Rose & Company (Wallpaper & Paints) Ltd v Campbell (HM Inspector of Taxes)
| Jurisdiction | England & Wales |
| Judgment Date | 23 November 1967 |
| Date | 23 November 1967 |
| Court | Chancery Division |
HIGH COURT OF JUSTICE (CHANCERY DIVISION)-
Income tax, Schedule D - Investment allowance - Wallpaper pattern books - "Machinery or plant" - Capital or revenue expenditure - Finance Act 1954 (2 & 3 Eliz. 2, c. 44), s. 16 (3).
The Appellant Company, a retailer of wallpaper and paint, purchased samples of wallpaper from a manufacturer and had them printed and bound as pattern books, which were either distributed free of charge to decorating contractors (while remaining the property of the Company) or kept for use at the Company's depots and branches. About half the Company's sales of wallpaper were attributable to the distribution of the pattern books. A pattern book was planned to have a minimum useful life of two years, and for each such period some 6000 were prepared at a cost of £3 each.
On appeal against assessments to income tax under Case I of Schedule D for the years 1963-64 and 1964-65, the Company contended that the books were plant and that it was consequently entitled to an investment allowance in respect of the capital expenditure involved. The General Commissioners decided that the expenditure on the pattern books was not capital expenditure and they could not be regarded as plant.
Held, (1) that the expenditure was not capital expenditure;
(2) that the Commissioners' decision that the pattern books were not plant was reasonable.
Stated under the Income Tax Act 1952, s. 64, by the General Commissioners for the purposes of the Income Tax for the Division of the City of York, for the opinion of the High Court of Justice.
1. At a meeting of the said Commissioners held on 6th July 1965 at Government Buildings, Piccadilly, York, Rose & Co. (Wallpaper & Paints) Ltd. (hereinafter called "the Appellant"), the registered office of which is at 13 Coppergate, York, appealed against the following assessments to income tax made upon it under Case I of Schedule D in respect of its trading profits as a paint and wallpaper retailer:
2. The general ground of the appeal notified to us was that the Appellant sought to establish its right to investment allowances under s. 16(3) of the Finance Act 1954 (as amended) in respect of its expenditure on certain of its wallpaper pattern books.
3. The Appellant was represented by Mr. George O. W. Pickard, of Messrs. G. O. W. Pickard & Co., chartered accountants, of 14 East Parade, Leeds 1.
4. Evidence (which we accepted) was given before us by Mr. Carl Rosen, a director of the Appellant:
(a) The wallpaper pattern books contained samples of wallpaper manufactured by Wallpaper Manufacturers Ltd. The Appellant selected and purchased these samples, and they incurred further expenditure in having these printed and bound by Cheapside (Productions) Ltd. of Bristol.
(b) The preparation and useful existence of a pattern book spread into four separate calendar years. From the middle of the first calendar year the pattern book was in the process of being compiled and manufactured. In the second and third calendar years the pattern book was in full use, and in the fourth calendar year it was the custom to have sales in January and February at which any remaining stocks were disposed of. At the beginning of the fourth calendar year the pattern book was replaced by a new pattern book. A pattern book was, therefore, planned to have a minimum useful life of two years. For each such period some 6000 of the pattern books in question were prepared at a cost of about £3 a book, and the Appellant's expenditure on these pattern books in 1962, for example, had been £15,703.
(c) The Appellant's practice in compiling its accounts was to write off three-fifths of the expenditure on pattern books after the first year of full use and the remaining two-fifths after the second year of full use. The Appellant had not claimed an investment allowance in respect of its expenditure on pattern books for any year previous to 1963-64.
(d) The said pattern books were not sold by the Appellant, but some were issued free of charge through the Appellant's representatives to decorating contractors throughout the country and others were kept for daily use at all branches and depots of the Appellant (wholesale and retail) by staff and customers. They remained the property of the Appellant, which reserved the right to withdraw the books. The pattern books were generally accepted and known as containing the Appellant's particular selection, under the Appellant's trade name "Academy".
(e) The pattern books were essential to the success of the Appellant's business, and about half of the Appellant's sales of wallpaper were attributable to the distribution of the pattern books. The Appellant was insured against the contingency of the pattern books being lost in the course of transit from the manufacturers; the cover extended only to loss of profit caused by the pattern books not being available for delivery to the Appellant's customers at the appropriate time, and it did not extend to any loss occurring after the pattern books had been received by the Appellant from the...
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Munby v Furlong
... ... Charles Furlong (Her Majesty's Inspector of Taxes) Respondent ... MR ... designs which were used for making wallpaper. Some of these designs were used physically on ... 40 Tax Cases 681 (partitions), Rose & Co. (Wallpapers & Paints) Ltd. v. Campbell 44 ... ...