Charitable covenant payments lose exemption where membership benefits and assurances amount to real counter-stipulations.

Payments made under deeds of covenant to a charitable body were examined on their substance and held not to be exempt annual payments under section 447(1)(b) where they secured appreciable membership benefits and assurances. The promised continuing membership, protection against increased subscriptions, and access to club-like amenities were real counter-stipulations, not trifling or illusory advantages. On that basis, the sums could not be treated as pure income payments or pure gifts in the hands of the charity, and the de minimis principle did not apply to disregard the benefits.

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Issues: Whether payments made under deeds of covenant by members of a charitable body were annual payments entitled to exemption under section 447(1)(b), or whether the associated membership advantages and assurances prevented the sums from being treated as pure income payments.

Analysis: The covenants were entered into in response to a circular which promised members continuing membership at lower rates and protection against increased subscriptions for seven years, together with the existing club-like amenities of the league's headquarters. The advantages were not illusory or trifling. The Court held that, looking at the substance and reality of the arrangement, the covenantors did not pay without conditions or counter-stipulations. The payments therefore could not be treated as pure gifts or pure income profit in the hands of the charity, and the de minimis principle could not be used to disregard the benefits.

Conclusion: The payments were not exempt annual payments within section 447(1)(b); the claim to recover tax failed, and the appeal was dismissed.

Ratio Decidendi: A covenant payment to a charity is not an exempt annual payment if, on the substance of the transaction, it is made in return for appreciable membership benefits or assurances that amount to real counter-stipulations rather than trifling or illusory advantages.

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