1992 (11) TMI 271 - HC - Income Tax

Summary

Issues Involved:
1. Interpretation of statutory provisions under section 63(1) and (2) of the Finance Act 1976.
2. Use of Parliamentary debates as an aid to statutory construction.
3. Relevance of Hansard to the construction of the Finance Acts.
4. Whether reference to Hansard breaches Parliamentary privilege under article 9 of the Bill of Rights 1688.

Summary:

1. Interpretation of Statutory Provisions u/s 63(1) and (2) of the Finance Act 1976:
The core issue was the valuation of benefits for income tax purposes under Schedule E, specifically the interpretation of "the cost of the benefit" and "expense incurred in or in connection with its provision." The taxpayers argued that the benefit should be assessed based on the marginal cost to the employer, which was minimal since the school was not at full capacity. The Crown contended that the benefit should be assessed based on the average cost, i.e., a proportionate part of the total cost of running the school. The House of Lords ultimately decided in favor of the taxpayers, concluding that the cost should be the additional or marginal cost, not the average cost.

2. Use of Parliamentary Debates as an Aid to Statutory Construction:
The judgment considered whether Parliamentary debates could be used to interpret ambiguous or obscure statutory provisions. The House of Lords decided to relax the exclusionary rule, allowing reference to Parliamentary material where the legislation is ambiguous or obscure, or leads to an absurdity, and where the material clearly discloses the legislative intention. This was a significant shift from the previous strict rule against using such materials.

3. Relevance of Hansard to the Construction of the Finance Acts:
The case involved examining the Parliamentary history of the Finance Act 1976, particularly the debates and statements made by the Financial Secretary. The House found that the Financial Secretary's statements were clear and consistent, indicating that the intention was to tax in-house benefits based on the marginal cost to the employer, not the average cost. This interpretation was supported by the fact that no relevant amendments were made to the Bill after these statements.

4. Whether Reference to Hansard Breaches Parliamentary Privilege u/s Article 9 of the Bill of Rights 1688:
The Attorney-General argued that using Hansard for statutory interpretation would breach article 9 of the Bill of Rights, which protects freedom of speech in Parliament. However, the House of Lords concluded that referring to Hansard for the purpose of construing legislation does not breach article 9, as it does not involve questioning or impeaching Parliamentary proceedings. The court's role is to give effect to the words enacted by Parliament, and using Hansard helps in understanding the legislative intent behind those words.

Conclusion:
The House of Lords allowed the appeals, determining that the cost of the benefit should be assessed based on the marginal cost to the employer. It also established a precedent for using Parliamentary debates as an aid to statutory construction, provided certain conditions are met, and clarified that such use does not breach Parliamentary privilege under article 9 of the Bill of Rights.