Townsend (HM Inspector of Taxes) v Electrical Yarns, Ltd
| Jurisdiction | England & Wales |
| Judgment Date | 29 February 1952 |
| Date | 29 February 1952 |
| Court | Chancery Division |
HIGH COURT OF JUSTICE-
Income Tax, Schedule D - Discontinuance of trade - Assessments for penultimate year - Balancing charge - Finance Act, 1926 (16 & 17 Geo. V, c. 22), Section 31 (1) (b), and Income Tax Act, 1945 (8 & 9 Geo. VI, c. 32), Sections 17, 22 and 55 (3).
The Company ceased trading in December, 1949. For the penultimate year of assessment, i.e. 1948-49, an assessment to Income Tax on the Company was made under Case I of Schedule D on the basis of the profits for the year to 31st March, 1948 (£3,038), such profits being greater than the profits for the year to 31st March, 1949 (£2,578). An additional assessment of £600 was also made on the Company for the year 1948-49 in respect of a balancing charge on the sale of plant and machinery.
The Company contended that the actual profits for the year 1948-49 were £3,178 (£2,578+£600 balancing charge) and that the additional assessment should be reduced to £140 (£3,178 - £3,038). The General Commissioners on appeal accepted this claim and reduced the assessment accordingly.
The Crown demanded a Case.
Held, that the amount in which the additional assessment fell to be made was £600.
Stated under the Income Tax Act, 1918, Section 149, by the Commissioners for the General Purposes of the Income Tax for the Division of Middleton in the County of Lancaster for the opinion 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 Middleton in the County of Lancaster held at Ashton-under-Lyne on 27th June, 1950, and adjourned to 29th August, 1950, Electrical Yarns, Ltd. (hereinafter called "the Respondents") appealed against the following additional assessment made on the Respondents under Case I of Schedule D of the Income Tax Act, 1918.
Electrical Yarns, Ltd. 1948-49 |
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£600. |
2. The following facts were admitted or proved.
(2) The Company, who formerly carried on business as cotton spinners and doublers, ceased trading on 21st December, 1949.
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(3) The assessment for 1949-50 has to be based on the actual profits in the period from 6th April, 1949, to the date of cessation, instead of the usual preceding year basis (Section 31 (1) (a) Finance Act, 1926).
(4) A balancing charge of £600 has to be made in respect of the sale of plant and machinery during the year ending 31st March, 1949, this charge being made under Section 17 of Income Tax Act, 1945. It was agreed that the proper year for this balancing charge is 1948-49. (Section 57 (2) Income Tax Act, 1945.)
3. It was contended by the Respondents;
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(a) that the actual profit for 1948-49, if calculated as the Respondents considered it should be calculated, exceeded the assessment based on the preceding year's figures and that an additional assessment for the excess only should be raised. The figures put forward by the Respondents were as follows:
£
Adjusted profit for the year to 31st March, 1949
2578
Add balancing charge
600
3178
Assessed on preceding year basis, i.e., on accounts to 31st March, 1948
3,038
Additional assessment contended by the Respondents to be necessary
£140
(b) that the balancing charge should legally be considered as part of the profits or gains and that the profits for 1948-49 consisted of £2,578 plus the balancing charge of £600 making a total of £3,178. As this exceeds the 1948-49 assessment of £3,038, the Respondents contended that Section 31 (1) (b) of the Finance Act, 1926, applies.
4. It was contended by the Appellant;
(a) that the comparison under Section 31 (1) (b) of the Finance Act. 1926, between the actual profits and the amount assessed has to be made without regard to the balancing charge, in which case no additional assessment would be necessary under that Section; and
(b) that the assessment of £600 balancing charge for 1948-49 was correctly made in accordance with Sections 17 and 55 (3) of the Income Tax Act, 1945.
5. At the adjourned hearing of this appeal we reduced the assessment under appeal to £140 and our decision was given as follows.
It has been agreed before us that the correct year for the balancing charge of £600 is 1948-49. We should have so held if there had been any dispute...
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...sense, you have really answered the only question in this case. There is some authority about it in Townsend v. Electrical Yarns, Ltd., 33 T.C. 166, a case of my brother Donovan's-and, of course, his decisions in this sort of matter carry a great deal of weight-where he was deciding somethi......
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