British Insulated and Helsby Cables Ltd v Atherton
[1926] AC 205(Judgment by: Lord Buckmaster)
Between: British Insulated and Helsby Cables Ltd - Appellants
And: Atherton - Respondent
Judges:
Viscount Cave LC
Lord Atkinson
Lord BuckmasterLord Carson
Lord Blanesburgh
Subject References:
REVENUE
INCOME TAX
TRADE PROFITS
DEDUCTIONS
Lump Sum set aside out of Profits to establish Pension Fund for Employees
Trust Deed
'Money wholly and exclusively laid out .... for the purposes of the trade'
'Capital withdrawn from or any sum employed .... as capital in such trade'
Income or Capital Expenditure
Legislative References:
Income Tax Act, 1842 (5 & 6 Vict. c. 35), Rules applicable to Cases I. and II., r. 1 - s. 100, Sch. D, Case I., rr. 1 and 3
Judgment date: 11 December 1925
Judgment by:
Lord Buckmaster
My Lords, the facts in this case have already been stated, they do not admit of ambiguity and their repetition is needless. The sole question for decision is whether the contribution of 31,784l. made for the purpose and in the circumstances already narrated can be deducted from the profits earned by the appellants in their business for the year ending April 5, 1918. The determination of this question depends upon the true meaning of the rules in Sch. D to the Act of 1842. The first and paramount provision is: that the duty to be charged shall be computed on a sum "not less than the full amount of the balance of the profits and gains" of the trade on a fair and just average for three years. In ascertaining this result there are certain restrictive conditions imposed by the succeeding rules - one prevents any deduction for any disbursements "not being money wholly and exclusively laid out or expended for the purposes of the trade," and another prevents allowance on account of capital withdrawn from the trade, or "for any sum employed or intended to be employed as capital in such trade."
It is, I think, plain upon the findings of fact of the Commissioners that the moneys in question in this case were exclusively laid out for the purposes of the trade - this view is emphatically asserted by Warrington L.J. and assented to by the Master of the Rolls. No difficulty arises in this connection. Whether this money should be treated as capital withdrawn from the business or intended to be employed as capital in the business, it is not, in my opinion, necessary to decide, for I agree with Warrington L.J. that the real difficulty lies in considering whether the deduction can be made in arriving at the full amount of the balance of profits and gains. In order to examine this question it appears to me that the different contributions to the scheme are not really material - the principle involved would be the same if there were no contributions other than those provided by the employers themselves and they had started and financed this scheme at their own sole cost. So tested I cannot think that this sum, which represents an amount set apart as the nucleus of the pension fund, can be properly deducted in determining the balance of the profits and gains. Authorities appear to me to be of little assistance; the Rowntree case [F29] is different, as the money there was set apart for charitable trusts in which ultimately others than those connected with the business might become the beneficiaries; and the Hancock case [F30] is nothing but the payment in one sum of an annually recurring liability and is closely analogous to the case of the Incorporated Council of Law Reporting. [F31] But neither in their facts nor in their reasoning does it seem to me that these authorities govern the present case.
In my opinion this appeal should be dismissed.