Between: Gas Lighting Improvement Company Ltd - Appellant
And: Commissioners of Inland Revenue - Respondents

Judges: Viscount Cave LC
Viscount Finlay
Lord Atkinson
Lord Sumner

Lord Phillimore

Subject References:
REVENUE
EXCESS PROFITS DUTY
Computation of Capital
Percentage Standard
Income received from Investments
Capital of Trade or Business
Deduction

Legislative References:
Finance (No. 2) Act, 1915 (5 & 6 Geo. 5, c. 89) - ss. 40, 41; Sch. IV., Part I., r. 8; Part III., r. 2

Judgment date: 11 May 1923

Judgment by:
Lord Phillimore

My Lords, I agree with the Court of Appeal and with your Lordships that this is not a case in which we are concluded by the finding of the Commissioners. The matter involves a question of construction of the statute and is therefore one of mixed law and fact.

I agree also that the expression "income received from investments" and the word "investments" taken by themselves, need receive no restriction other than those necessarily imposed by the consideration of the rest of the statute. Those restrictions are (as I can see them) three. You must not include as an investment the capital put into the business itself, because that is the very matter on which excess profits are to be considered; nor money already in the business and merely shifted from one limb or branch of the business to another; nor new capital put into the business, because that is provided for by s. 41.

All else is an investment to be treated as separate from the business, and the income from it is not to be taken into calculation in arriving at profits.

So far, I see my way clear; but when the question comes to be considered, as in this case, of an incorporated company shifting some part of its assets into some cognate business for the purpose of furthering its original business, a decision that this is an investment within the meaning of Part I., r. 8, and Part III., r. 2, of the Fourth Schedule, and therefore removed from the calculation of profits, and not a mere shifting from one branch or limb of the business to another, seems to me an almost arbitrary one. Considerations could be urged on either side; and I have difficulty in finding any guiding principle of law or business; though I see more force in the contention for the Crown as to the Belgian matter than in the contention as to the Roumanian matter.

Upon the whole, however, I do not dissent, even in the Roumanian matter, from the conclusions at which the Court of Appeal have arrived and of which your Lordships have now expressed your approval, and I agree that this appeal should be dismissed.

Order of the Court of Appeal affirmed, and appeal dismissed with costs.

Lords' Journals, May 11, 1923.

Solicitors for the appellants: Deacon & Co.

Solicitor for the respondents: Solicitor of Inland Revenue.