Mitchell v Revenue Commissioners

• Jurisdiction: Ireland
• Date: 1931
• Court: King's Bench Division (Ireland)

NO. 888.-HIGH COURT OF JUSTICE (KING'S BENCH DIVISION- NORTHERN IRELAND).-

MITCHELL

and

THE COMMISSIONERS OF INLAND REVENUE

Sur-tax - Government securities surrendered in payment of death duties - Interest accrued after date of death - Finance Act, 1917 (7 & 8 Geo. V, c. 31), Section 34.

The Appellant's wife was entitled under the will of her father, who died in May, 1927, to receive, during her lifetime, one-fifth of the income of the residue of his estate.

The executors of the will had deposited, or undertaken to deposit, with the Commissioners of Inland Revenue, certain Victory Bonds with a view to their transfer in payment of death duties. Under Section 34 of the Finance Act, 1917, the executors received, in part satisfaction of the duties payable (including interest thereon for the period for which payment was postponed), an allowance in respect of the interest which had accrued on these bonds as at the date when the bonds were transferred in payment of the duties. The interest so allowed appeared in the executors' account of income and expenditure for the period to 31st December, 1928, as "Victory Bond interest appropriated against duties" and was shown as reducing the amount of the interest on unpaid death duties entered on the expenditure side of the account. The amount of the residuary income arrived at on this basis was paid to the life tenants, and the Appellant was assessed to Sur-tax for the year 1928-29 in a sum which included, as his wife's share of that income, the amount actually paid to her by the executors as increased by the Income Tax appropriate thereto. He appealed, contending that, on the authority of the decision in the case of Monks v. Fox's Executors (13 T.C. 171), accrued Victory Bond interest was not assessable to Income Tax and should be excluded from the executors' account, and that the residuary income should be computed accordingly.

The Special Commissioners decided that the form of account adopted by the executors was correct and corresponded to the true nature of the transaction.

Held, that only the difference between the interest on death duties and the interest accrued on the Victory Bonds was chargeable against the income of the estate and that the amount actually received by the Appellant's wife was income.

CASE

Stated by the Special Commissioners of Income Tax under the Finance Act, 1927, Section 42 (7), and the Income Tax Act, 1918, Section 149, for the opinion of the King's Bench Division (Northern Ireland).

At a meeting of the Commissioners for the Special Purposes of the Income Tax Acts held at Belfast on 25th November, 1931, for the purpose of hearing appeals, R.A. Mitchell, of Marmont, Strandtown, Belfast, hereinafter called the Appellant, appealed against an additional assessment to Sur-tax made upon him in the sum of £2,255 for the year ended 5th April, 1929.

1. The Appellant was married to one of five daughters of Mr. Thomas Gallaher, who died on 3rd May, 1927. Under Mr. Gallaher's will, each of the daughters was entitled to receive, during her lifetime, one-fifth of the income of the residue of his estate. The Appellant had included the sum of £794 in his returns for assessment for the...