United Kingdom House of Lords Decisions

Income Tax, Schedule D - Balancing charge - Succession by Crown - Whether cessation provisions apply - Income Tax Act, 1918 (8 & 9 Geo. V, c. 40), Schedule D, Cases I and II, Rule 11 ; Finance Act, 1926 (16 & 17 Geo. V, c. 22), Section 32.

The Respondent Company carried on an electricity undertaking in Madras under several licences which all provided that on 29th August, 1947, the local authority or local government should have the option to purchase the undertaking. This option was exercised by the Madras Government who took possession of the undertaking on that date and thereafter carried it on.

A balancing charge was made on the Company for the year 1947-48 on the footing that on 29th August, 1947, the Madras Government succeeded to the trade within the meaning of Rule 11 (2) of Cases I and II of Schedule D; that accordingly the basis period for the assessment on the Company for that year was the period beginning 5th April, 1947, and ending 29th August, 1947; and that the sale of the Company's undertaking occurred in that basis period. On appeal to the Special Commissioners, the Company contended that the person succeeding to its trade was the Crown; that Rule 11 (2) of Cases I and II of Schedule D had no application where the successor to the trade was the Crown or was not chargeable to Income Tax; and that the Company's basis period for the year of assessment 1947-48 was therefore the preceding year, the year to 3Is/ December, 1946, and not the period in which the sale occurred. The Commissioners allowed the appeal, holding that the trade was carried on after 29th August, 1947, by the Crown and that the Crown was not a "person "for the purposes of Rule 11 (2).
Held, that "person "in Rule 11 (2) includes the Crown.

A HTML version of this file is not available click here to view the whole pdf version : [1955] UKHL TC_35_612