William P. Lawrie v Commissioners of Inland Revenue
| Jurisdiction | Scotland |
| Judgment Date | 19 June 1952 |
| Date | 19 June 1952 |
| Court | Court of Session (Inner House - First Division) |
COURT OF SESSION (FIRST DIVISION)-
Income Tax, Schedule D - Deduction - Cost of replacement of factory roof.
The Appellant firm carried on the trade of manufacturing concrete slabs and blocks. The roof of the building which they occupied for this purpose fell into disrepair and reconstruction of the premises was undertaken involving the lengthening and heightening of the building and the construction of a new roof.
On appeal before the Special Commissioners, it was contended on behalf of the Appellants that in computing the trading profits for Income Tax purposes there should be deducted as a sum expended for repairs, a proportion of the expenditure incurred on the new roof corresponding to the ratio of the original to the new floorage. The Commissioners dismissed the appeal, and the firm demanded a Case.
Held, that the sum in question was not allowable as a deduction in computing the firm's trading profits for Income Tax purposes.
Stated for the opinion of the Court of Session as the Court of Exchequer in Scotland, under the Income Tax Act, 1918, Section 149.
I. At a meeting of the Commissioners for the Special Purposes of the Income Tax Acts held at Glasgow on 17th October, 1951, for the purpose of hearing appeals, Messrs. William P. Lawrie, a firm of concrete manufacturers carrying on trade at Prestwick (hereinafter called "the Appellants"), appealed against an assessment to Income Tax made upon them for the year 1950-51 under Case I of Schedule D of the Income Tax Act, 1918, in respect of the profits of that trade in the estimated sum of £25,000, less capital allowances of £2,000.
II. The sole question raised by the appeal was whether in computing their said profits for the purpose of assessment to Income Tax the Appellants were entitled to deduct as an expense on revenue account a sum of £2,891, being part of a larger sum of £3,469 expended by them on the construction of a new roof at their works at Prestwick in the circumstances hereinafter set forth.
III. Evidence on behalf of the Appellants was given before us by Mr. W.P. Lawrie, a partner in the firm, Mr. Duncan McCulloch, a chartered architect practising at 130, High Street, Ayr, and Mr. W. Campbell Galbraith, chartered accountant, 10, Barns Street, Ayr, and the facts proved were as follows:-
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(a) The Appellant firm, the partners in which are Mr. W.P. Lawrie and his brother, was constituted in 1928, in which year they took over,
and have since carried on, a trade of concrete slab and block manufacturers at Prestwick. The works premises taken over by the Appellants when they commenced business consisted of a small wooden building 60 feet by 40 feet, which had been constructed in 1924. Between 1930 and 1937, the Appellants made various extensions, alterations and additions to these premises, but no further extensions, alterations or additions were made after 1937 until 1949, in which year the alterations which are the subject of the present appeal were carried out. (b) Between 1937 and 1949 the Appellants carried out no repairs to the roof, owing to the difficulty of obtaining licences. The result was that the roof began to fall into disrepair. But for the difficulty aforesaid, repairs would have been carried out year by year as and when necessity arose.
(c) By the end of the War (i.e. 1945) owing to the absence of repairs the roof had deteriorated to such an extent that it was not water-tight. Between approximately one-half and one-third of the whole area was leaking, and the brick pillars supporting the roof were defective. About the same time there was a great increase in building activity and the Appellants had to meet a greatly increased demand for their concrete products. The entry of water from the roof was highly detrimental to the manufacture of concrete slabs and blocks and it became essential for the Appellants to take steps to deal with the situation.
(d) The Appellants first obtained an estimate for repairing the existing roof, involving inter alia the replacement of certain of the roofing sheets. The amount of this estimate was £5,750. Having obtained this estimate, they consulted their architect, Mr. McCulloch, in 1947. He did not, however, favour the acceptance of this estimate. The building was an old one which had been extended on previous occasions; the supports for the roof had moved slightly because of the thrust of the roof and some of the brick piers supporting the valleys between the four spans into which the roof was divided had cracked and were leaning over. In Mr McCulloch's opinion it might have been possible to repair the roof, though he was unable to express any opinion as to the said estimate of £5,750. But his advice was that in all the circumstances it would be simpler and better to reconstruct the whole roof, rather than attempt to repair it. The Appellants accepted Mr. McCulloch's advice, but decided upon a larger operation involving the lengthening and heightening of the whole building and the construction of an entirely new roof.
(e) This larger operation was carried out in 1949 for the Appellant by Messrs. Wright and James (Builders), Ltd., Troon, under the direction of Mr. McCulloch. Mr. McCulloch produced and explained to us a plan and blue print of the work done. Shortly stated, the two end walls of the building which were about 9 ft. 6 ins. in height were demolished and new end walls of the same width were built to a height of about 13 ft., and at a distance from each other greater than the former distance between the old end walls. The two side walls were not demolished, but were reinforced with new brick piers, extended at either end and heightened from about 9 ft. 6 ins. to...
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