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Issues:
Interpretation of Income Tax Act, 1918 regarding profit from the office of director and manager based on a payment made under a written agreement between a private company and an individual. Analysis: The case involved a dispute where the Crown contended that a payment of lb7,000 to the respondent by a private company under a written agreement constituted "profit from the office" of director and manager, thus taxable under the Income Tax Act, 1918. The High Court was approached after the General Commissioners and the Court of Appeal ruled against the Crown's contention. The written agreement in question outlined the terms of service, bonuses, and a restrictive covenant. The critical aspect was the payment of lb7,000 made by the company to the respondent upon the execution of the agreement, in consideration of the restrictive covenant. The Court emphasized that the payment was not for services rendered but for the covenant that would only take effect post-termination of service. The Court rejected the Crown's argument, stating that the lb7,000 was not profit from the respondent's office and should not be taxed under Schedule E. The Court highlighted the separation between the remuneration for services and the consideration for the restrictive covenant in the agreement. It was noted that the payment was not directly linked to the services provided by the respondent during his employment. The Court dismissed the argument that the payment should be apportioned between office profit and covenant price, focusing solely on the agreement's terms. The Court emphasized the bona fide nature of the contract and concluded that the lb7,000 payment could not be considered as profit arising from the respondent's office or employment. The judgment was delivered unanimously, with all Lords concurring to dismiss the appeal and award costs to the respondent.
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