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Income Tax - From: 1900 To: 1929

This page lists 29 cases, and was prepared on 08 August 2015.

 
London County Council -v- Attorney General [1901] AC 26
1901

Lord Macnaghten
Income Tax
Lord MacNaghten said: "Income tax, if I may be pardoned for saying so, is a tax on income. It is not meant to be a tax on anything else."
1 Citers


 
Inland Revenue -v- Cadwalader [1904] 5 TC 101; (1904) 7 F (Sess Cas) 146
1904

Lord M'Laren
Scotland, Income Tax
An American citizen, with his ordinary residence and indeed practising the law in New York, took a three-year lease of a furnished shooting lodge in Scotland. He resided at the shooting lodge for a period of two months in each year during the shooting season, but the lodge was available to him for the rest of the year if he had wished to come. He kept his home in New York open throughout the year and returned there when he was not shooting in Scotland. The shooting box was kept in readiness for him when he was not there, and his occupation was described by the Lord President as not being of a casual or temporary nature but as "substantial" and, as regards some of its incidents, "continuous". It was asked whether he was in Scotland for a temporary purpose only on those facts. Held: Lord M'Laren said "I do not think that Mr. Cadwalader is in a position to affirm, when he comes year after year during the currency of his lease to spend the shooting season in Scotland, that he is here for a temporary purpose only. I do not mean that you might not frame a definition which would bring this within the scope of temporary purposes, but, taking the ordinary meaning of the word, I should say that temporary purposes means casual purposes as distinguished from the case of a person who is here in the pursuance of his regular habits of life."
1 Citers


 
Strong & Co of Romsey Ltd -v- Woodifield [1904-7] All ER Rep 953
26 Jun 1905
CA

Income Tax
The compamy operated public houses. It became liable to pay damages for injuries paid to a visitor, and sought to set the cost off against income tax. Held: The Commissioners had been correct to refuse to allow the company to set the sums off against tax.
1 Citers


 
Revell -v- Edinburgh Life Insurance Co (1906) 5 TC 221
1906


Income Tax

1 Citers


 
Advocate (HM) -v- M'Taggart Stewart (1906) 43 SLR 465
1906


Scotland, Income Tax

1 Citers


 
Strong & Co of Romsey Ltd -v- Woodifield [1906] AC 448
30 Jul 1906
HL
Lord Loreburn, The Lord Chancellor, Lords Macnaghten, Davey, James and Robertson
Income Tax
The company sought to deduct from its trading profits a sum expended paying damages for personal injuries to a visitor to the taxpayer's Inn. The claim had been rejected. Held: The company's appeal failed. Lord Davey said: "I think that the payment of these damages was not money expended `for the purposes of the trade'. These words are used in other rules, and appear to me to mean for the purpose of enabling a person to carry on and earn profits in the trade etc. I think the disbursements permitted are such as are made for that purpose. It is not enough that the disbursement is made in the course of, or arises out of, or is connected with, the trade, or is made out of the profits of the trade. It must be made for the purpose of earning the profits." and
"for the purposes of the trade" means "for the purposes of enabling a person to carry on and earn profits in the trade": "These words are used in other rules and appear to me to mean for the purpose of enabling a person to carry on and earn profits in the trade, etc. I think the disbursements permitted are such as are made for that purpose. It is not enough that the disbursement is made in the course of, or arises out of, or is connected with, the trade, or is made out of the profits of the trade. It must be made for the purpose of earning the profits."
Income Tax Act 1842
1 Cites

1 Citers



 
 Blakiston -v- Cooper (Surveyor of Taxes); HL 10-Dec-1908 - [1908] UKHL 1; (1909) STC 347; [1909] AC 104
 
Bowles -v- Bank of England [1913] 1 Ch 57; [1913] 82 LJ Ch 124; [1913] 108 LT 95; [1913] 29 TLR 42; [1913] 57 Sol Jo 43; [1913] 6 Tax Cas 136
4 Nov 1912
KBD
Parker J
Constitutional, Income Tax
The House of Commons Ways and means committee resolved to assent to the imposition of income tax at the required rate for the next year. Held: Such a resolution was inadequate to authorise the Crown to levy the tax by its deduction from the Bank's dividends payable to its shareholders. Authority could be granted only by statute. Parker J said: " No practice or custom, however prolonged or however acquiesced in on the part of the subject could be relied on by the Crown as justifying an infringement of the provisions of the unrepealed Bill of Rights."
Bill of Rights 1689
1 Citers


 
Regina -v- Commissioner of Taxes, ex parte Hooper [1915] 7 TC 59
1915
QBD
Lord Reading CJ
Income Tax
The court considered what it was for the Revenue to 'discover'. It accepted previous judicial statements that "discover" means "comes to the conclusion from the examination it makes and from any information it may choose to receive" or "has reason to believe" or "satisfies himself". Lord Reading CJ said: "The surveyor may be mistaken in the 'discovery', but if there is information before him which he could, and did honestly believe the person to be liable to the duties, the only remedy is by the appeal prescribed by the Statutes." and
"there must be information before the surveyor which would enable him, acting honestly, to come to the conclusion that a person is chargeable."
1 Citers


 
Mitchell (Surveyor of Taxes) -v- Egyptian Hotels Ltd [1915] UKHL 2; [1915] AC 1022
9 Jul 1915
HL
Earl Loreburn
Income Tax

[ Bailii ]
 
Birmingham & District Cattle By-Products Co Ltd -v-Inland Revenue Commissioners (1919) 12 TC 92
1919

Rowlatt J
Income Tax
A company had not completed a full trade year before the outbreak of the First World War was required to obtain tax relief.
1 Citers


 
Commissioners of Inland Revenue -v- Marine Steam Turbine Co. Ltd [1920] 1 KB 193
1920

Rowlatt J
Income Tax
The respondent taxpayer company, had transferred to a third party its licence to exploit various patents for the manufacture of a marine steam turbine engine in return for the payment of a royalty on every engine sold by the third party and whose only business consisted of receiving the royalties, was not "carrying on a trade or business" within the meaning of the Finance (No. 2) Act 1915. Held: The word "business" was used in the sense of "an active occupation or profession continuously carried on".
Finance (No. 2) Act 1915
1 Citers


 
Inland Revenue Commissioners -v- Von Glehn [1920] 2 KB 553; 36 The Tims LR 463
1920
CA
Lord Sterndale MR, Scrutton LJ, Warrington LJ
Income Tax
The company had paid a penalty during the First World War under the Customs (War Powers) Act 1915 for exporting goods without taking all reasonable care to secure that the ultimate destination should not be enemy territory. They sought to set off the penalty against income tax. Held: The claim was disallowed. Although the incurring of the penalty was connected with the trade, in the sense that it would not have happened unless the trade had been carried on, it was not for the purposes of the trade but because of a wrongful act on the part of the company.
Lord Sterndale MR said: "It is perhaps a little difficult to put the distinction into very exact language" but that the payment was not a "loss connected with the business but. . . a fine imposed upon the company personally."
Warrington LJ said that the payment was not a loss "connected with or arising out of the trade" because it was a sum which "the persons conducting the trade have had to pay because in conducting it they have so acted as to render themselves liable to this penalty."
Scrutton LJ said that the obvious answer to the question whether a trader could deduct penalties imposed for carrying on the trade in an unlawful manner was "Of course he cannot" but said that he did not find it easy to explain the reasons. He cited some well-known dicta about the criteria for allowable deductions and went on to say: ". . [W]ere these penalties an expenditure necessary to earn the profits ? Were they paid for the purpose of earning the profits ? The answer seems to me to be obvious, that they were not; they were unfortunate incidents which followed after the profits had been earned."
Customs (War Powers) Act 1915
1 Citers



 
 Williams -v- Singer; HL 17-May-1920 - [1920] UKHL 2; [1921] 1 AC 65
 
Cape Brandy Syndicate -v- Inland Revenue Commissioners [1921] 1 KB 64
1921
CA
Rowlatt J, Lord Sterndale MR, Lord Atkinson
Income Tax, Litigation Practice
Rowlatt J said: "In a taxing Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied" and "subsequent legislation, if it proceeded on an erroneous construction of previous legislation, cannot alter the previous legislation".
Lord Sterndale MR said: "I quite agree that subsequent legislation, if it proceed upon an erroneous construction of previous legislation, cannot alter that previous legislation; but if there be any ambiguity in the earlier legislation, then the subsequent legislation may fix the proper interpretation which is to be put upon the earlier."
Lord Atkinson: "Where the interpretation of a statute is obscure or ambiguous, or readily capable of more than one interpretation, light may be thrown on the true view to be taken of it by the aim and provisions of a subsequent statute."
1 Citers


 
Ryall -v- Hoare (1923) 8 TC 521
1923

Rowlatt J
Income Tax
It was argued that income tax was levied on annual profits. Since the appellants profit was raised within one tax year and not repeated, he argued that it could not properly be described as 'annual' Held: Though the wording of the tax act was not without difficulty, the argument failed.


 
 Commissioners of Inland Revenue -v- The Anglo Brewing Co. Ltd; 1925 - (1925) 12 TC 803

 
 Graham -v- Green; 1925 - [1925] 2 KB 37
 
Martin -v- Lowry (HM Inspector of Taxes) [1926] 1 KB 550
15 Jun 1925
KBD
Jowett J
Income Tax
The taxpayer had other business, but purchased a substantial quantity of cloth and resold it. He said this was not by way of trade. The Revenue said that he had used all the standard trade practices, and it was taxable as such. Held: The transactions were taxable.
Income Tax Act 1918 149
1 Citers


 
Wigmore -v- Thomas Summerson & Sons Ltd [1926] 1 KB 131
1926

Rowlatt J
Income Tax
The Revenue was unable to charge to income tax a holder of gilts who, by a well-timed sale just before payment of a half-yearly instalment of interest, in effect turned his accrued income into a capital gain. Rowlatt J said that: "The result is that nobody on the super tax level, who has not more money than appreciation of income tax law, will ever buy a security that is full of dividend, because in doing so he is buying super tax; and that a man on the super tax level, if he wants to sell a security, had better sell when it is full of dividend, because then he is selling super tax."
1 Citers


 
Martin -v- Lowry (HM Inspector of Taxes)
1926
CA
Pollock MR, Atkin, LJ
Income Tax
The appellant purchased the entire stock of government surplus aircraft linen. He had another main business and had intended to resell it immediately. When that failed to promise a profit he set out to sell and sold the material over several months in many smaller transactions. He claimed not to have been in trade in this exercise, saying it was just one gambling exercise, and appeal a finding that he was in trade. Held: the taxpayer's approach was untenable: "The Appellant entered upon this separate and new trade, or business, or adventure, for the purpose of realising profits or gains in it, and even if his purchase was made under a single contract, the realisation of his profits, which were large, was accomplished by his setting up a trading organisation. " He then said that these were not 'annual profits'. As to this the system of Income tax was that the charge to tax was established annually by statute, and made no provision for taxation beyind that range: "the Acts contemplate and impose a tax for one year only." The argument failed; a casual profit arising from an isolated transaction in the course of the year was taxable in tha year.
Atkin LJ: "If one could adopt as a rigid canon of construction an assumption that in any statute the same word is always used with the same meaning, one's task would perhaps be easier; but it is plain that the assumption is ill-founded, and particularly so in regard to the Income Tax Acts. We must have regard to the context. When the history of the Income Tax Acts is looked at, the meaning of the words in question becomes plain." and
"I am inclined to accede to the argument that "annual" often, perhaps usually, connotes recurrence, and that it is sometimes used with that connotation in the Income Tax Acts, on the other hand it sometimes means "of the year", and is also used in that connotation in the Income Tax Acts. In the context in which it is used in this Schedule it appears to me to mean profits of the year of charge. In that view the question that arises in respect to them is not whether they are recurrent or capable of being recurrent. With that quality an Act imposing taxation for a year only may be considered to take little concern. The question is whether they can fairly be brought within the main purview of the Acts, which is to tax income, not capital, and whether, if they are profits in the sense of income, they arose within the year in respect of which the Legislature is exacting revenue. "
Finance (No 2) Act 1915 38(1)
1 Cites

1 Citers



 
 Martin -v- Lowry (HM Inspector of Taxes); HL 7-Dec-1926 - [1927] AC 312
 
Inland Revenue Commissioners -v- Livingston (1927) 11 Tax Cas 538
1927

Lord Clyde
Income Tax
Lord Clyde: "I think the test, which must be used to determine whether a venture such as we are now considering is or is not, 'in the nature of trade', is whether the operations involved in it are of the same kind, and carried on in the same way, as those which are characteristic of ordinary trading in the line of business in which the venture was made."
1 Citers


 
BW Noble Ltd -v- Mitchell [1927] EWCA Civ 1; [1927] 11 TC 372; [1927] 1 KB 719; (1927) 11 Tax Cas 372; (1927) 34 TR 2004/15
7 Feb 1927
CA
Lord Hanworth MR, Sargant, Lawrence LLJ
Income Tax
HMRC Income Tax, Schedule D, Case I - Business carried on abroad - Control - Profits of trade - Deduction.
Under its Articles of Association the management of a Company of insurance brokers registered in England was vested in its Board of Directors in London, with powers of delegation. One of the Directors was appointed Resident Director in France, and conducted the French business of the Company from an office in Paris under a power of attorney from the Company. He attended a few Board meetings in London, though not bound to do so. He also made some reports to the other Directors, and on one or two occasions received their concurrence with his proposals, but they did not interfere with his conduct of the French business. Separate accounts of that business were kept in Paris, but the results were incorporated in the balance sheets of the Company, though no part of the French profits was ever remitted to London.
The Company contended that the control of the Paris business was in Paris and not in London, and that the profits therefrom were accordingly not assessable to Income Tax.
The Company also claimed as a deduction from its profits for Income Tax purposes, a sum of £19,200 payable (by instalments) to a retiring Director in the following circumstances.
The original Directors were appointed for life so long as they held a qualifying number of shares, subject to dismissal forthwith for neglect or misconduct towards the Company. A Director so dismissed was only entitled to receive Jus salary then due and could be required to sell his shares to the other Directors at par. He would also have to surrender for cancellation certain notes issued by the Company entitling him to participate in surplus profits.
Circumstances arose in 1920 and 1921 in which the Company might possibly have been justified in dismissing one of the Directors, but, to avoid publicity injurious to the Company's reputation, it entered into negotiation with him for his retirement He claimed £50,000 compensation, but a compromise was arrived at and embodied in an agreement dated the 30th December, 1921, by which he agreed to retire from the Company, to transfer his 300 £1 shares to the other Directors at par value (they were then worth considerably more) and to surrender his participating notes. The Company agreed to pay him £19,200, and the Directors to pay him £300 (expressed to be consideration for his shares), making together £19,500 (payable in five annual instalments), which he agreed to accept in full satisfaction of all claims against the Company or the Directors.
The Special Commissioners on appeal decided against the Company on the question of the control of the French business, but in their favour on the question of the deduction of the said sum of £19,200. A Case for the opinion of the High Court was demanded both by the Company and by the Crown.
Held: (1) that the control of the Company's Paris business was with the Board of Directors in London, that their authority was not divested by the power of attorney to the Paris Director, and that the Company was accordingly assessable to Income Tax in respect of its Paris profits under Case I of Schedule D (Egyptian Hotels, Limited v. Mitchell, 6 T.C. 152 & 542, distinguished);
and (2) that the instalments of the sum of £19,200 payable by the Company to the retiring Director under the agreement of the 30th December, 1921, were admissible deductions in arriving at its profits for Income Tax purposes.
[ Bailii ]

 
 Baker -v- Archer-Shee; HL 26-Jul-1927 - [1927] UKHL 1; [1927] AC 844; [1926] 11 TC 749

 
 Inland Revenue Commissioners -v- Hawley; 1928 - [1928] 1 KB 578
 
Levene -v- Inland Revenue Commissioners [1928] AC 217; [1928] UKHL 1
1928
HL
Viscount Cave LC, Lord Warrington
Income Tax
Until 1919 Mr. Levene had been both resident and ordinarily resident in the UK. Then, for five years he spent about five months (mainly in the summer) each year, staying in hotels in the UK and receiving medical attention or pursuing religious and social activities. He spent the remaining months staying in hotels abroad. The House considered what was the meaning of 'residence.' Held: The appeal failed. The taxpayer had remained resident and ordinarily resident in the UK during those years.
Viscount Cave LC said: "My Lords, the word "reside" is a familiar English word and is defined in the Oxford English Dictionary as meaning "to dwell permanently or for a considerable time, to have one's settled or usual abode, to live in or at a particular place." No doubt this definition must for present purposes be taken subject to any modification which may result from the terms of the Income Tax Act and Schedules; but, subject to that observation, it may be accepted as an accurate indication of the meaning of the word "reside". In most cases there is no difficulty in determining where a man has his settled or usual abode, and if that is ascertained he is not the less resident there because from time to time he leaves it for the purpose of business or pleasure. Thus, a master mariner who had his home at Glasgow where his wife and family lived, and to which he returned during the intervals between his sea voyages, was held to reside there, although he actually spent the greater part of the year at sea (Re Young, 1875, 1 Tax Cases 57; Rogers v Inland Revenue, 1879, 1 Tax Cases 225). Similarly a person who has his home abroad and visits the United Kingdom from time to time for temporary purposes without setting up an establishment in this country is not considered to be resident here." and
"The expression 'ordinary residence' is found in the Income Tax Act 1806 and occurs again and again in the later Income Tax Acts, where it is contrasted with the usual or occasional or temporary residence; and I think that it connotes residence in a place with some degree of continuity and apart from accidental or temporary absences."
Lord Warrington said: "A member of this House may well be said to be ordinarily resident in London during the Parliamentary session and in the country during the recess. If it has any definite meaning I should say it means according to the way in which a man's life is usually ordered".
1 Citers

[ Bailii ]

 
 Leigh -v- Inland Revenue Commissioners; ChD 1928 - [1928] 1 KB 73
 
De Robeck -v- Inland Revenue Commissioners [1928] UKHL 3; 1928 SC (HL) 34; 1928 SLT 222
14 Feb 1928
HL

Scotland, Income Tax

Income Tax Act 1918
[ Bailii ]
 
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