Commissioners for the General Purposes of the Income Tax for the City of London v Gibbs and Others
[1942] 1 All ER 415Between: Commissioners for the General Purposes of the Income Tax for the City of London
And: Gibbs and Others
Judges:
Viscount Simon LC
Lord Russell of Killowen
Lord MacMillan
Lord Wright
Lord Porter
Subject References:
INCOME TAX
Partnership
Admission of new partner
Assessment of profits
'Succession'
Continuance of business
Legislative References:
Income Tax Act 1918 (c 40) - Sched D, Cases I and II, rr 8, 9, 10, 11
Finance Act 1926 (c 22) - s 32
Case References:
Income Tax Special Purposes Comrs v Pemsel - [1891] AC 531; 28 Digest 10, 51, 61 LJQB 265; 65 LT 621
Baird's Trustees v Lord Advocate - (1888) 15 R (Ct of Sess) 682; 28 Digest 10, g
R v Hogg - (1787) 1 Term Rep 721; Cald Mag Cas 266; 42 Digest 671, 818
Saltoun (Lord) v Advocate General - (1860) 3 Macq 659; 42 Digest 675, 868; 3 LT 40
Caledonian Ry Co v North British Ry Co - (1881) 6 App Cas 114; 42 Digest 638, 410
Sadler v Whiteman - [1910] 1 KB 868; 36 Digest 319, 21; 79 LJKB 786; 102 LT 472; on appeal sub nom Whiteman v Sadler [1910] AC 514
Watson & Everitt v Blunden - (1933) 18 Tax Cas 402; Digest Supp
Brace v Calder - [1895] 2 QB 253; 36 Digest 392, 652; 64 LJQB 582; 72 LT 829
Kensington Income Tax Comrs v Aramayo - [1916] 1 AC 215; 28 Digest 102, 622; 84 LJKB 2169; 113 LT 1083
Judgment date: 20 FEBRUARY 1942
The appellants were a firm of London stockbrokers. During the year of assessment, there had been a change in the firm through the taking in of a new partner on 7 February 1938, and also a falling off of its profits far below its current assessment. The revenue claimed to act upon a power conferred by Sched D, cases I and II, r 9, to apportion the existing assessment between the parties of the year before and after the change, on the footing that one firm of 4 partners had "ceased to carry on the business" and had been "succeeded" by a new firm of 5 partners. The procedure laid down by the rule had been strictly followed, and, if the rule were applicable, the result claimed by the revenue-namely, that the existing assessment as apportioned became unalterably binding-would prima facie seem to follow. The firm contended that the rule had no application to such a change in the constitution of a partnership, and that it was limited to a case of one person really ceasing to carry on a business and another person succeeding to it. On 22 March 1938, the firm of 5 partners agreed to take in a sixth partner as from 25 March 1938. On 1 April 1938, all the 6 partners sent a notice, in accordance with the proviso to r 11(1), requiring computation of the tax payable in accordance with that rule. No such notice had been sent in respect of the change on 7 February 1938. The business was carried on after each of these dates in the same manner as before:-
Held (Lord Russell of Killowen dissenting) -
- (i)
- the rule applicable, so far as the admission of the new partner on 7 February 1938, was concerned, was r 9, and the procedure laid down in that rule ought to be followed.
- (ii)
- Where there is a difference between English and Scots law, the Income Tax Acts, which apply to both countries, should be so construed as to obviate differences of construction in the two countries.
Decision of the Court of Appeal ( [1940] 3 All ER 613 ) reversed.
Notes
Lord Russell of Killowen has dissented from the other members of the House for the reason that he had heard no argument in favour of the more liberal construction placed on the rule by the majority which did not appear to him to be irreconcilable with the plain meaning of the words under construction. Whether this is a further instance of the conflict between the liberal and literal construction of statutes may be doubted, since, as the majority admitted, neither view presented to the House was entirely satisfactory. It has, however, given an opportunity to the majority to repeat the many arguments in favour of the liberal construction, which has so many practical advantages. If it is permissible to add a word or two on this matter, it might be said that the real and fundamental objection to a literal construction is that it places an impossible burden on the parliamentary draftsman. This silent worker is usually, as, indeed, he is in the opinions herein, subjected to criticism, but it is to be remembered that he had to draft a clause, of the practical application of which he could be given only one or two concrete examples, and it must almost always be the case that the words which he has used have to be construed with reference to problems that were not only not presented to him, but are in fact widely different from anything presented to him. Further, if his words are not to be liberally construed, he would have to insert so many explanatory phrases and provisos that the clause would, in most cases, become practically unintelligible. It is, therefore, very helpful that their Lordships have again emphasised the first rule of construction, that effect is to be given to the intention with which the enactment was passed. At the same time, no meaning can be ascribed to any enactment or part of an enactment which is irreconcilable with its meaning; but upon the application of this rule two minds seldom think alike. Another useful point made in the course of the case here reported is that Acts which apply to both England and Scotland should, where the law of England differs from that of Scotland, be so construed as to obviate differences of construction in the two countries. It is, perhaps, idle to deal in any detail with the particular rule under consideration, for, no doubt, when opportunity occurs, the rules will, in accordance with the suggestion of the House, be redrafted.
As to Successions in Partnerships, see Halsbury (Hailsham Edn), Vol 17, pp 109-113, paras 204-209; and for Cases, see Digest, Vol 28, pp 40-42, Nos 208-214.
Appeal
Appeal by the Commissioners from an order of the Court of Appeal (Scott, Clauson and Goddard LJJ), dated 2 August 1940, and reported [1940] 3 All ER 613 , allowing an appeal by the taxpayers from an order of a Divisional Court (Hawke, Charles and Hilbery JJ), dated 10 May 1940. The facts are fully stated in the opinion of Viscount Simon LC.
The Attorney-General (Sir Donald Somervell KC), J S Scrimgeour and Reginald P Hills for the appellants.
Cyril King KC and Frederick Grant for the respondents.
ORDER
Appeal allowed.