Strong & Company of Romsey v Woodifield
| Jurisdiction | UK Non-devolved |
| Date | 1906 |
| Court | House of Lords |
Revenue - Income Tax - Trade - Balance of Profits - Deductions - Expenses incurred in earning Profits - Loss arising from Negligence - Hotel - Injury to Guest - Damages -
A brewery company owned an inn which was carried on by a manager as part of their business. A customer sleeping in the inn was injured by the fall of a chimney, and recovered damages and costs against the company for the injury, which was owing to the negligence of the company's servants:—
Held, that the damages and costs could not be deducted in estimating the balance of profits for the purpose of the income tax, the loss not being connected with or arising out of the trade, and not being money wholly and exclusively laid out or expended for the purposes of the trade.
THE facts indicated in the head-note were stated in a case by the Income Tax Commissioners, who disallowed the deduction claimed. This decision was reversed by Phillimore J., but re-established and confirmed by the Court of Appeal (Collins M.R., Mathew and Cozens-Hardy L.JJ.).
June 14. Danckwerts, K.C., and Bremner (P. G. Henriques with them), for the appellants. The tax is payable only upon the balance of the profits and gains — that is, upon the net profits arrived at after deducting the losses incurred in carrying on the business. The profits and gains were diminished by the amount of damages and costs incurred in the action; they were an incident to the business — an outlay necessarily incurred in the course of the trade. Negligence is inevitable in every business, and the loss sustained by negligence must be allowed for. By implication every kind of loss outside the specified exceptions may be deducted. Those exceptions are mentioned in the Third Rule of Sched. D. in the Act of 1842, which, as Lord Blackburn observed in Coltness Iron Co. v. BlackF1, “still continued to be negative in its form.” That is to say, certain deductions were not to be allowed, but this claim for exemption is not excluded. The duties of an innkeeper are explained in Sandys v. Florence.F2 Among them is that of not being negligent of his guests, and the loss suffered by reason of such negligence is loss, without taking account of which there are no gains or profits. This is the principle laid down by Lord Macnaghten in London County Council v. Attorney-General.F3 “From this total income,” he said, “the taxpayer was allowed to make a great many deductions ….. The total amount of deductions was to be subtracted from the total amount of income, and the difference was the ‘income chargeable.’” So in Gresham Life Assurance Society v. StylesF4 Lord Herschell said, at p. 323: “The scheme of the Act obviously is to tax, not receipts, but profits properly so called”; or, as Lord Halsbury put it at p. 315, “the profits realized.” In that case the appellants were allowed to deduct the sums annually paid in respect of annuity contracts. In like manner, in Ashton Gas Co. v. Attorney-GeneralF5, Lord Halsbury, at p. 12, said: “The profit upon which the income tax is charged is what is left after you have paid all the necessary expenses to earn that profit.” Here among those necessary expenses were the damages and costs of the action. All deductions are allowed except those which are forbidden. In Reid's Brewery Co. v. MaleF6 bad debts incurred in a money-lending business were allowed. In Russell v. Town and County BankF7 a deduction was allowed in respect of the annual value of the whole of the bank premises, including that part of them which was occupied by the manager. Brickwood & Co. v. ReynoldsF8 is distinguishable, as the deduction claimed, but not allowed, was for the repair of premises not occupied for the purposes of their trade by the persons assessed, who were brewers. Equally inapplicable is Mersey Docks and Harbour Board v. LucasF9, where no deduction was allowed for a...
To continue reading
Request your trial
- Herald & Weekly Times Ltd v Federal Commissioner of Taxation
- Ampat Tin Dredging Ltd v Director General of Inland Revenue
-
Smith's Potato Estates Ltd v Bolland
...profits to assessment to Income Tax, and the appeal should be dismissed. The cases of Strong and Company of Romsey, Ltd. v.Woodifield, 5 T.C. 215; Commissioners of Inland Revenue v. Alexander von Glehn & Co., Ltd., 12 T.C. 232; Spofforth and Prince v. Golder, 26 T.C. 310, andL.C., Ltd. (in ......
-
Commissioners of Inland Revenue v Dowdall, O'Mahoney & Company Ltd
...his trade and that this is so whether such taxes are U.K. taxes or foreign or dominion taxes and reliance was placed upon the cases of Strong v. Woodifield [1906] A.C. 448, 5 Tax Ca. 215; Commissioners of Inland Revenue v. Von Glehn [1920] 2 K.B. 553, 12 Tax Ca. 232; Commissioners v. Warn......
-
The Deductibility Of DSTs In Ireland: Some Clarity At Last
...Non-trading income is taxable in Ireland at 25 percent. 3. Section 81(2) of the Taxes Consolidation Act 1997. 4. Strong v. Woodfield, [1906] AC 448. See also Smith's Potato Estates Ltd. v. Inspector, (1948) 30 TC 267. U.K. case law is persuasive, but not binding, authority in Ireland. 5. Ma......
-
Tax Relief For Victims of Fraud
...Investments plc. REFERENCES (1) Income and Corporation Taxes Act. (2) ICTA 1988 s. 74(a). (3) Ibid., s. 74(e). (4) Ibid., s. 74(f). (5) (1906) 5 TC 215, [ 1906] AC 448. (6) Ibid. at 220. (7) Ibid. at 219. (8) (1933) 9 TC 319. (9) Ibid. at 330. (10) (1972) 48 TC 359. (11) Ibid. at 367G (12) ......
-
The origins and development of the general deduction formula in income tax legislation of the Cape Colony
...D, as provided for by the Third Rule to the Second Case of Schedule D.94Strong & Co., of Romsey, Limited v Woodifield (Surveyor of Taxes) [1906] AC 448.95Strong & Co., of Romsey, Limited v Woodifield (Surveyor of Taxes) [1906] AC 448 at 453.96Tiley, at 428–429 regards this as a court-made r......