Martin Fitzgerald v Commissioners of Inland Revenue
| Judge | Hanna J. |
| Judgment Date | 03 June 1925 |
| Court | High Court |
Excess profits duty - deductions - expenditure on temporary premises - restoration of destroyed premises under covenant to repair.
The appellant was lessee of certain premises, where he carried on business as a wine merchant, under a lease containing a covenant to maintain and keep in complete repair. In 1916 the premises were destroyed by fire under circumstances which precluded recovery by him under insurance policies or criminal injuries Acts, but his covenant involved his rebuilding them. The amount contributed by him in replacement was £10,213.
Pending rebuilding, in order to carry on business, he expended the sum of £1,736 in salving his books and fitting up and adapting temporary premises elsewhere, and claimed that above sums were admissible deductions in the computation of his profits, and were not capital expenditure.
The Special Commissioners having refused the deductions claimed, a case stated came before the King’s Bench Division in July 1923, when the case was remitted to the commissioners for further details of the expenditure in question.
The amended case stated was argued in the High Court before Mr Justice Hanna, who confirmed the Special Commissioners’ decision.
Held, on appeal to the Supreme Court, judgment was delivered in favour of the Revenue, with cost.
ITA 1967 s 61.
Ushers Wiltshire Brewery Ltd v Bruce 6 TC 399, [1915] AC 458.
Vallambrosa Rubber Company Ltd v Farmer 5 TC 529, [1910] SC 519.
Ounsworth v Vicars Ltd 6 TC 671, [1915] 3 KB 273.
Granite Supply Association Ltd v Kitton 5 TC 168, 43 SC LR.
Robbert Addic and Sons’ Collieries v Commissioners of Inland Revenue 8 TC 671, [1924] SC 231.
Case stated under FA 1915 (No 2) s 45(5), and the Taxes Management Act 1880 s 59 by the Commissioners for the special purposes of the Income Tax Acts for the opinion of the King’s Bench Division of the High Court of Justice in Southern Ireland
At a meeting of the Commissioners for the special purposes of the Income Tax Acts, held on 20 October 1921, at No 8 Hume Street, Dublin, for the purpose of hearing appeals, Mr Martin Fitzgerald of 91, 92 and 93 Middle Abbey Street, Dublin, hereinafter called the appellant, appealed against assessments to excess profits duty made upon him for accounting periods of one year each ended 30 June 1916, and 30 June 1917, in the net amounts of £459 18s 0d and £1,927 2s 0d respectively, under the provision of FA 1915 (No 2) and subsequent enactments.
The following facts were proved or admitted:
The appellant carried on his business as a tea, wine and spirit merchant in premises at 91, 92 and 93 Middle Abbey Street, Dublin.
The said premises were held by the appellant under a lease dated 18 April 1894, which was acquired for the purpose of the business. Under the provisions of the said lease which was for a term of 50 years and at a yearly rent of £255, the appellant was bound as lessee to keep the said premises in good condition and complete repair, and at the expiration or sooner determination of the said term to yield up the same, reasonable wear and tear excepted, unto the lessors, their successors and assigns. A copy of the lease is annexed to and forms part of this case. [Not included in present print]
During the week commencing 24 April 1916, the premises were burnt out during the rebellion in circumstances which precluded appellant from recovering the value of the property destroyed under any insurance policy or under the criminal injuries Acts.
Pending the restoration of the premises which had been destroyed, it was not possible for the appellant to continue to carry on his business at 91, 92 and 93 Middle Abbey Street, but he acquired temporary premises at 94 and 95 Thomas Street under a lease dated 3 July 1916, for a term of 5 years from 8 May 1916, at a yearly rent of £220 (with a right on expiration of the term to renewal for a further term of 5 years). The appellant also found it necessary for the purpose of his business to take additional premises for use as temporary stores, at yearly rents amounting to £10 0s 0d for the period to 30 June 1916, and £32 0s 0d for the period to 30 June 1917, plus in each case rates and taxes.
For the purpose of adapting the said temporary premises and stores to the purposes of his business, the appellant expended certain sums, amounting to £300, in the year ended 30 June 1916, and £1,436 12s 5d in the year ended 30 June 1917.
During the accounting periods in question the premises in Middle Abbey Street were not, and could not, be occupied for the purposes of the appellant’s trade, but, without any avoidable delay on his part, steps were taken for the restoration and rebuilding of the premises. Under the plans made for the rebuilding, the new premises when completed will be more commodious and better than the old premises which were destroyed.
For the purpose of this case it is agreed that an expenditure of not less than £18,713 would have been necessary in order to rebuild and restore the old premises to the state required by the covenants in the lease of 18 April 1894.
The appellant has in years subsequent to the accounting periods expended a sum approximating to £30,000 upon the new premises, and he has received from the government an ex gratia payment of £8,500, in respect of the premises which were destroyed.
At the hearing of the appeal the appellant contended:
- (1) that the sums of £300 and £1,436 12s 5d expended by him in the accounting periods in fitting up temporary premises were admissible deductions under the principles of the Income Tax Acts in calculating his liability to excess profits duty,
- (2) that the sum of £10,213, being the difference between the agreed estimated cost of replacing the old buildings, namely £18,713, and the sum received from the government namely £8,500, was also a proper deduction under the same principles,
The inspector of taxes, on behalf of the Commissioners of Inland Revenue, opposed these contentions, and claimed that the sums of £300, £1,436 12s 5d and £10,213 were all of them expenditure of a capital nature not admissible as deductions under the principles of the Income Tax Acts and further that the sum of £10,213 did not represent any expenditure incurred in the accounting periods under appeal. We the commissioners who heard the appeal upheld the contentions of the inspector and confirmed the assessments.
The appellant immediately upon the determination of the appeal, expressed to us his dissatisfaction therewith as being erroneous in point of law, and in due course required us to state a case for the opinion of the High Court, pursuant to FA 1915 (No 2) s 45(5) and the Taxes Management Act 1880 s 59, which case we have stated and do sign accordingly, the question for the decision of the court being whether or not the above-mentioned sums of £300, £1,436 12s 5d and £10,213 are admissible as deductions in arriving at the proper assessments upon the appellant in respect of excess profits duty for the said accounting periods.
Supplemental statement of facts
These two sums of £300 and £1,436 12s 5d were arrived at as follows:
£ |
|
|---|---|
(1) Account of William Connolly & Son, dated 23 September 1916 |
290 12 2 |
(2) Account of William Connolly & Son, dated 27 September 1916 |
1,095 18 9 |
1,386 10 11 |
|
Less: credit |
27 16 9 |
1,358 14 2 |
|
(3) Account of Musgrave & Co Ltd, dated 5 August 1916 |
151 5 0 |
(4) Accounts of James C Meldon for Electric Lighting (Meldons Ltd) |
226 13 3 |
1,736 12 5 |
(Copies of Accounts numbered (1) (2) and (3) are attached hereto and form part of this case, but we are unable to give any particulars of the accounts numbered (4) as Messrs Meldon’s state that they have no detailed account as far back as 1917 [not included in present print]).
No (1) account is in connection with the clearing of the site at 91, 92 and 93 Middle Abbey Street which was undertaken at once for the purpose of recovering the books, papers and safes but would in any event have had to be done for the purpose of clearing the site and the items charged are principally for the cost of labour employed and the use and wear and tear of implements.
No (2) account is for cost of material and labour supplied in fitting up temporary premises at 94 and 95 Thomas Street. The materials consisted of timber for flooring, skirting, shelving, etc., doors, window-sashes, slates, lavatory equipment, glass for windows, paints, office furniture, etc.
No (3) account is for providing and fixing in the temporary premises at 94 and 95 Thomas Street an...
To continue reading
Request your trial