SCOTTISH FLYING CLUB, Ltd v Commissioners of Inland Revenue
| Jurisdiction | Scotland |
| Judgment Date | 28 June 1935 |
| Date | 28 June 1935 |
| Docket Number | No. 81. |
| Court | Court of Session (Inner House - First Division) |
1ST DIVISION.
RevenueIncome TaxExemptionsCharityFlying club established to promote the pursuit of aviationInterest and dividendsProfitsIncome Tax Act, 1918 (8 and 9 Geo. V, cap. 40), sec. 37 (1)Finance Act, 1921 (11 and 12 Geo. V, cap. 32), sec. 30 (1) (c)Finance Act, 1927 (17 and 18 Geo. V, cap. 10), sec. 24.
The Income Tax Act, 1918, by sec. 37 (1), grants exemption from income tax in respect of interest and dividends forming part of the income of any body of persons established for charitable purposes only, and so far as the same are applied to charitable purposes only.
The Finance Act, 1921, by sec. 30 (1) (c), as amended by sec. 24 of the Finance Act, 1927, grants exemption from income tax in respect of the profits of a trade carried on by a charity, if the profits are applied solely to the purposes of the charity.
A limited company claimed exemption under the above sections in respect of interest and profits. The company had been formed to carry on the activities of a flying club, and it was in receipt of an annual Government grant. Its objects were to promote the pursuit of aviation, to provide facilities for instructional and sporting flights by members of the club, to conduct a club and to provide a clubhouse for the accommodation of members, to procure the delivery of lectures, and to maintain a library, on technical, educational, and other subjects. Membership of the club, and of the company, was subject to election and to payment of subscriptions. The interest and profits in question arose chiefly from public aviation displays organised by the club.
Held that the company was not entitled to the exemption claimed, in respect that it was not established for charitable purposes only, its objects being primarily the conduct of a club for sporting and social purposes.
At a meeting of the Commissioners for the Special Purposes of the Income Tax Acts, the Scottish Flying Club, Limited, claimed exemption from income tax under section 37 of the Income Tax Act, 1918,1 in respect of untaxed interest, and under section 30 (1) (c) of the Finance Act, 1921,1 as amended by section 24 of the Finance Act, 1927,1 in respect of the profits of a pageant or display which it had organised. The Special Commissioners refused the appeal, and, at the request of the Company, stated a case for appeal to the Court of Session as the Court of Exchequer in Scotland.
The case set forth:"(I) The following facts were admitted or proved:1. The Company was incorporated on the 23rd day of February 1928 under the Companies Acts, 1908 to 1917, as a company having no share capital and limited by guarantee. The promoters of the Company were The Scottish Flying Club, an unincorporated body, and the Company was formed to carry on the activities of that Club as it was considered that a corporate body could carry out more effectively the objects for which the Club existed. 2. The objects of the Company as set forth in Clause III of its memorandum of association were:(1) To promote generally the pursuit of Aviation, to provide facilities for instructional and sporting flights, to train members to fly and to provide and maintain flying machines for the instruction and pleasure of members. (2) To bring together those who are interested in Aviation, and thus form an organisation for the purpose of keeping in touch with all developments in practical Aviation. These objects were adopted from the objects of the Scottish Flying Club. The Company, in addition to these objects, included in its memorandum,inter alia, the following additional objects:(5) To establish, maintain and conduct a club for the accommodation of members of the Club and to provide a Clubhouse and other conveniences, and generally to afford to members all the usual privileges, advantages, conveniences and accommodation of a club. (6) To procure the delivery of lectures on technical, educational, and other subjects. (7) To form and maintain a library of technical, educational, historical and other literatures. 3. The activities of the Company were directed chiefly towards the encouragement of flying by its members, the acquisition of knowledge relating to aviation, and the advancement of aeronautical science. The Company leased the aerodrome at Renfrew from the Royal Burgh of...
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