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TMI Blog1933 (1) TMI 23X X X X Extracts X X X X X X X X Extracts X X X X ..... fully set out together with the material part of section 15, sub-section 1, of the Act of 1922, as amended in 1929. Latter, K. C., and Cyril King, for the appellant The Attorney-General (Sir Thomas Inskip, K. C. ), and R. P. Hills, for the respondent JUDGMENT February 21.-LORD MACMILLAN.-The appellants, Rhodesia Railways, Ltd., a company registered in the United Kingdom, own a railway between Vryburg and Buluwayo. The line is 588 miles in length, of which 112 miles are in the Union of South Africa, 394 in the Bechuanaland Protectorate and 82 in Southern Rhodesia. The company are liable to income tax under the Bechuanaland Protectorate Income Tax Proclamation, 1922, in respect of the profits derived by them from carrying on their undertaking in the Protectorate. In making their return to the respondent of their income for the year of assessment to June 30, 1931, based on their accounts for the year to September 30, 1930, the appellants debited a sum of £ 252,174 under the heading "renewals of permanent way" and brought out a loss for the year over all of £ 97,445. In the notice of assessment subsequently sent to the appellants the respondent wrote back th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pital and was not included in the sum of £ 252,174 claimed as a deduction. The scrap value of discarded rails and sleepers was credited back to renewals in diminution of the cost of the work. The result of the renewals, apart from the additional sleepers, was to bring the track back to normal condition and the line as renewed was not capable of giving more service than the original line. The appellants' accountant stated that "from day today throughout the year charges arise for ordinary maintenance and at certain periods there are periodical repairs or delayed maintenance, and in common railway practice they are distinguished as maintenance in the first named and renewals in the second. This relaying of the line would be periodical." He further stated that for income tax purposes the cost of renewals had been allowed as a deduction in the Union of South Africa and in Rhodesia and that actual expenditure on renewals was also allowed to be deducted in the United Kingdom. In the Proclamation provision is made for deductions in section 15, of which the first sub-section, as amended by a subsequent Proclamation of 1929, reads (inter alia), as follows:-"15.- (1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court below it was held that the outgoing was of a capital nature and so excluded from the benefit of paragraph (a); and that the work in question was one of reconstruction and not of repair and so excluded from the benefit of paragraph (b). Their Lordships do not agree with the conclusion reached by the Special Court. In their Lordships' opinion the sum in question was within the meaning of paragraph (a) an outgoing "not of capital nature" and was "expended for the repairs of property occupied for the purpose of trade or in respect of which income is receivable" within the meaning of paragraph (b). As was pointed out by Buckley, L.J. (as he then was), in Lurcott v. Wakeley and Wheeler (80 L.J.K.B., at p. 726; [1911] 1 K.B., at pp. 923, 924): "Repair' and 'renew' are not words expressive of a clear contrast," and "Repair is restoration by renewal or replacement of subsidiary parts of a whole. Renewal as distinguished from repair, is reconstruction of the entirety, meaning by the entirety not necessarily the whole but substantially the whole subject-matter under discussion." The periodical renewal by sections of the rails and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellate Division of the Supreme Court of the Union under a similar statute, held they were not entitled to any such allowance, on the ground that a railway line was a work of a permanent nature. Oddly enough, the inference was drawn from this that what the appellants could not get by way of depreciation they cannot have been intended to get by way of repairs. The inference, their Lordships would have thought, was rather the other way, namely, that having been allowed a deduction in name of repairs the appellants were not intended to get a deduction in name of depreciation in respect of the same permanent structure. Their Lordships find an excellant illustration of the accepted practice in such matters in the United Kingdom, to which the appellants' chief accountant spoke, in the case of Highland Railway v. Special Commissioners of Income Tax. There the Highland Railway Co. had relaid a portion of their main line and in doing so had substituted steel rails of greater weight for the previous iron rails. No question was raised as to the cost of relaying the rails except as regards the additional weight and cost of the improved rails as compared with the original rails. The railwa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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