Whitworth Park Coal Co Ltd (in liq) and Ors v. Inland Revenue Commissioners

[1959] 3 All ER 703

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Between: Whitworth Park Coal Co Ltd (in liq)
And: Inland Revenue Commissioners
Between: Ramshaw Coal Co Ltd (in liq)
And: Inland Revenue Commissioners
Between: Brancepeth Coal Co Ltd (in liq)
And: Inland Revenue Commissioners

Court:

Judges: Viscount Simonds
Lord Reid
Lord Radcliffe
Lord Tucker
Lord Keith of Avonholm

Subject References:
TAXATION
INDUSTRY
INCOME TAX
PROFITS
Computation of profits
Year of assessment
Interim income payments in respect of compensation on nationalisation of coal industry
Payments in respect of specified periods
Whether income of those periods or of years of receipt
COAL MINING
Nationalisation of industry
Colliery company
Interim income

Legislative References:
Income Tax Act, 1918 (8 & 9 Geo 5 c 40) - Shc D, Case VI, r 2
Coal Industry Nationalisation Act, 1946 (9 & 10 Geo 6 c 59) - s 22(2), (3)
Coal Industry (No 2) Act, 1949 (12, 13 & 14 Geo 6 c 79) - s 1(2)

Case References:
Dewar v Inland Revenue Comrs - [1935] All ER Rep 568; [1935] 2 KB 351; 104 LJKB 645; 153 LT 357; 19 Tax Cas 561; 28 Digest (Repl) 333, 1475
Ensign Shipping Co Ltd v Inland Revenue Comrs - (1928) 139 LT 111; 12 Tax Cas 1169; 28 Digest (Repl) 414, 1836
Forth Conservancy Board v Inland Revenue Comrs - [1931] All ER Rep 679; [1931] AC 540; 100 LJPC 193; 145 LT 121; 95 JP 160; sub nom Inland Revenue Comrs v Forth Conservancy Board, 16 Tax Cas 103; 28 Digest (Repl) 48, 181
Gardner, Mountain & D'Ambrumenil Ltd v Inland Revenue Comrs - [1947] 1 All ER 650; 177 LT 16; 29 Tax Cas 69; 2nd Digest Supp
Grey v Tiley - (1932), 16 Tax Cas 414; 28 Digest (Repl) 219, 941
Hanbury, Re, Coniskey v Hanbury - (1939) 20 ATC 333
Hawley v Inland Revenue Comrs - (1925), 134 LT 502; 9 Tax Cas 331; 28 Digest (Repl) 332, 1470
Hill v Gregory - [1912] 2 KB 61; 81 LJKB 730; 106 LT 603; 6 Tax Cas 39; 28 Digest (Repl) 159, 625
Holden (Isaac) & Sons Ltd v Inland Revenue Comrs - (1924), 12 Tax Cas 768; 28 Digest (Repl) 417, 1851
Howe (Earl) v Inland Revenue Comrs - [1919] 2 KB 336; 88 LJKB 821; 121 LT 161; 7 Tax Cas 289; 28 Digest (Repl) 350, 1549
Inland Revenue Comrs v Butterley Co Ltd - [1956] 2 All ER 197; [1957] AC 32; 36 Tax Cas 411; [1956] 2 WLR 1101; 28 Digest (Repl) 377, 1645
Inland Revenue Comrs v City of London Corpn (as the Conservators of Epping Forest) - [1953] 1 All ER 1075; 117 JP 280; 34 Tax Cas 293, 315; [1953] 1 WLR 652; 28 Digest (Repl) 171, 690
Inland Revenue Comrs v Haddington (Earl) - 1924 SC 456; 8 Tax Cas 711; 28 Digest (Repl) 356, 803
Lambe v Inland Revenue Comrs - [1933] All ER Rep 417; [1934] 1 KB 178; 103 LJKB 69; 150 LT 190; 18 Tax Cas 212; 28 Digest (Repl) 333, 1474
Lambert Bros Ltd v Inland Revenue Comrs - (1927), 12 Tax Cas 1053; 28 Digest (Repl) 413, 1834
Leigh v Inland Revenue Comrs - [1928] 1 KB 73; 96 LJKB 853; 137 LT 303; 11 Tax Cas 590; 28 Digest (Repl) 334, 1482
LCC v A-G - [1901] AC 26; 70 LJQB 77; 83 LT 605; 65 JP 227; 4 Tax Cas 265; 28 Digest (Repl) 191, 790
Moss' Empires Ltd v Inland Revenue Comrs - [1937] 3 All ER 381; [1937] AC 785; 1937 SC (HL) 35; 106 LJPC 138; 157 LT 396; 21 Tax Cas 264; 28 Digest (Repl) 170, 688
Newcastle Breweries Ltd v Inland Revenue Comrs - [1927] All ER Rep 287; 96 LJKB 735; 137 LT 426; sub nom Inland Revenue Comrs v Newcastle Breweries, Ltd 12 Tax Cas 927; 28 Digest (Repl) 413, 1833
St Lucia Usines & Estates Co Ltd v St Lucia (Colonial Treasurer) - [1924] AC 508; 93 LJPC 212; 131 LT 267; 28 Digest (Repl) 167, 486
Simpson v Maurice's Exors - (1929) 14 Tax Cas 580; 28 Digest (Repl) 203, 850
Smith v Smith (No 2) - [1923] P 191; 92 LJP 132; 130 LT 8; 28 Digest (Repl) 178, 721
Try Ltd v Johnson - [1946] 1 All ER 532; sub nom Johnson v Try, Ltd 174 LT 399; 27 Tax Cas 167; 28 Digest (Repl) 36, 164

Hearing date: 15-16, 20-22 July 1959
Judgment date: 5 November 1959

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On 1 January 1947, the colliery assets of the first appellant (which was a company under the control of not more than five persons within s 21 of the Finance Act, 1922) were transferred to the National Coal Board under the Coal Industry Nationalisation Act, 1946, and the company became entitled to compensation from the Crown for those assets.

The compensation became due on 1 January 1947, subject to determination of its amount and would not, therefore, be paid for a substantial time. For the period between 1 January 1947, and the date on which compensation was fully satisfied the company was entitled to "interim income". Under s 22(2)(a) of the Act, the right to interim income for the period between 1 January 1947, and the issue of stock or the making of a payment in satisfaction of any amount of compensation was to be satisfied by making "in addition to the issue of the stock then issued in satisfaction of that amount of compensation or to the making of the money payment then made in satisfaction of that amount of compensation ... a money payment of an amount equal to interest for that period on that amount of compensation at such rate or rates as may be prescribed as respects that period of different parts thereof by order of the Treasury." These payments were to be made at the same time as the compensation was paid or satisfied. Under s 22(3) "revenue payments" were to be made in respect of each of the two years beginning with 1 January 1947, equal to one half of the comparable ascertained revenues of the company attributable to activities for which its transferred interests were used or owned. No time was fixed for making these payments. Section 22(5) provided for adjustments for under-payments and over-payments arising from payment before all relevant facts for giving effect to the provisions were ascertainable and adjustments of payments were in fact made in subsequent payments. By s 1(2) of the Coal Industry (No 2) Act, 1949, modified revenue payments were in substitution, so far as they went, for the right to interim income.

From 1 January 1947, the company was, as a consequence of the nationalisation, an investment company within the meaning of s 20(1) of the Finance Act, 1936, and the whole of its actual income was deemed to be the income of the members under s 14 of the Finance Act, 1939. In 1948, 1949, 1950 and 1951, the company received payments in respect of interim income (viz; payments within s 22(2) of the Act of 1946) and revenue payments under s 22(3) of the Act of 1946 and under s 1(2) of the Act of 1949. All these payments were conceded to be income of the company for tax purposes. The Special Commissioners of Income Tax in their apportionment of the income of the company among the members under s 21 of the Finance Act, 1922, assessed the payments (viz, both those made under s 22(2) of the Act of 1946 and the revenue payments made under s 22(3) and the Act of 1949) as income of the company in the year in which they were received and as being so assessable under Case III of Sch D. The company contended that the payments should be assessed as income of the year or period in respect of which each was paid, and that they were so assessable under Case VI of Sch D.

Held

(Lord Radcliffe dissenting): the payments were assessable to tax under Sch D, Case III, and should each be included in the actual income of the company of the year in which it was received, for the following reasons:-

(i)

although r 19 and r 21 of the All Schedules Rules to the Income Tax Act, 1918, did not apply to payments by the Crown out of moneys provided by Parliament, that did not prevent Case III of Sch D from applying (see p 711, letter f, and p 712, letter c, post);

(ii)

the requirements of Case III were satisfied because all the payments made to the company were pure profit income and of a recurring character (see p 712, letters g and h, post);

(iii)

the payments made to the company (which were not trading receipts as the company was not then engaged in trade) were each "income arising" within Case III, r 2, during the year of assessment in which the payment was received (see p 714, letter a, and p 725, letter b, post).

(iv)

(per Viscount Simonds, Lord Reid and Lord Tucker) the income so received could not be spread back over previous years because there was nothing in the Rules applicable to Case III to warrant that (see p 714, letter e, post); moreover income could not be "income arising" before it became payable and, though these receipts could be regarded as accruing during earlier years, yet they could not be regarded as having become payable during those years (see p 714, letter g, post).

Inland Revenue Comrs v Butterley Co Ltd ([1956] 2 All ER 197) applied.

Per Lord Keith of Avonholm: if the payments were treated as coming under Case VI of Sch D they would still be income of the company arising in the years in which they were received (see p 725, letter e, post).

Decision of the Court of Appeal ([1958] 2 All ER 91) affirmed on different grounds.

Notes

The Income Tax Act, 1918, has been repealed and replaced by the Income Tax Act, 1952. Schedule D, Case III, r 1(a) and Case VI, r 2, and All Schedules Rules, r 19 and r 21, to the Act of 1918 have been replaced respectively by s 123(1), s 135(2), s 169 and s 170 of the Act of 1952.

As to annual payments chargeable to tax under Sch D, see 20 Halsbury's Laws (3rd Edn) 247, 248, para 453; and for cases on the subject, see 28 Digest (Repl) 161-177, 638-709.

As to the basis of computation of income under Sch D, Case VI, see 20 Halsbury's Laws (3rd Edn) 289, para 528; and for cases on the subject, see 28 Digest (Repl) 216-221, 913-953.

As to chargeability of the Crown to income tax and whether the Crown is a "person" within the Income Tax Acts, see 20 Halsbury's Laws (3rd Edn) 598, 599, para 1171; and for cases on the subject, see 28 Digest (Repl) 18, 67, and 3rd Digest Supp.

For the Income Tax Act, 1918, Sch D, Case III, r 1(a) and Case VI, r 2, and All Schedules Rules Applicable to Sch A, B, C, D and E, r 19 and r 21, see 12 Halsbury's Statutes (2nd Edn) 167, 173, 188, 190; and for the Income Tax Act, 1952, s 123(1), s 135(2), s 169 and s 170, see 31 Halsbury's Statutes (2nd Edn) 116, 132, 162, 165.

For the Coal Industry Nationalisation Act, 1946, s 22, see 16 Halsbury's Statutes (2nd Edn) 304; and for the Coal Industry (No 2) Act, 1949, s 1, see 28 Halsbury's Statutes (2nd Edn) 1014.

Appeals

Consolidated appeals by Whitworth Park Coal Co Ltd (in liquidation), Ramshaw Coal Co Ltd (in liquidation) and Brancepeth Coal Co Ltd (in liquidation) against orders of the Court of Appeal (Jenkins, Romer and Ormerod LJJ) dated 12 March 1958, and reported sub nom Inland Revenue Comrs v Whitworth Park Coal Co Ltd (in liquidation), Inland Revenue Comrs v Ramshaw Coal Co Ltd (in liquidation), Inland Revenue Comrs v Brancepeth Coal Co Ltd (in liquidation), [1958] 2 All ER 91, affirming orders of Harman J dated 31 July 1957, whereby he allowed appeals by the Crown against determinations of the Special Commissioners of Income Tax. The facts are set out in full in the report at [1958] 2 All ER at p 94. See also letter, i infra and p 709, post.

F N Bucher QC and P M B Rowland for the appellants.

John Pennycuick QC, E Blanshard Stamp and A S Orr for the Crown.

Their Lordships took time for consideration

5 November 1959. The following opinions were delivered.