Trading losses funded by constituent authorities can be treated as taxable trading receipts when made to support the undertaking.

Sums paid to a statutory water board under precepts issued to constituent local authorities to cover a deficiency in trading revenue were trading receipts chargeable to tax under Case I of Schedule D. The payments were not like a local rate raised by a rating authority for its own inhabitants, because the board was not directly representative of the contributing bodies and had no general power to levy a rate. They were made to meet trading losses and support the carrying on of the undertaking, and authorities on grants or advances intended to supplement trading solvency supported treating them as part of the board's receipts.

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Issues: Whether sums received by a statutory water board under precepts issued to constituent local authorities to cover a deficiency in trading revenue were trading receipts chargeable to tax under Case I of Schedule D.

Analysis: The sums were not analogous to a local rate imposed by a rating authority on its own inhabitants, where the same community both contributes and receives the benefit and any surplus is not treated as profit. The board was not directly representative of the inhabitants, had no general power to levy a rate, and the amounts were paid by distinct constituent authorities to meet a deficiency arising from the insufficiency of the board's trading receipts. The payments were designed to make good trading losses and to support the carrying on of the undertaking. Authorities concerning grants or advances intended to supplement trading solvency supported the view that such payments form part of trading receipts.

Conclusion: The sums received under precept were trading receipts and were properly brought into computation of the board's profits under Case I of Schedule D; the appeal failed.

Final Conclusion: Assistance provided to meet a business deficiency, where it is used to support the trading operations of the undertaking and lacks the character of a self-rating surplus, is taxable as part of the trade's receipts.

Ratio Decidendi: A payment made to an undertaking to meet or supplement trading losses is a trading receipt where it is received for the purpose of supporting the business and does not arise from the identity of contributor and recipient that characterises a self-imposed public rate.

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