Whitworth Park Coal Company Ltd ((in Liquidation)) v Commissioners of Inland Revenue
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE JENKINS,LORD JUSTICE ROMER,LORD JUSTICE ORMEROD,LORD JUSTICE JENKIN |
| Judgment Date | 12 March 1958 |
| Judgment citation (vLex) | [1958] EWCA Civ J0312-1 |
| Date | 12 March 1958 |
| Court | Court of Appeal |
[1958] EWCA Civ J0312-1
In The Supreme Court of Judicature
Court of Appeal
Lord Justice Jenkins
Lord Justice Romer
Lord Justice Ormerod
Appeal of the Respondents
MR JOHN PENNYCUICK, Q.C., MR E. BLANSHARD STAMP and MR A.S. ORR (instructed by the Solicitor of Inland Revenue, Somerset House, Strand, W.C.2.) appeared as Counsel for the Commissioners of Inland Revenue.
MR F.N. BUOHER, Q.C. and MR PETER ROWLAND (instructed by Messrs. Tamplin, Joseph and Flux, 122, Minories, London, E.C.3.) appeared as Counsel for the Respondent Companies.
Friday, 2lst February. 1958.
The first of these three appeals is brought by the Whitworth Park Coal Company Limited from a judgment of Mr Justice Earman, dated.31st July, 1957, whereby (reversing thedetermination of the Speoial Commissioners) he deoided in favour of the Crown a question concerning the computation of the actual income of the Company for the years 1948/49, 1949/ 50 and 1950/51 for the purposes of directions and consequential apportionments of the aotual income, of the Company amongst its members given and made with respect to the Company under the provisions of Section 21 of the Finance Aot 1922 as amended by Section 14 of the Finance Aot 1939.
Down to the 31st December, 1946 the Company, which was under the control of not more than five persons and consequently a company to which the previsions of Section 21 of the Finance Act 1922 applied, carried on the business of a colliery proprietor. So long as the Company continued to trade, the position, to put it very shortly, was that the giving of directions and making of consequential apportionments with respect to the Company under Section 21 depended upon the discretion of the assessing Special Commissioners, such discretion being exercised in the event of it appearing to them that the Company had not distributed a reasonable part of its actual income so as to make the amount distributed income of its members for sur-tax purposes.
By virtue of the provisions of the Coal Industry Nationalisation Act, 1946 (which we will for brevity term "the Coal Act of 1946") the colliery assets of the Company were on the 1st January, 1947 (the "primary vesting date" fixed pursuant to Section 5 of the Act) compulsorily transferred to the National Coal Board, and the Company became entitled in respect of the assets so transferred to compensation, which became due on the same date subject to the determination of the amount thereof, and also to "interim income" for the period between that date and the date on which such compensation should be fully satisfied.
The Company accordingly became as from the primary vesting date an investment company within the meaning of Section 20(l) of the Finance Act, 1936 because it had ceased to trade and no longer had any income other than the "interim income" to which it was entitled under the Coal Act of 1946 (with certain modifications later introduced by the Coal Industry (No. 2) Act, 1949, here in after referred to as "the Coal Act of 1949") and which would not, if the Company had been an individual, have been earned income as defined in Section 14 (3) of the Income Tax Act, 1918. Accordingly, by virtue of Section 14 of the Finance Act, 1939 (to put it very shortly) the whole of the actual income of the Company was to be deemed to be the income of its members irrespective of the amounts of any distributions made, and the assessing Special Commissioners were enjoined to put into operation with respect to the Company the machinery of direction and apportionment contained in Seotion 21 of the Finance Act, 1922
There is no dispute as to the applicability of Section 21 of the Finance Act, 1922 and Section 14 of the Finance Act, 1939. It is moreover accepted by the Company that the "interim income" to which it was entitled under the nationalising legislation was for tax purposes income and not capital. But the assessing Special Commissioners in making their apportionments for the three years under appeal treated each sum received by the Company in respect of interim income as income of the Company for the year in which it was actually so received, and Mr Justice Herman has held that they were right in so doing. The Company contends that this method of computation was wrong and claims that (as held by the Special Commissioners who tried the case) each amount received in respect of interim income should be treated as accruing from day to day over the period in respect of which it was paid, and that the proportion of any such amount attributable to each of the three years under appeal should be ascertained on that footing
That is the sole question in the appeal. The competing contentions in regard to it are these:-
A For the Commissioners of Inland Revenue it is said:(i) that the payments made in respeot of interim income were annual payments within the meaning of Rule 1 (a) of Case III of Sohedule "D" in the Income Tax Act, 1918 and consequently payable (as they were in fact paid) under deduction of tax at the standard rate in force at the time of payment, as provided by Rule 21 of the General Rules in that Act, with the result that by virtue of Section 39 (2) of the Finance Act, 1927 each such payment was to be deemed to be income of the year in which it was paid; and (ii) that even if (contrary to their first contcntion) Case III of Sohedule "D" is inapplicable and recourse must be had to the sweeping provisions of Case VI, the same result follows, that is to say each payment in respect of interim income must be treated as income of the year in which it was paid
B For the Company it is said: (i) that while the result of applying Case III of Schedule "D" and Rule 21 of the General Rules would be as claimed by the Commissioners of Inland Revenue, those provisions are not applicable to the payments here in question beoause (a) their character was not such as to make them annual payments within the meaning of Rule 1 (a) of Case III of Schedule "D" and Rule 21 of the General Rules; and (b) that even if they could in other respects properly be regarded as annual payments within the meaning of those provisions, the application to them of those provisions is excluded by the ciroumstance that the payer was the Crown as represented by the Minister of Fuel and Power; and (ii) that the appropriate head of charge was Case VI of Schedule "D", and that proper assessments under that head would attribute to each year only such proportion of any payment in respect of interim income as would be appropriate on the footing that the amount of such payment was income of the period in respect of which it was paid, and accrued from day to day during that period
In order to do justice to these contentions it is necessary to refer to the provisions of the Coal Act of 1946, and also to those of the Coal Act of 1949, relating to the right to interim income and the ways in which that right was to be satisfied.
By Section 5 (l) of the Coal Act of 1946 the assets compulsorily acquired were to vest in the Board on such date as the Minister (i. e. the Minister of Fuel and Power) should by order appoint. That date (as we have already mentioned) was fixed by the Minister as the 1st January, 1947.
By Section 19 of the same Act: "(l) Compensation in respect of a transfer" of transferred interests or of an overhead expenses increase shall be due "on the primary vesting date, subject to determination of the amount thereof".(2) For the period between the primary vesting date and the date on which "any such compensation is fully satisfied, there shall be a right to interim" income, to be satisfied in accordance with the provisions of section twenty-two of this Act". Then (3): "Provision may be made by regulations for "authorising the partial satisfaction of such compensation before the determination of the amount thereof has been completed.
By Section 21 of the same Act compensation in respect of the assets transferred was to be satisfied by the issue of Government Stock, with certain exceptions (the only one applicable here being, we think, the value attributable to stocks of colliery products and consumable or spare stores) where it was to be satisfied by a money payment
By Section 22 of the same Act, sub-section (l): "The right conferred "by sub-section (2) of section nineteen of this Act to interim income for "the period between the primary vesting date and the date of the satisfaction in full of compensation in respect of a transfer of transferred "interests, or of an overhead expenses increase, shall be satisfied in "accordance with the provisions of this section". Then sub-section (2): "Subject to the provisions of subsection (3) and (4) of this section as to "the revenue payments therein mentioned,- (a) the said right conferred by "subsection (2) of section nineteen of this Act shall be satisfied, so far "as regards erim income for the period between the primary vesting date "and the time when any amount of compensation in respect of a transfer of "transferred interests or of an overhead expenses increase is satisfied "by making, in addition to the issue of the stock then issued in satisfaction of that amount of compensation or to the making of the money payment "then made in satisfaction of that amount of compensation, as the case may "be, a money payment of an amount equal to interest for that period on that "amount of compensation at such rate or rates as may be prescribed as respects "that period or differents parts...
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