The National Provident Institution v Brown (Surveyor of Taxes): CA 10 May 1920

Lord Sterndale MR said: ‘It seems to me to be a general principle of Income Tax Law that a person in order to be taxable in a particular year must have an income arising from a source existing in that year and in order to justify this assessment the Crown must show some reason for departing from that general principle. It is admitted that if the taxation be in respect of a trade, or business, or an office, or of property the taxpayer must continue in the year of charge to carry on the trade or business or hold the office or the property. It was, however, contended for the Crown that the principle did not apply in this case because by the first rule of the Third Case the duty to be charged was computed according to the profits of the preceding year, and, therefore, if the last year was not taxed because there was no source, one year escaped taxation altogether. I do not think the first rule has this effect. The provision as to computation of profits is the same as that in respect of trades, etc., in the first rule of the First Case, and it is admitted that in that instance the trade must exist in the taxable year in order to make the taxpayer liable. I see no reason for construing the same provision in a different way in the two rules; both refer to methods of computation only, and are not directed to whether there is a taxable income or not. Besides, as pointed out in Dowell’s Income Tax Laws, 7th Edition, page 300, the Third Case originally dealt with property which must have existed in the hands of the taxpayer in the taxable year in order to make him liable, and it can hardly have been intended by the insertion of the second rule to alter the effect of the first. if the first year does escape taxation, it is because the Legislature has not inserted in the second rule of the Third Case such a provision as is found in the first rule of the First Case. It is suggested by the Commissioners that the profits of the first year might be taxed under the Sixth Case. I do not think it necessary to decide that point, for even if they be not taxable it does not in my opinion show that the taxpayer can be taxed in respect of a source of income which does not exist.’


Lord Sterndale MR


[1920] 3 KB 35


Income Tax 1842


England and Wales

Cited by:

Appeal fromThe National Provident Institution v Brown (Surveyor of Taxes) HL 3-Jun-1921
The House was asked (inter alia) whether discounts on certain Treasury Bills could be subject to taxation, on a preceding year basis, for a year in which the taxpayer did not hold or have any transactions in the relevant securities.
Held: The . .
Lists of cited by and citing cases may be incomplete.

Income Tax

Updated: 16 May 2022; Ref: scu.606460