1969 (3) TMI 81 - HC - Income Tax

Travel allowances not emoluments, deductible as necessary expenses for duties. Dissent on emoluments. Appeal allowed.

The court held that the travelling allowances were not considered emoluments but rather reimbursements for necessary expenses incurred in the performance ... - Issues Involved:1. Whether the travelling allowances were properly included in the appellant's emoluments for income tax purposes under Schedule E.2. Whether the actual cost of the journeys was deductible from his emoluments under the relevant rule.Detailed Analysis:Issue 1: Inclusion of Travelling Allowances in EmolumentsLORD GUEST:The appellant, a general medical practitioner, received travelling expenses for journeys between Fishguard and a hospital in Haverfordwest. The Revenue's contention was that these allowances were emoluments, but the court found that they were reimbursements for actual expenditure, not profits or perquisites. The court distinguished this case from Fergusson v. Noble, stating that the allowances were not emoluments as they were used to cover necessary travel expenses for the appellant to perform his duties.LORD PEARCE:The appellant was reimbursed for travel expenses incurred while performing his duties. The court found that these reimbursements were not emoluments as they were not a source of profit but necessary expenses incurred in the performance of his duties. The court emphasized that the reimbursements were not over-generous and were only partial, leaving the appellant out of pocket.LORD DONOVAN:The court found that the travelling expenses reimbursed to the appellant were not emoluments within the meaning of Schedule E, as they were simply reimbursements for necessary expenses incurred in the performance of his duties. The court distinguished this case from Fergusson v. Noble, where a cash allowance was considered an emolument because it yielded a benefit to the employee.LORD WILBERFORCE:The court found that the appellant's travelling expenses were incurred in the performance of his duties and were not emoluments. The court emphasized that the appellant was travelling on his work, not to his work, and that the expenses were necessary for the performance of his duties.LORD PEARSON:The court found that the travelling allowances were emoluments, as they constituted a benefit to the appellant. However, the court also acknowledged the unfairness of the situation, as the appellant's necessary professional expenses were not allowed as deductions in the assessment of his net income.Issue 2: Deductibility of Actual Travel CostsLORD GUEST:The court found that the travelling expenses were necessarily incurred in the performance of the appellant's duties and were deductible under rule 7 of Schedule 9 to the Income Tax Act, 1952. The court distinguished this case from Ricketts v. Colquhoun, where the expenses were not deductible because they were incurred due to the taxpayer's personal choice of residence.LORD PEARCE:The court found that the travelling expenses were necessarily incurred in the performance of the appellant's duties and were deductible. The court emphasized that the appellant's duties commenced as soon as he received a telephone call and that the expenses were incurred in the performance of his duties.LORD DONOVAN:The court found that the travelling expenses were not deductible under rule 7, as they were not necessarily incurred in the performance of the appellant's duties. The court emphasized that the expenses were incurred because the appellant chose to live at a distance from his place of work.LORD WILBERFORCE:The court found that the travelling expenses were necessarily incurred in the performance of the appellant's duties and were deductible. The court emphasized that the appellant had two places of work and that the expenses were incurred in travelling from one to the other in the performance of his duties.LORD PEARSON:The court found that the travelling expenses were not deductible under rule 7, as they were not necessarily incurred in the performance of the appellant's duties. The court emphasized that the expenses were incurred due to the appellant's personal choice of residence and were not imposed by the nature of the employment.Conclusion:The majority of the judges found that the travelling allowances were not emoluments and that the actual travel costs were necessarily incurred in the performance of the appellant's duties and were deductible. However, there was a dissenting opinion that the allowances were emoluments and that the travel costs were not deductible. The appeal was allowed with costs.