1969 (11) TMI 90 - HC - Income Tax

Summary

Issues Involved:
1. Deductibility of medical expenses for income tax purposes.
2. Interpretation of "wholly and exclusively" for the purposes of trade, profession, or vocation.
3. Application of dual-purpose expenditure rules.

Detailed Analysis:

1. Deductibility of Medical Expenses for Income Tax Purposes:
The appellant, Mr. Harry Prince, appealed against an income tax assessment for the year 1967-68 under Schedule D concerning his profits as a dance musician. He sought to deduct lb81 in medical expenses incurred due to an operation on his finger, arguing that these expenses were necessary to continue his profession as a guitarist. The court examined whether these medical expenses could be deducted from his taxable income.

2. Interpretation of "Wholly and Exclusively" for the Purposes of Trade, Profession, or Vocation:
The court referred to Section 137 of the Act of 1952, which states that no sum shall be deducted unless it is "wholly and exclusively laid out or expended for the purposes of the trade, profession or vocation." The court cited several precedents to interpret this clause:

- Norman v. Golder: It was established that doctor's bills could not be considered as expenses wholly and exclusively for the purposes of the trade or profession. Lord Greene stated that such expenses serve a dual purpose, benefiting the taxpayer as a human being and not solely for professional purposes.

- Bentleys, Stokes & Lowless v. Beeson: The court emphasized that the sole purpose of the expenditure must be to promote the trade or profession. If the expenditure also serves another purpose, it does not satisfy the requirement of being "wholly and exclusively" for professional purposes.

- Murgatroyd v. Evans-Jackson: This case reinforced that expenses with a dual purpose cannot be apportioned and must be disallowed in full if they serve both professional and personal purposes.

3. Application of Dual-Purpose Expenditure Rules:
The court found that Mr. Prince's operation was undertaken not solely for professional reasons but also to continue his hobby of playing the guitar. The commissioners explicitly found a dual purpose in the expenditure, which disqualified it from being "wholly and exclusively" for professional purposes. The court noted:

- The operation was necessary for Mr. Prince to continue playing the guitar both professionally and as a hobby.
- The finding that Mr. Prince would not have undergone the operation solely for professional reasons but also to enjoy his hobby was critical.
- This dual-purpose nature of the expense meant it could not be deducted under Section 137(a).

The court concluded that the expense was not "wholly and exclusively" for professional purposes, and thus, the appeal was dismissed. Additionally, the court found that the expense could be considered as "a sum expended for some other domestic or private purpose distinct from the purposes of the profession," satisfying the second limb of Section 137(b).

Conclusion:
The appeal was dismissed with costs, affirming that the medical expenses incurred by Mr. Prince could not be deducted from his taxable income as they were not "wholly and exclusively" for professional purposes but also served his personal interest in playing the guitar as a hobby.