Income Tax, Schedule D – Profits Tax – Capital allowances – Industrial building or structure – Building for screening and packing coal – Whether coal subjected to a process – Whether building used for purpose ancillary to a retail shop – Income Tax Act, 1952 (15 and 16 Geo. VI and 1 Eliz. II, c. 10), Section 271.
A co-operative society carried on business as general merchants. Its objects included manufacturing of all kinds. A substantial part of its business was the sale of coal in 1cwt bags and in bulk, distributed by lorry from the society’s coal yard or depot. It also sold coal in 28lb paper bags through its shops as part of its retail business and to other co-operative societies as a wholesaler. It erected a building at its coal depot specifically to house the machinery used to pre-pack the coal in the paper bags. The issue was whether this was an industrial building or structure within the meaning of section 271 of the 1952 Act. The General Commissioners had found that the separation of the coal and the filling of the bags was not a process within the meaning of section 271(1)(c).
Held: The bulk coal delivered to the building was subjected to a process within the meaning of section 271(1)(c) and the building was used for part of the society’s trade so as to come within section 271(2). The pre-packing operation (which was not carried on elsewhere) was held to be a separate part of the society’s trade on the basis that it was a separate commercial activity in its own right.
Lord Guthrie said: ‘But in my opinion the separation of the dross from the coal is its subjection to a process, the process of selection from the mass of coal of lumps which are suitable for packing in bags. There is no doubt that at the building the Appellants carry on a trade, a business conducted with a view to profit, which consists of the subjection of the coal to this process.’
Lord Clyde: ‘The Crown further argued that in any event the building in question was not in use for a trade or part of a trade which consisted in the subjecting of the goods to a process within the meaning of Section 271(2) of the Act.
It was therefore disqualified from being an industrial building or structure, so the argument runs, within the meaning of the Sub-section. This contention by the Crown is also not specifically dealt with by the Commissioners, if it was presented to them. The argument was that if the Society’s only trade was screening and packing of coal in paper bags then the situation might have been different, but this Society operated a trade of general merchants, and only a small part of their total operations involved paper packaging of screened coal. But the relative proportions of the Society’s various activities appear to me to be quite irrelevant. The building in question houses a definitely identifiable part of their industrial operations and a quite separate activity, and that separate activity alone. This is in my view enough to satisfy the requirements of Sub-section (2).’
Judges:
Lord Clyde, Lord Guthrie
Citations:
(1966) 42 TC 675, [1966] ScotCS TC – 42 – 675, 1966 SLT 224
Links:
Statutes:
Jurisdiction:
Scotland
Cited by:
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Cited – Maco Door and Window Hardware (UK) Ltd v Revenue and Customs HL 30-Jul-2008
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Cited – Iceland Foods Ltd v Berry (Valuation Officer) SC 7-Mar-2018
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Lists of cited by and citing cases may be incomplete.
Income Tax
Updated: 07 July 2022; Ref: scu.244455
