Reported [1950] 2 All E. R. 633
Income Tax, Schedule D - Profits of trade - Publications produced for benefit of trade charitable association - profits from sale paid over to association - Whether such profits to be included in computation of company's liability - Deductions - Life subscriptions to association paid by company on behalf of employees - Whether an admissible deduction.
The Appellant Company produced certain publications to assist a charitable association established for the benefit of publishing and printing trade employees and their dependents. There was an understanding that all profits of the venture were to be paid over to the association. The Company paid the association sums of £31,469 in respect of profits from the sale of the publications and £6,972 representing life subscriptions which the Company had offered to pay on behalf of certain of its employees.
On appeal to the General Commissioners against assessments to Income Tax, Schedule D, the Company contended that the sum of £31.469 belonged to the association and should not be included in the Company's profits and that the sum of £6,972 was an admissible deduction in computing profits. The Commissioners rejected the Company's contentions and dismissed the appeal.
Held, that the Commissioners' decision was correct.
Stated by the Commissioners for the General Purposes of the Income Tax for the City of London pursuant to the provisions of Section 149 of the Income Tax Act, 1918, for the opinion of the High Court of Justice.
1. At meetings of the said Commissioners held on 1Oth May and on 5th and 13th July, 1948, at Gresham College, Basinghall Street, in the said City, Hutchinson & Co. (Publishers), Ltd., an incorporated company having its registered office at No. 47 Prince's Gate, S.W.7., (hereinafter called "the Appellant Company") appealed against estimated assessments to Income Tax made upon it under the Rules applicable to Case I, Schedule D of the Income Tax Act, 1918, as follows:-
For the year ended 5th April, 1944, in the sum of £40,000; and
for the year ended 5th April, 1945, in the sum of £10,000.
2. The questions for our determination were (a) what sums if any the Appellant Company was entitled to deduct in arriving at its profits for the two years in question in respect of various payments made to a trade charity known as the Printers' Pension Almshouse and Orphan Asylum Corporation (hereinafter referred to as "the corporation") and (b) whether the sum of £31,469 being profit made by the printing and sale during the year ended 31st December, 1943, of publications called "Printers' Pie" Christmas Pie", "Junior Pie" and "Printers' Devil" fell to be included in the profits of the Appellant Company for that year.
It will be seen, however, from what follows, that no argument was addressed to us which affected the year 1943-44, the assessment for which was based upon the accounts for the year ending 31st December, 1942. The amounts in dispute hereinafter referred to are amounts affecting the profits of the year 1944-45, based upon the accounts for the year ending 31st December, 1943.
3. Some but not all of the payments referred to in this Case were debited in the accounts of the Appellant Company. The balance of the payments was divided amongst other companies in the group. In one case, viz. the payment of £63,OOO hereinafter referred to, the whole amount was capitalised as an asset in the balance sheet of the Appellant Company at 31st December, 1943, but was subsequently split up amongst a number of companies including the Appellant Company. No question of principle, however, is involved in the division of the payments amongst the various companies, and although all the companies concerned have made formal appeals against the assessments made on them for the relevant years, the question of principle can be decided on the present appeal. If contrary to our decision any of the sums referred to under (a) above are held to be allowable as deductions it is understood that the parties will endeavour to agree the appropriate division amongst the various companies.
4. The Appellant Company is the principal company in a large group of subsidiary and associated companies engaged in various branches of the trade of printing and publishing books and magazines. Mr. Walter Hutchinson is the chairman and managing director of the Appellant Company and owns all the ordinary shares. The majority of the preference shares are held by other persons.
Through his ownership of the ordinary shares in the Appellant Company, Mr. Hutchinson owns directly or indirectly all the shares in the other companies in the group. Mr. Hutchinson is in a position to, and in fact does, control the business and financial policy and internal affairs of the Appellant Company and of the other companies in the group.
5. In the year 1943 Mr. Hutchinson was invited to become the chairman of the corporation. The corporation was incorporated by Royal Charter, 1865. and was well known and supported by the publishing community throughout the United Kingdom for the provision of annuities and other benefits for printing employees and their dependants in the publishing trade. A copy of the Charter including the by-laws, rules, and regulations was produced to us and is annexed hereto marked "A" and forms part of this Case (not included in this file). Copies of the reports and accounts of the corporation for the years 1943 and 1944 were also produced to us and are annexed hereto marked "A.1" and "A.2." and form part of this Case (not included in this file). Mr. Hutchinson, being anxious to assist the corporation, conceived the idea of reviving a publication called "Printers' Pie" and publishing certain other similar publications called "Christmas Pie" " Junior Pie" and "Printers' Devil". " Printers' Pie", starting in 1902, had been for many years produced annually by various publishers for the benefit of the corporation but had been dormant since 1933. "Printers' Pie" to the knowledge of all concerned in the printing and publishing trades had always been published for the benefit of the corporation and never for the profit of the publisher concerned. Mr. Hutchinson accordingly invited advertisers who were willing to help the corporation to subscribe £100 for the corporation in return for a page advertisement in "Printers' Pie" or "Christmas Pie" and he secured the help of contributors and others free of charge, such persons having been informed that the publications were being brought out for the benefit of the corporation. This printing and publishing of the "Pie" publications was done by the Appellant Company, to which the payments for advertisements and sales were made. The purchasers of "Printers' Pie" and the other "Pie" publications knew that they were being published by the Appellant Company in aid of the corporation. Any attempt by the Appellant Company to retain for its own use or benefit the profits arising from the payments by advertisers in and purchasers of those publications would, apart from any question of illegality, have been expressly damaging to the reputation and goodwill of the Appellant Company. The profits so arising in the year ended 31st December, 1943, amounted to £31,469
6. Mr. Hutchinson, at the festival luncheon of the corporation in December, 1943, at which he presided as chairman, handed to the secretary of the corporation a cheque for £83,.000., of which £81,907 represented payments on behalf of the Hutchinson group of companies.
The composition of this cheque was explained to us. Mr. Hutchinson produced some pencil notes made by himself just prior to the festival lunch showing a rough estimate of how he proposed to allocate the said sum of £83,000. The various items of this estimate amounted to £77,425. The original card upon which these pencil notes were written cannot now be traced but a letter from the Appellant Company's accountants dated 21st June, 1949, containing the substance of the said notes is by arrangement with the parties annexed hereto and marked "B" and forms part of this Case (not included in this file).
Not the whole of this sum is relevant to the present appeal. The items which are relevant fall under the following heads:
(a) £63.000. This sum is described in the accounts as a payment to secure improved pension prospects for employees. The money so paid formed part of the ordinary moneys at the disposal of the pension fund of the corporation and was not earmarked for the employees or any particular members of the corporation.
The corporation had been made aware of Mr. Hutchinson's intent to revive "Printers' Pie" and other "Pie" publications, as mentioned in paragraph 5 of this Case, and the sum of £63,000 included in the cheque for £83.000 was paid to the corporation in anticipation of any profit which might emerge from the sales of the "Pie" publications.
There was no written agreement under which the Hutchinson companies undertook to pay over all the profits to the corporation. There was, however, a distinct understanding between the Hutchinson companies and the Printers' Pension Corporation that when "Printers' Pie" was published all profits should go to the corporation.
The gross receipts for the year ending 31st December, 1943, from the sale of "Printers' Pie" and the other publications were £42,677 from which had to be deducted £11,208 as being the cost of paper and printing.
The net profits from such sale for the year ending 31st December, 1943, were therefore £31,469, and these were excluded from the Appellant Company's profit and loss account, but were included in the balance sheet as a suspense account amongst sundry creditors. There was a further profit of £2,916 in the following year which, added to the previous sum, amounted to £34,385, and this sum likewise was included amongst sundry creditors in the balance sheet at 31st December, 1944. It was explained to us that the accountants had suggested that the difference between the sum of £63,000 and the sum of £31,469 could have been shown in the balance sheet at 31st December, 1943, as £31,531 and called "Balance of Payments to Printers' Pension Corporation" to the exclusion of the other two items, but that it was thought better when preparing the 1943 accounts to show the sums of £63,000 and the profits from the "Pie" publications separately because the profits were not yet complete. When the accounts for 1944 were being considered the "Pie" profits were complete, but the question of the Company's taxation in respect of them had been raised, and it was thought advisable that they should be retained, as they have been up to date, in the suspense account to meet any contingencies in case an assessment was made in respect of them.
Our attention was drawn to an item in the Appellant Company's balance sheet at 31st December, 1944, which reads "Foundation of Pie Publications as valued by Managing.Director £75.000." Mr. Hutchinson explained to us that after 1944 the Hutchinson companies had published for profit a number of periodicals which incorporated the word "Pie" in their titles. The publication of these periodicals was greatly assisted by the goodwill which was acquired from the publishing of "Printers' Pie" and similar publications in 1943 and 1944, and the goodwill so acquired was described as an enduring benefit to the trade which required a valuation in subsequent balance sheets.
A specimen copy of "Printers' Pie" was produced to us, and is annexed hereto marked "C" and forms part of this Case (not included in this file).
Copies of the Appellant Company's accounts for the two years ending 31st December, 1943, and 31st December, 1944, were produced to us and are annexed hereto marked "D" and "E" and form part of this Case (not included in this file).
As regards the balance of the £63,000, namely £31,531, the Appellant Company restricted its claim to a deduction to £20,000 as representing ten times the normal annual contribution of £2,000 to the corporation. This claim was based by the Appellant Company upon the practice of the Commissioners of Inland Revenue to allow such payments to a charity connected with the trade when made in response to a special appeal, provided the payment was not otherwise disallowable as being of a capital nature
(b) A sum of £6,972 which represented life subscriptions paid by a number of the Hutchinson companies (including the Appellant Company) on behalf of the printers in their employment. 1,468 employees were made life members of the pension fund at a subscription of £4 4s. 0d. each and 384 employees were made life members of the orphan fund at a subscription of £2 2s. 0d. each, the total payment being £6,972 as above stated.
As life members the employees thus received the right to vote each year at the election for pensions or benefits, and could qualify in accordance with the rules of the corporation as beneficiaries.
This payment had been debited in the profit and loss accounts of the respective companies for the year ending 31st December, 1943, as wages and had been disallowed as such by the district Inspector of Taxes. There was produced to us a specimen of a circular letter addressed to all the employees concerned shortly before the payment was made, in support of the claim that this sum was an allowable deduction, a copy of which is annexed hereto marked "F" and forms part of this Case (not included in this file). The circular letter made no offer of a cash payment to the employees who might refuse to take the benefit offered. Two only of the employees who received the letter declined to be made life members, and no equivalent cash payment was made to them.
7. Evidence was given by Mr. J. E. Firth of the Chief Inspector's office of the Board of Inland Revenue, which we accepted, in explanation of the Board's treatment of charitable subscriptions in traders' accounts, and in particular of the instruction to Inspectors of Taxes as to the circumstances in which subscriptions in response to a special appeal might be allowed up to ten times the amount of the normal annual subscription. The Commissioners of Inland Revenue did not intend by this instruction to authorise Inspectors of Taxes to allow what was clearly disallowable under the appropriate sections of the Income Tax Acts or the cases decided under those sections. The instruction was only a guide to Inspectors in using their judgment as to what to allow where there was no express prohibition and where in the opinion of the Commissioners of Inland Revenue certain conditions were satisfied, and the reference to ten times the normal subscription was nothing more than placing a limit beyond which a payment would be challenged as made not for ordinary day-to-day trading advantages but to secure an enduring advantage for the trade which would be disallowable under the decision in the Helsby Cables case (10 T.C. 155) or would be disallowable as a private subscription not connected with the trade or business. In this case the Commissioners of Inland Revenue did not consider that the conditions in the instructions were satisfied.
8. We were informed of the subscriptions paid to the corporation by the Hutchinson companies during the last few years. Prior to the year ending 31st December, 1942, the total subscriptions averaged about £10 10s. 0d. a year. In 1942, the year immediately prior to Mr. Hutchinson's presidency of the corporation the total subscriptions were £3,074. In the year 1943, the year in which Mr. Hutchinson served as president, the total payments of the companies amounted to £81,907, which included the items of £63,000 and £6,972 specifically mentioned in this Case. Thereafter the total subscriptions have been a little more or less than £2,000 a year. The Commissioners of Inland Revenue informed the companies before the hearing of this appeal that so long as the subscriptions were so maintained they were prepared to allow only £1,007 as the balance of the payment was in their view entirely of a capital nature. At the hearing of this appeal, however, it was stated on behalf of the Commissioners of Inland Revenue that they would not raise any objection provided we, the Commissioners for the City of London, saw fit to treat a sum of £2,000 as a proper deduction in arriving at the profits for the year ending 31st December, 1943.
9. No evidence was produced to us to show what payments, if any, had been made during the two years in question to the employees or their dependants of the Appellant Company, or to those of the other companies in the Hutchinson group, out of the funds of the corporation.
10. Mr. Hutchinson based the Appellant Company's claim on the following grounds:-
(a) that the sum of £31,469, being the net profit resulting from the sale of "Printers' Pie", "Christmas Pie", "Junior Pie" and "Printers' Devil" which had been carried to a suspense account in the Appellant Company's balance sheet, belonged to the corporation and was not a profit of the trade of the Appellant Company;
(b) that the sum of £6.972 paid to the corporation in respect of life subscriptions of four guineas each to the pension fund for 1,400 of the Appellant Company's employees and subscriptions of two guineas each to the orphan fund for 380 of the employees was a sum paid for the benefit of such employees and for services rendered by such employees and should be deducted from the Appellant Company's profits;
(c) that Inspectors of Taxes being allowed by instructions from their Head Office in cases of special grants to make an increase up to 10 times the annual amount of such grant, the Inspector of Taxes had allowed nothing, and that the annual grant allowed to the Appellant Company being £2,000 a special grant of £20,000 should be allowed.
11. It was contended on behalf of the Crown:
(a) that the profit of £31,469 resulting from the sale of "Printers' Pie" during the year ending 31st December, 1943, was part of the trading profits of the Appellant Company and should be included in the assessment for the year 1944-45:
(b) that the sum of £6,972 was not remuneration paid to the employees of the Appellant and of the other companies within the meaning of Schedule E and that its deduction was prohibited by Rule 3 (a) of the Rules applicable to Cases I and II of Schedule D, Income Tax Act, 1918, as not being money wholly and exclusively laid out or expended for the purpose of the trade or alternatively under Rule 3 (f) as capital withdrawn from or a sum intended to be employed as capital in the trade;
(c) that the aforementioned payments made to the corporation in so far as they were made in connection with the Appellant Company's trade or the trade of the other companies in the group were payments to secure enduring benefits and were therefore of a capital and not a revenue nature and were not admissible as deductions;
(d) that the instructions to Inspectors of Taxes referred to by Mr. Hutchinson are not intended to operate in contravention of the Income Tax Acts and the decisions of the Courts thereon but as a guide to their interpretation, and that the conditions outlined in those instructions did not in the opinion of the Commissioners of Inland Revenue exist in this case so as to justify a deduction in excess of the sum of £2,000 in respect of the payments made by all the companies for each of the two years under appeal.
12. The following cases amongst others were referred to:-
Atherton v. British Insulated and Helsby Cables, Ltd. 10 T.C. 155;
Bourne and Hollingsworth, Ltd. v. Ogden, 14 T.C.349;
Mersey Docks and Harbour Board v. Lucas, 2 T.C. 25;
Tennant v. Smith, 3 T.C. 158;
Weight v. Salmon, 19 T.C. 174:
Machan v. McLoughlin, 11 T.C. 83.
The Commissioners held that the sum of £31,469 received from "Printers' Pie" formed part of the profits of the Appellant Company and that the other sums in question claimed as deductions were not wholly and exclusively expended for the purposes of the trade and are properly attributable not to revenue but to capital and the appeal failed.
Since the hearing of this appeal the assessments for the two years in question have been agreed between the parties on the basis of the Commissioners' decision as follows:-
1943-44 Liability: Nil (losses £26,024);
1944-45 Liability: Nil (losses £27,790).
The Appellant Company having expressed dissatisfaction with the findings of the Commissioners as being erroneous in point of law required us to state a Case for the opinion of the High Court of Justice which we have stated and do sign accordingly.
CECIL LUBOCK
ALAN HOTHAM
FRANCIS EDMANN
C. W. LAMPSON
F. ROWLAND
C. B. LEATHAM
E. J. REID
CONYERS BRIDGEWATER
Clerk to the Commissioners for the City of London.
The case came before Vaisey, J., in the High Court on 11th and 12th July, 1950, and judgment was reserved. On 20th July, 1950, judgment was given in favour of the Crown, with costs. Sir Andrew Clark, K.C., and Mr. L. C. Graham-Dixon appeared as Counsel for the Appellant Company, and Mr. J. Pennycuick, K.C., and Mr. Reginald P. Hills appeared as Counsel for the Crown.
Vaisey, J. - This is a Case stated by the Income Tax Commissioners for the City of London. The Appellants are Hutchinson & Co. (Publishers), Ltd., to whom I will refer as "Hutchinsons" or "the Appellants". It raises two entirely separate points. The first point concerns a sum of £31,469 which the Crown has claimed and the Commissioners have held to be part of Hutchinsons' profits based upon the accounts for the trading year ending 31st December, 1943, and assessable to tax for the year 194-45.
Hutchinsons carry on a well-known publishing business and the sum which 1 have mentioned represents the profits which were admittedly made by them in the printing, producing and selling of certain publications: "Printers' Pie", "Christmas Pie", "Junior Fie" and "Printers' Devil", but what the Appellants say is, in brief, that the sum was no part of the profits of their own trading but belonged in truth and in fact to a charity known as the Printers' Pension Almshouse and Orphan Asylum Corporation which I will call "the corporation". Alternatively, they say that if (contrary to their first contention) the said sum did form part of their own trading profits they are nevertheless entitled to set against it an equivalent sum as a permissible deduction from those profits. There is no doubt that they have, in fact, paid that sum over, along with other moneys (as in]deed is admitted) to the corporation. This alternative submission was by implication, though not expressly, rejected by the Commissioners. I can refer to the various publications collectively as "Printers' Pie". The facts are not really in dispute and for the purposes of this judgment I need not deal with certain complications arising from the fact that subsidiaries of Hutchinsons are concerned or interested in the appeal. At all material times the late Mr. Walter Hutchinson owned all the ordinary shares in Hutchinsons and was its chairman and managing director and very largely controlled its operations and directed its policy.
Now "Printers' Pie" had originated in 1902 and was I think then something of a novelty in charitable appeals. For a number of years thereafter it was brought out annually by various printing and publishing firms for the benefit of the corporation, which may be described as their special trade charity. Whether in those former years the proceeds were for tax purposes treated as belonging to the corporation ab initio, or as belonging to the firms and handed over by them ex gratia to the corporation, I do not know; but on any view of the matter it was common knowledge that a purchaser of "Printers' Pie" at a bookshop or a bookstall was by his purchase contributing to the support of the corporation which, as I have stated and as its name indicates, is a charity established for the benefit of persons and the dependants of persons engaged or employed in the trades or businesses of publishers and printers.
"Printers' Pie" had not appeared since 1933, and when in 1943 Mr. Hutchinson became chairman of the corporation he determined to revive it in order to augment the corporation's funds, and he, or rather the Appellants, did so. The venture was very successful. The gross receipts from sale of the issue of the resuscitated "Printers' Pie" amounted to no less than £42,677. The cost of the paper and printing came to £11,208. The balance is the sum of £31,469 which is now in dispute. I have already said that considerably more than that sum was paid over by the Appellants to the corporation. The circumstances in which that was done are really not material but there can be no question but that the corporation has in fact received from the Appellants that sum and more also in augmentation of its charitable funds.
Now in the admitted absence of any written agreement between the Appellants and the corporation, but in view of the "distinct understanding" (whatever that may mean) which they had come to that the profits should go to the corporation, it seems to me that there are two possible views which may be taken in this case about what the essence of the matter really is. First., it may be said that the venture of bringing out "Printers' Pie" was undertaken by the Appellants on the terms that they were acting as agents for the corporation under a special bargain that if that venture resulted in a profit the corporation should receive it, while if there was a loss the Appellants would bear it. On that view the profit belonged, as soon as realised, to the corporation and nothing belongs to the Appellants, with the result, as they claim, that they ought not to be assessed to tax in respect of it. Or secondly, it may be said that the Appellants produced "Printers' Pie" with the object and intention of handing over to the corporation the profit, or an amount equal to the profit, resulting from the venture; or (to put the matter in another way) the amount by which the trading profits of the Appellants were increased or augmented thereby. That means, I think, that Hutchinsons were to hand over to the corporation some of the moneys which they themselves had earned and upon which they were accordingly liable to be taxed. I incline to think that the Appellants would have been justified in the forum of their own conscience if they had paid over to the corporation the sum of £31,469 less the amount of the tax, that is to say, 11/20ths of that sum. assuming that it had been subjected to tax in their hands; but it may well be that such a payment would have appeared lacking in generosity or might have been represented as an evasion of Hutchinsons' obligations (were they legal or moral) to the corporation
I am wholly unable to find any agreement here, whether of agency or otherwise, and I am equally unable to spell out of what was done or said any trust. At no time so far as I can see could the corporation have taken any proceedings either against Hutchinsons or against Mr. Hutchinson to enforce any claim to the money. They were of course morally quite certain of getting it. The benevolent intentions of Hutchinsons, and of Mr. Hutchinson in particular, and the wide publicity which had been given to those intentions served to create the very maximum of confidence and to afford ample security to the corporation that effect would be given to them. But a promise, however solemnly given and however certain it may be that it will not (because it cannot in decency) be broken, remains a promise and nothing else. That is the view which the Commissioners have taken and I can see no reason to differ from it.
The alternative claim on this part of the case may be thus stated: The payment of the £31,469 to the corporation is alleged to have been a necessary outgoing of Hutchinsons' business because had it not been made Hutchinsons would, or at least might, have been so ruined in reputation as to affect to a serious degree their financial position and standing. This is to my mind a plausible plea but I have come to the conclusion that it is open to the same kind of objection as the other. Take the case of a successful tradesman in a country town who has a relative living in poverty near him whom, as his customers and neighbours all know, he has promised to maintain with an annual payment. If such a man were to withhold that payment it is all too likely that he would lose his custom as well as his relation. But could the payment for that reason be held to be a proper outgoing of and deduction from the profits of his business? I think not. The analogy of that imaginary case to the present case seems to me to be close. On this ground also the appeal as to the £31,469 must fail.
Much stress was laid by the Appellants' Counsel on that passage in the Case which states that Mt. Hutchinson had invited advertisers who were willing to help the corporation to subscribe £1OO for the corporation in return for a page advertisement in the publication and that he secured the help of contributors and others free of charge, such persons being of course well aware that the publications were being brought out for the corporation's benefit. Indeed, that knowledge was widespread and there is no doubt that any attempt by the Appellants to retain the profits for their own use (including the advertisers' payments) would have been damaging in the extreme to the Appellants' reputation and goodwill. There is however nothing in those facts which, in my judgment, prevented the Commissioners from the conclusion at which they arrived or is inconsistent with the view which I myself have expressed. On any view of the matter the appeal as regards the £31,469 must. in my judgment, fail.
The other point raises entirely different considerations and raises, in my judgment, rather more difficulty. It concerns a sum of £6,972 which represents life subscriptions to the corporation paid by the Appellants on behalf of certain of their employees; that is to say, 1,468 employees were made life members of the corporation's pension fund at a single-payment subscription of four guineas each, and 384 employees were made life members of the orphan fund at a like subscription of two guineas each. Of all the employees to whom the offer was made two only refused to accept it and no equivalent cash payment was made to them.
Now it appears that an employee for whom the payment, whether of four guineas or two guineas, was made obtained thereby two separate advantages; first. a right to vote at the annual elections of pensioners or beneficiaries and secondly, the right for himself or herself to be eligible for a pension or other benefit. With regard to the former of these privileges, it may be suggested that the conferring of voting rights upon its employees would be remotely to the advantage of Hutchinsons because the probability of the election of the employees of Hutchinsons rather than those of any rival publishing firm would be increased. It may also be said with truth that this payment was in the case of each employee something in the nature of a bonus, not of a large amount, giving to him or her an immediate advantage in consideration of past services and calculated to encourage efficiency and good feeling in the future. But can it be said that these were moneys wholly and exclusively expended for the purposes of the trade, properly referable to income and not to capital? So far as the Appellants themselves were concerned, no benefit and certainly no "enduring benefit" except as previously mentioned, was conferred upon them by these payments and the fact that the benefits conferred on the employees were "enduring" seems to me to be immaterial. But because no employee seems to have had the option of taking his or her four guineas or two guineas in cash I cannot for myself see how the sum was really a gratuity or how it differed in substance from a free pass to a theatre or a free railway ticket to the seaside presented as a reward for good service. The sums of four guineas or two guineas were never cash in the hands of the employees and cannot I think be treated as part of their wages or taxable income; see Tennant v. Smith [1892] A.C. 10. To allow them as deductions from the Appellants' profits is, in my judgment, prohibited by Rule 3 (a) of the Rules applicable to Cases I and II of Schedule D, and possibly also by Rule 3 (f). The case of British Insulated and Helsby Cables, Ltd. v. Atherton [1926] A.C. 205 and particularly the classic speech of the Lord Chancellor (Lord Cave) seems to me to support the view which I have stated, though the formation of a pension fund with which that case deals seems to me to be rather a different matter from anything with which I am concerned here.
I feel bound to hold that there was ample evidence upon which the Commissioners could have reached their conclusions on this second point and although the matter is to my mind not free from difficulty, I think that the Commissioners came to a right decision and drew a proper inference from the admitted facts. I hold, therefore, that the appeal fails as to the said sum of £6,972 also.
The appeal must accordingly be dismissed.
Mr. Hills - The appeal will be dismissed with costs, my Lord?
Vaisey, J. - Yes.
[Solicitors:- Rubinstein, Nash & Co.; Solicitor of Inland Revenue]
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