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Initializing Secure Chambers
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Initializing Secure Chambers
Petitioner: G. H. CHAMBERS, '(NORTHIAM FARMS) LTD. VS Respondent: WATMOUGH (INSPECTOR OF TAXES)Honorable Justice Vaisey
1968 P T D 34
1968 P T D 34
[Chancery Division]
Before Vaisey, J
G. H. CHAMBERS, '(NORTHIAM FARMS) LTD.
Versus
WATMOUGH (INSPECTOR OF TAXES)
1 W. L. R. 1483 1956, decided on 26th June 1956.
Income-tax‑Annual allowance‑Abatement for machinery- Farm‑Car used partly for business and partly for pleasure‑Choice of car dictated by personal preference‑Allowance reduced‑Income- tax Act, 1952 (15 & 16 Geo. 6 & 1 Eliz. 2, c. 10), S. 289.
A private company carrying on the business of a fruit farm bought in 1952 a second‑hand Bentley car for approximately 7,000, which was used in connexion with the farm, and also for the private motoring of the managing director who held a controlling interest in the company. It was agreed that one‑twelfth of the annual mileage covered was attributable to the latter purpose, and that the gross capital allowance of 1,749 should be pro tanto abated by 145 15s. The general commissioners held that the allowance should be further abated by 1,020 5s. on the ground that the purchase of such a car was, in part at least, dictated by considerations of the personal choice of the managing director and not of the company's business:
Held, that there was ample evidence on which the com missioners could come to their conclusion and that their finding should not be disturbed.
Kempster v. McKenzie (1952) 33 T C 193 distinguished.
Appeal from the Commissioners for the General Purposes of the Income‑tax.
The case stated provided so far as material: At a meeting of the Lower South Aylesford Commissioners held on February 9, 1955, G. H. Chambers (Northiam Farms) Ltd. appealed against an assessment made under Schedule D for the year 1953‑54 on the company's profits as farmers.
The parties were in agreement as to the amount of the assess ment but the question before the commissioners was the amount of the annual allowance to be made to the company under the Income‑tax Act, 1952, section 289, in respect of a car used in the company's business; namely, what abatement was to be made of the amount of the annual allowance due to the company under section 289 in respect of a Bentley motor‑car which was pur chased in circumstances hereafter‑set out.
The company carried on business as fruit farmers at Northiam Farm, Horsmonden, Kent, where it farmed some 75 acres. The farm surrounded the private house of Mr. G. H. Chambers.
The company made up its accounts to January 31, each year.
Mr. G. H. Chambers was managing director of the company and his shareholding in the company gave him virtual control of it.
On May 17, 1952, during the accounting year ended January 31, 1953, the company purchased the Bentley car for 6,995.
The Bentley was used in part for the purposes of the company's business and in part for Mr. Chambers' private motor ing, and it was agreed that Mr. Chamber's use of the Bentley for the purposes of his private motoring accounted for one‑twelfth of the mileage covered. It was accordingly conceded that the annual allowance aforesaid should be abated to the extent of one‑twelfth of the amount thereof which would otherwise have been due, and the question before the commissioners was whether that allowance should be abated to any, and if so what, further extent.
The Bentley was produced for the inspection of the com missioners. It was, at the time of its purchase, a second‑hand car. It had a special Mulliner saloon body expensively upholstered and fitted, which, in a new car, would have cost 2,500 extra.
Mr. Chambers gave the following evidence before the com missioners, which, subject to their comments made below, they accepted : (1) It was necessary for the company to have a car for the purposes of its business. It had previously owned a Humber car, purchased in 1949. (2) The Bentley was used to travel to and from shows and demonstrations and to fetch spare parts. Only small parts could be carried in it, however, owing to its delicate upholstery. The total mileage it had done each year since its purchase was between seven and eight thousand miles, mainly on short journeys to and from Maidstone, which was some 14 miles from Northiam Farm. (3) Mr. Chambers was the sole driver of the Bentley and personally worked all day on the farm. (4) His wife owned a Hillman car, the whole of the expenses of which were borne by her. The Hillman was used on the company's business to the extent of one‑third of an estimated mileage of 15,000. (5) The Humber which the company had previously owned had cost a considerable sum to maintain, and to avoid this expense the company had bought the Bentley to replace it. In the opinion of Mr. Chambers the most expensive machinery was the best in the long run.
While the commissioners accepted that this consideration did induce the company to buy the Bentley, they thought that its purchase was dictated not by this consideration alone but also by the consideration of Mr. Chambers' personal choice or preference, which bore no relation to the requirements of the company's business, and that the Bentley was not a car of the kind that would have been bought had its purchase been dictated by consideration of the requirements of the company's business alone.
It was contended on behalf of the company (a) that the company's Humber car had to be replaced after three years' use to avoid constant maintenance expenses. (b) That the Hillman was used when Mrs. Chambers had to go on company business and when Mr. Chambers went to the village of Horsmondon on company business. (c) That choice of the Bentley car in question was not unreasonable, and that the capital allowance to which the company was entitled should be abated only .by the agreed one‑twelfth for private running; (d) That the company was accordingly entitled to a total allowance of 1,603 5s. for 1953‑54 computed as follows : Gross capital allowance as agreed 1,749 less one‑twelfth for private running, 145 15s. (e) That it would be wrong in law to make any further deduction from the net figure of 1,603 5s. on the grounds of personal choice or otherwise in view of the decision in Kempster v. McKenzie ((1952) 33 T C 193).
It was contended on behalf of the Crown : (1) That the Bentley must be taken to have been purchased out of regard, in part at least, of considerations of Mr. Chambers' personal choice and not of the requirements of the company's business. (2) That this was a relevant circumstance to be taken into account in determining what was fur the purposes of the Income‑tax Act, 1952, section 289, a just and reasonable allowance in the circumstances of the case under appeal. (3) That accordingly, the allowance due under the Income‑tax Act, 1952, section 289, should be abated beyond the amount agreed upon as aforesaid, by an amount which should be such amount as should appear to the commissioners to be a just and reasonable amount having regard to the circumstances mentioned in the preceding sub paragraph.
Having considered the evidence advanced and the arguments of the parties, and having inspected the car in question, the commissioners found that the capital allowance should be abated by something more than the agreed proportion for private running and determined the allowance due for 1953‑54 at 583, calculated as follows : Gross capital allowance as agreed 1,749; abatement for personal choice, 1,020 5s., and disallowance for private running, 145 15s., making a total allowance of 583.
Scottish Shire Line Ltd. v. Lethem (1912) 6 T C 91 ; Holder v. Inland Revenue Commissioner 1932 A C 624 ; Morgrett v. Lowestoft Water and Gas Co. (1935) 19 T C 481 and Tomkins v. Tomkins 1948 P. 110 cited but not ref.
Patrick Brennan for the Taxpayer.
John Senter Q. C. and Sir‑Reginald Hills for the Crown.
Solicitors : Evan Davies & Co. for Stevens & Graves, Maidstone : Solicitor of Inland Revenue.
JUDGMENT
Having stated the facts, continued: Section 289, looks like a self‑contained section not referring to allowances under other sections but containing so to speak, a complete direction to the tax officials as to what they may do in respect of machinery and plant. It reads "An annual allowance may be made in respect of any machinery or plant in charging the profits or gains of a trade for any year of assessment no the withstanding that the machinery or plant is also used in that year for purposes other than those of the trade ." Pausing there, I think that the reference to "purposes other than those of the trade" does not refer exclusively or perhaps at all to user by the trader and not by third parties. Then the section goes on: "but where, in the basis period for any year of assessment, machinery or plant is used for purposes other than those of the trade"‑in my judgment, that means used by anyone, the trader or anyone else "for purposes other than those of the trade, the annual allowance to be made in respect thereof shall be so much only of the allowance that otherwise would be made as may be just and reasonable, having regard to all the relevant circumstances of the case and, in particular, to the extent of the use for the said other purposes during the said basis period." "Having regard to all the relevant circumstances of the case" is about as wide an expression as it is possible to imagine. In arriving at what is "just and reasonable", everything has to be looked at which concerns or touches or is related to the matter in question. I cannot see that the commissioners in the present case have not had regard to "all the relevant circumstances of the case,' nor can I come to the conclusion that they have had regard to circumstances which were not relevant. I think that they have directed their minds in the proper direction ; that is to say, by having regard to the relevant circumstances they have come to the conclusion that it is "just and reasonable" that the amount of abatement which can be claimed by the company under this section is the sum of 583 and no more. It may be‑when it is a question of quantum it is never easy to arrive at exactitude‑that either the commissioners or other persons would have fixed a larger or smaller sum. In fact, it is almost impossible to imagine that anyone can say what .is a normal sum at which to arrive. I cannot for myself see that this figure of 583 was otherwise than a right sum to be assessed as "just and reasonable" under the provisions of section 289.
It is a queer case because I should have thought it was almost res ipsa loquitur that it would be unreasonable to buy a Bentley for 7,000 for the purposes of the trade of a fruit farmer. I should have thought that mere statement by itself would have at once aroused suspicion as to the propriety of the expenditure, and justified the necessity for going into the reasons for and objections to such a purchase when the question of taxation has to be considered. Here, I think that the commissioners have properly found that there was in this case such an element of "personal choice" or preference (which is a curious expression‑whether it was invented by Danckwerts, J. in the case to which I am just going to refer, I do not know) as to justify their taking it into consideration. What is meant by that expression is that the car would not have been bought by anyone who, in considering the question of its purchase, was directing his mind, solely and exclusively, to the necessities of the trader or of the trade as such.
The case to which I have been referring is Kempster v. McKenzie (Inspector of Taxes) ((1952) 33 T C 193). I will read the headnote: "The appellant K. bought a car for use in connexion with his forming business and also for private purposes. It was agreed that, on a mileage basis, the car was used as to six‑sevenths for business and one‑seventh for private purposes. On appeal before the General Commissioners against an assessment to income‑tax made on him for the year 1949‑50 in respect of his farming profits, K. contended that the full initial and annual allowances in respect of the car for that year should be abated only by one seventh for private running. On behalf of the Crown it was contended that personal choice of the type of car bought was a relevant circumstance to which regard should be had in deter mining what initial and annual allowances should be made, and that in the circumstances of the case the allowances should first be reduced by one‑fifth on that account. The commissioners held that the allowances should first be reduced by one‑seventh for personal choice, and that one‑seventh of the allowances as so reduced should then be disallowed for private running." Danckwerts, J. held "that there was no evidence to justify the determination of the commissioners that an abatement should be made for personal choice".
The judgment of Danckwerts, J. in a case similar to the present turns out to have a very vital difference in its facts. He stated in the course of his judgment (33 T C 197) : "In other words it is a matter which is committed for the decision of the commissioners but which depends upon circumstances, and, it is not until they have found the circumstances and reached a decision on the facts that the decision is committed to the commissioners. I do not think that it is really disputed on behalf of the respondent, but it is contended that the circumstances were in fact found and the commissioners accordingly rightly applied the requirements of that paragraph. It is also argued‑on behalf of the appellant that there is no evidence which would justify the commissioners in reaching a conclusion that the appellant bought this sort of car by reason of some special ground or consideration applicable only to himself personally, and therefore there was no evidence upon which the commissioners could reach a conclusion requiring this further deduction which they have made." Later Danckwerts J. said (33 I C 199): "Now if the commissioners had reached the conclusion upon matters of fact in respect of which there was evidence before them on which they could reach such a conclusion, there would, of course, be no right to interfere with their decision, but as it seems to me there is no evidence upon which they were justified either in holding or in inferring that the choice of the kind of car made by the appellant in this case was dictated otherwise than by his requirements for the purposes of his farming business. It appears that he wanted a car which was to travel along, roads and not necessarily one which‑would be driven about the rough farm‑land and that it was for the purposes of his business that he chose this particular car. It does not appear, on the evidence, to have been an extravagant purchase, having regard to the cost of a second‑hand car of sufficiently recent vintage to be an economic proposition and it does not appear to have been an unreasonable purchase having regard to the evidence which appears in the findings of fact as to the availability" .. ... ....of another car. I need not read that. He says (33 T C 200): "I find it impossible to see what evidence there was which justified the commissioners‑in reaching the conclusion that this was a purchase dictated wholly or partly by the personal choice of the appellant which, it was suggested, might be due to a desire to impress the persons who saw him drive about in it or any other alien and outside consideration of that sort."
The present case differs from that case in the vital and material respect that, whereas there was no evidence there on which the commissioners could have found this element of personal choice (which was suggested to but not accepted by Danckwerts, J.), in this case, in my judgment, there is ample evidence of it. I think it is almost an inference which hardly requires any evidence to support it. That is contrary to the Kempster case where Danckwerts, J. found that it was not an extravagant purchase. There was evidence that a list of available cars was produced to the commissioners in this case.
I have not seen the list but I should have thought that the purchase of this car for a sum of nearly 7,000 was a most extravagant purchase. I should have thought it was not as Danckwerts, J. found in the case before him, a purchase which was made entirely having regard to the requirements of the farming business. Whether the commissioners have given rather a high figure or rather a low figure in the amount they have fixed with regard to the matter of personal choice I do not know ; but I am quite sure of one thing, that I do not myself regard it as in any way unreasonable. They, having heard the evidence and considered the arguments and seen the car, came to a conclusion, and I think that the conclusion which they reached is one that it is quite impossible for me to disturb.
In the result, this appeal fails and must be dismissed.
Appeal dismissed.