Ltd. v. Hampstead Assessment Committee, [1940] 2 K.B. 543, was referred to.
4. It was contended on behalf of the Crown:-
(a) That the lift was part of the hereditament.
(b) That the cost of repairs to the lift was cost of repairs to the hereditament and was not allowable as a deduction in arriving at the gross annual value.
(c) That the gross assessment, after taking into account the said adjustments not in dispute, should be reduced to £1,433. Reference was made to the Finance Act, 1936, Section 22 (1), and the Rating and Valuation Act, 1925, Section 24 and Third Schedule.
We, the Commissioners who heard the appeal, having considered the facts and...
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