Dr Barnardo's Homes National Incorporated Association v Commissioners for Special Purposes of the Income Tax Acts
[1921] 2 A.C. 1(Judgment by: Lord Atkinson)
Between: Dr Barnado's Homes National Incorporated Association - Appellant
And: Commissioner for Special Purposes of the Income Tax Acts - Respondents
Judges:
Viscount Finlay
Viscount Cave
Lord AtkinsonLord Sumner
Subject References:
REVENUE
INCOME TAX
EXEMPTION OF CHARITIES
Residuary Bequest
Ascertainment of Residue
Income Tax on Interim Dividends
Legislative References:
Income Tax Act, 1842 (5 & 6 Vict. c. 35) - s. 88, Sch. C, r. 3; s. 105
Judgment date: 14 March 1921
Judgment by:
Lord Atkinson
My Lords, I think the judgment appealed from is right. I further think that the King's Bench Division were by the counsel for the Special Commissioners of Income Tax induced to give a judgment in favour of the present appellants, on the erroneous assumption that a certain principle applicable to the case of a specific legacy applied to a bequest of the residue of a testator's estate - namely, that the assent of an executor to a specific legacy when once given relates back to the death of the testator and vests in the legatee the property in the specific legacy from that date. That principle has no application whatever, and could not in the nature of things have any application whatever, to a legacy of the residue, which is, as its name indicates, only the property or fund which remains after all claims upon the testator's estate have been satisfied.
The case of Lord Sudeley v. Attorney-General [F17] decided in this House conclusively established that until the claims against the testator's estate for debts, legacies, testamentary expenses, etc., have been satisfied, the residue does not come into actual existence. It is a non-existent thing until that event has occurred. The probability that there will be a residue is not enough. It must be actually ascertained. And if this be so, then it cannot be held that until the residue has been ascertained any residuary legatee is entitled thereto within the meaning of s. 88, Sch. C, of the Income Tax Act, 1842, or that the payment of income tax on any portion of the income of the testator is a payment made on behalf of the residuary legatee. Rule 3 of Sch. C does not apply, because what is applicable to the charity is the residue when ascertained.
The principle applied by a Court of equity to a case between a tenant for life and a remainderman of a residue, to prevent the entire income of that fund being, during the life of the tenant for life, taken towards discharging the claims on the testator's estate has no application to the present case. The compromise of the probate suit cannot, of course, affect the right of the Crown to levy income tax on that income, or affect the question in controversy in this suit.
I think the appeal should be dismissed. Owing to the course which was taken I do not think the Crown are entitled to costs either here or in either of the Courts below.