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Interpretation of sections 160 and 161 of the Income Tax Act, 1952 regarding liability for expenses incurred by a company for the benefit of a director. Judgment Analysis: Donovan L.J.'s Judgment: Donovan L.J. agreed with the special commissioners that the company incurred an expense of lb641 in providing a benefit to the taxpayer, which was the defense by solicitors and counsel. He emphasized that the liability under section 161(1) is based on the expense incurred by the company, not the benefit received by the director. Donovan L.J. rejected the argument that the charge should be restricted to the benefit received by the director. He stated that once a benefit is conferred upon a director, the Act dictates that the liability is based on the sum expended by the company. Donovan L.J. concluded that the appeal should be allowed, and the cross-appeal dismissed. Russell L.J.'s Judgment: Russell L.J. concurred with Donovan L.J. and emphasized that the provision of solicitors and counsel for the defense of the taxpayer constituted a benefit for the taxpayer. He highlighted that the expense incurred by the company should be treated as money paid in respect of expenses, falling under section 160. Russell L.J. rejected the argument that the benefit to the taxpayer should be limited to the amount he would have spent if left to his own resources. He agreed that the appeal should be allowed, and the cross-appeal dismissed. Sellers L.J.'s Judgment: Sellers L.J. acknowledged the reasoning of Buckley J. but noted that the Crown argued it was not in accordance with the statute. He expressed inclination towards interpreting section 161 to support the judge's conclusion. Sellers L.J. discussed the extent of the benefit to the taxpayer, suggesting that the benefit might be less than the expenditure incurred by the company. He considered a scenario where the benefit received by the taxpayer might be narrower than the expenditure. Sellers L.J. discussed the case of Evans Medical Supplies Ltd. v. Moriarty and concluded that the court had the power to remit the matter back to the commissioners. He ultimately agreed with his fellow judges that the appeal should be allowed, and the cross-appeal dismissed. In conclusion, the Court of Appeal interpreted sections 160 and 161 of the Income Tax Act, 1952 to determine the liability for expenses incurred by a company for the benefit of a director. The judges unanimously held that the liability is based on the sum expended by the company, not solely on the benefit received by the director. They rejected arguments restricting the charge to the benefit or the amount the director would have spent personally. The appeal was allowed, and the cross-appeal was dismissed, with costs awarded and leave to appeal to the House of Lords granted.
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