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TMI Blog1938 (3) TMI 16X X X X Extracts X X X X X X X X Extracts X X X X ..... London under Case I, in respect of these profits. The following statement shows, in summary form, the material receipts and expenses of the London branch for the year ending March 31, 1928, upon which the assessment was based, as adjusted for income tax purposes by the additional commissioners:- Dr. Cr. Working expenses 41,070 Exchange and commission (mainly, profits on exporter's bills purchased) 90,600 Interest paid on deposits and balances in London 19,312 Rebates on bills receivable which were immature on March 31, 1928 7,814 Loans to Banks and discount houses 37,209 Commission and exchange 36,482 Interest on overdrawn accounts 25,558 Interest and expenses paid in New Zealand in respect of money borrowed in New Zealand, and used at the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he cost of obtaining the money used in earning the item or items so excluded should also be excluded, so that only the net profit derived should be excluded from the trading account. As stated above, the proportion attributable to the four credit items sought to be excluded is 41,262, which consists of the cost of obtaining from New Zealand the money used in these four securities, so far as it is not part of the bank's capital, and takes into account, not only the average rate of interest paid on deposits in New Zealand, and the cost of issuing notes there, but also an appropriate proportion of the general expenses incurred by the bank there. The special commissioners upheld the respondents' contentions and excluded the four credit items from the account, and rejected the appellant's contention, on that footing, for exclusion of the debit item of 112,868 to the extent of 41,362. In accordance with this decision, the assessable profit was reduced from 116,023 by the amount of the four credit items ( 78,556), to 37,467. On appeal to the King's Bench Division, Lawrence. J., affirmed the determination of the special commissioners, and his judgment was affi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ersons in the United Kingdom, shall extend to the tax to be assessed and charged under this rule. As regards the War Loan, the Crown did not maintain their appeal. In this I think that the Crown were well-advised, for I agree with Lord Wright, M.R., that their contention is contrary to the apparent meaning of the statutory provisions, originally contained in the Finance (No. 2) Act, 1915, Section 47, and would involve the very serious frustration of what the parties, taking the securities from time to time, might be assumed to have contemplated. It is necessary, however, to notice here an argument which the Crown put forward as applicable to all the four credit items in dispute-namely, that the provisions of Section 46(1) of the Income tax Act, Schedule C, General Rules, r. 2(d) merely exempted certain interest paid to persons not resident, or not ordinarily resident, in the United Kingdom from charge under Schedule C, or Schedule D. Case III, qua interest, and did not operate to exclude any trading receipts of a trade exercised in the United Kingdom from the computation of the profits of the trade for the purpose of assessment under Schedule D, Case I. This appears to have bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of annuities, and that in the eight preceding rules the word dividends is alone used. That group of rules is properly described as providing mere machinery. The respondents maintain that the language of Rule 7(2) is apt to include every provision of Schedule C, which, mutatis mutandis, is applicable to the dividends described in rule 7(2), and that among such provisions of Schedule C, General Rules, r. 2(d), necessarily has a place. My Lords, I feel the greatest difficulty in coming to any clear conclusion on the matter. I find the language of the sub-section of Rule 7 evasive and ambiguous. A slight alteration of the words could have clearly expressed either of the opposing constructions. In the first place, I agree with the Court of Appeal in their acceptance of the argument of the Crown that the Finance Act, 1910, Section 71(2), did not confer the exemption here claimed, and in their rejection of Mr. Latter's contention to the contrary. If follows that this exemption, if the respondents are right in their construction, is conferred for the first time by the Consolidation Act. The presumption against such a construction was rightly recognised by the Court of Appeal, b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 of the General Rules applicable to Schedule C; or (ii) under Rule 7 of the Miscellaneous Rules applicable to Schedule D in connection with a claim for repayment of income tax made to the Commissioners of Inland Revenue by the person owning the stocks, funds, shares or securities and entitled to the income arising therefrom, or entitled to the annuities, pensions or other annual sums, as the case may be, and from whose income a deduction has been made on account of the income tax assessed and charged under the said rule . LORD WRIGHT, M.R., holds that head (ii) of sub-sect. (3)(c) treats Rule 7 as containing a provision in the terms set out, and holds that the terms set out are the exact terms to be found in Schedule C, General Rules, Rule 2(d), and that, accordingly, they can only be found in Schedule D, Miscellaneous Rules, r. 7, if Rule 7(2) has incorporated them, which is the conclusion at which he had already arrived. Greece, L.J., expresses the same view and also lays stress on the use of the word decision on the ground that that could only refer to a power of decision expressly conferred on the Commissioners of Inland revenue. I find myself unable to agree with thi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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