Saxone Lilley & Skinner (Holdings) Ltd v Commissioners of Inland Revenue
| Jurisdiction | Scotland |
| Judgment Date | 16 February 1967 |
| Date | 16 February 1967 |
| Court | Court of Session (Inner House - First Division) |
COURT OF SESSION (FIRST DIVISION)-
HOUSE OF LORDS-
Income tax, Schedule D - Capital allowances - Industrial building or structure - Warehouse used for storing goods delivered to purchasers together with some goods not so delivered - Income Tax Act 1952 (15 & 16 Geo. 6 & 1 Eliz. 2, c. 10), s. 271.
Income tax - Procedure in Scotland - Appeal - Case Stated - Question of law not stated in the Case may not be argued in the Court of Session.
The Appellant Company was the parent company of a group. One of its subsidiaries traded as manufacturers and retailers of shoes, and others as manufacturers of shoes or as retailers of shoes respectively. The Company erected, and let to a subsidiary whose business was the warehousing of shoes, a central warehouse for shoes manufactured, or purchased for sale by retail, by members of the group. Shoes manufactured by the manufacturing and retailing company were stored in all parts of the warehouse, but the greater part of the shoes stored there had been delivered to purchasers, viz., the retailing companies.
The Inspector of Taxes objected to claims by the Appellant Company for initial, investment and annual allowances for the years 1959-60 to 1962-63 in respect of the warehouse as an industrial building. On appeal, the Company contended, inter alia, (a) that the warehouse was not in use for any purpose ancillary to those of a retail shop within s. 271(3), Income Tax Act 1952; (b) that part of the trade for which it was in use consisted in the storage of shoes manufactured by the manufacturing and retailing company and not yet delivered to a purchaser within s. 271(1)(d)(iii); (c) that capital allowances were due in respect of the whole cost of the building, or, alternatively, an apportioned part of it. For the Crown it was contended, inter alia, that the warehouse was in use for a purpose ancillary to the purposes of retail shops, and that neither the warehouse as a whole nor any identifiable part of it was in use for the purposes of a trade consisting in the storage of shoes manufactured but not yet delivered to any purchaser. The Special Commissioners found that the warehouse was not in use for a purpose ancillary to those of retail shops, but disallowed the claims on the ground that neither the whole building nor any identifiable part of it was in use for part of a trade consisting in the storage of shoes manufactured but not yet delivered to a purchaser within the meaning of s. 271(1)(d)(iii). The Company demanded a Case; in stating the Case the Commissioners did not include the question whether the building was in use for a purpose ancillary to those of retail shops among the questions of law for the opinion of the Court of Session.
In the House of Lords the Crown did not pursue the contention that the warehouse was in use for a purpose ancillary to the purposes of retail shops.
Held, in the Court of Session, that a question of law not put by the Commissioners in the Case could not be argued in the Court of Session
Held, in the House of Lords, that the warehouse was in use for the purpose of a trade consisting in the storage of shoes manufactured but not yet delivered to a purchaser.
Stated for the opinion of the Court of Session, as the Court of Exchequer in Scotland under the Income Tax Management Act 1964, s. 12(5), and the Income Tax Act 1952, s. 64.
I. At meetings of the Commissioners for the Special Purposes of the Income Tax Acts held at London on 22nd and 23rd March 1965 Saxone Lilley & Skinner (Holdings) Ltd. (hereinafter called "the Appellant Company") appealed against the objection by H.M. Inspector of Taxes to the following claims for the years 1959-60 to 1962-63: (1) initial allowances under s. 265(1) and (2) of the Income Tax Act 1952; (2) investment allowances under s. 16(1) and (2) of the Finance Act 1954; (3) annual allowances under s. 266(1) of the Income Tax Act 1952.
The claims were made in respect of a building in Leeds, on the ground that it was, or that part of it was, an industrial building or structure, within the meaning of the relevant legislation. For simplicity we refer hereafter to this building as "the warehouse".
II. Shortly stated, the questions for our decision were: (1) whether the whole of the warehouse was an industrial building or structure such that the allowances in question were due in respect of the whole of the capital expenditure incurred; (2) whether part of the warehouse was an industrial building or structure such that the allowances were due in respect of part of the capital expenditure incurred.
III. Mr. David Philip Farrer gave evidence before us on behalf of the Appellant Company. He has been a director of the Appellant Company since May 1962; a director of Saxone Shoe Co. Ltd. ("Saxone Kilmarnock") since February 1958; a director of Jacksons Ltd. ("Jacksons") since October 1958.
(2) The Appellant Company is a holding company with many subsidiaries ("the group"). The names of the members of the group which have a connection with the questions in issue, and their functions inside the group, appear later.
(3) The Leeds warehouse was built by the Appellant Company, and was let to and occupied by Jacksons, a member of the group, from June 1959. Jacksons' business was the warehousing of shoes.
(4) The principal manufacturer of shoes in the group was Saxone Kilmarnock. This company, in addition to manufacturing, bought shoes from manufacturers inside and outside the group. It also retailed shoes, whether manufactured by itself or by other manufacturers inside and outside the group, through approximately 145 retail shops of its own and through retail shops both inside and outside the group. Benefit Footwear Ltd. ("Benefit"), a member of the group, was a retailer only: it retailed some shoes manufactured by Saxone Kilmarnock but mostly shoes manufactured outside the group. Lilley & Skinner (Sales) Ltd., a member of the group, was a retailer only: it bought shoes from Saxone Kilmarnock or from Saxone Kilmarnock's manufacturers, from George Green & Sons Ltd., a manufacturer within the group at Leicester, and from manufacturers outside the group. Lilley & Skinner (Stores Group) Ltd., a member of the group, was a retailer only; it operated departmental stores and departments in other stores, and bought most of its shoes from outside the group, but also some from Saxone Kilmarnock.
(5) The warehouse is a very large building. The object of the Appellant Company in building it was to provide a central warehouse for all the companies in the group. Before it was built the various companies had their own warehouses, and it was considered more economic to have this one central warehouse.
(6) A copy of a brochure descriptive of the warehouse and its functions and containing various photographs is annexed hereto, marked "A", and forms part of this Case(1): The building in the foreground of the photograph on page 6 is the headquarters of Benefit, but no question arises in respect of this building.
(7) The warehouse received shoes manufactured by Saxone Kilmarnock, and shoes which that company had bought from manufacturers, whether inside or outside the group; because there was no factory warehouse at Kilmarnock shoes manufactured by Saxone Kilmarnock were arriving from Kilmarnock every night and remained in the warehouse for about 10 to 13 weeks, while shoes from other manufacturers having factory warehouses remained for shorter periods.
(8) The warehouse also received shoes from George Green & Sons Ltd. and Parker Shoes Ltd., which had become a subsidiary in 1961, and shoes manufactured for Benefit by manufacturers outside the group.
(9) Shoes from Saxone Kilmarnock were despatched from the warehouse to Saxone Kilmarnock's own retail shops, to Lilley & Skinner (Sales) Ltd., Lilley & Skinner (Stores Group) Ltd., Benefit and retailers outside the group.
(10) Shoes entering the warehouse from Saxone Kilmarnock and George Green came in transport belonging to Jacksons, and a small proportion of shoes bought outside also came in this transport, which conveyed about a third of all the deliveries to the warehouse. Jacksons' transport was also used for despatch from the warehouse, except that shoes for shops outside the group would be sent by post or train.
(11) There is annexed hereto a document marked "B", and forming part of this Case. Page 1 shows the numbers of pairs of shoes, and their value, stored in the warehouse at the ends of the years 1959 to 1961. Page 2 shows the respective proportions of pairs of shoes manufactured by Saxone Kilmarnock and George Green and not yet sold, and of other manufacturers' shoes at the same dates.
(12) The numbers and values of the shoes stored in the warehouse in the year 1960 and the respective proportions of Saxone Kilmarnock's and George Green's manufactured shoes on the one hand, and other manufacturers' shoes on the other hand, represented a fair average for all years as anticipated at the time when the capital expenditure was incurred.
-
(13) Since the shoes stored included shoes which had been delivered to purchasers (e.g., retailers who were storing their purchased shoes), it was admitted
on behalf of the Appellant Company that Jacksons' trade did not consist in the storage of goods manufactured but not yet delivered to any purchaser, within the provisions of s. 271(1)(d)(iii), but without prejudice to the Appellant's contention that part of Jackson's trade did consist in such storage. (14) Pages 3 and 4 give details of despatches from the warehouse (numbers and values, and percentages of numbers and values).
(15) Shoes arriving at the warehouse were put on a conveyor, and then into a trolley attached to a conveyor belt which drew the trolley to the particular part of the warehouse where they were to be stored.
(16) Shoes manufactured by Saxone Kilmarnock were mainly men's or children's shoes. These...
To continue reading
Request your trial
-
Maco Door and Window Hardware (UK) Ltd v HM Revenue and Customs
... ... and Revenue and Customs Commissioners No tax allowance for warehouse ... the decisions of the House of Lords in Inland Revenue Commissioners v Saxone, Lilley and r (Holdings) LtdWLR ((1967) 1 WLR 501) and the Court of ... ...
-
Maco Door and Window Hardware (UK) Ltd v HM Revenue and Customs
...They are Kilmarnock Equitable Cooperative Society Ltd v IRC 42 TC 675 (“ Kilmarnock”) and Saxone Lilley & Skinner (Holdings) Ltd v IRC 44 TC 122 (“ Saxone”). They were decided under section 271 of Income Tax Act 1952 Act, the material parts of which are in the same terms as section 18. 7 In......
-
Maco Door and Window Hardware (UK) Ltd v HM Revenue and Customs
...is part of a trade but is not itself a trade. 8 Authority for both constructions can be found. In Saxone Lilley & Skinner Ltd v IRC (1967) 44 TC 122 this House had to consider the meaning of "a part of a trade" in a statutory predecessor of section 18(2). Lord Reid said that the phrase shou......
-
Next Distribution Ltd and Another
...42 TC 675Maco Door and Window Hardware (UK) Ltd v R & C CommrsTAX[2008] BTC 486Saxone Lilley & Skinner (Holdings) Ltd v IR CommrsTAX(1967) 44 TC 122Vibroplant Ltd v Holland (HMIT)TAX(1980) 54 TC 658Evidence 15.There were six volumes of agreed documents produced. 16.We heard oral evidence (2......