TaxTMI 
TaxTMI 
1955 (7) TMI 26
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.... in the County of York. They discharged the assessments but, the appellant having expressed his dissatisfaction with their decision as being erroneous in point of law, stated a case for the opinion of the High Court. My Lords, it would not be right for me, in view of the conclusion which I have reached in this appeal, to try to abbreviate the statement of facts upon which the Commissioners made their determination and I therefore set out verbatim paragraph 3 of the case which is in these terms." The following facts were admitted or proved:--(1) Mr. Harrison became aware in 1946 that a complete spinning plant was for sale at Messrs. Whitworths at Luddenden Foot and had reason to believe that the plant could be purchased for a reasonable figure. He communicated this information to Mr. Bairstow as he himself was not in a position to finance any purchase. Mr. Bairstow expressed himself to be interested but both he and Harrison agreed that they had no intention of holding. the plant--what they desired was a quick purchase and re-sale. Mr. Bairstow therefore arranged for a valuation to be made by a professional value in order that he might be satisfied that the price asked by Whitw....
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....ey could. (2) The rest of the plant was sold in two other principal and two smaller lots by February, 1948, though owing to difficulties the last plant was not removed until March, 1949. The two smaller lots consisted of the two items of warping plant. (3) Mr. Bairstow was a director of a company manufacturing leather. Mr. Harrison was an employee of a spinning firm. Neither of them had had any transactions in machinery or any other commodity before. (4) The profits shown by the accounts (which form part of this case and are annexed hereto, marked 'A') was £ 18,225 11s. 3d. (5) The respondents' sole purpose in the transaction was to sell the plant at a profit. (6) With regard to the manner in which the sales were effected:--(A) Some commissions were paid for assistance received in effecting sales. (B) There was no advertising. Customers principally learnt of the existence of the plant for sale when they came to inspect the premises which were being advertised by the original owners as becoming vacant. (c) About 400 spindles out of the 220,000 which the plant represented were replaced because they were missing or damaged. (D) Insurance risks were covered by the res....
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....is was a transaction the profits of which could not be liable to tax under Case I of Schedule D, because, as they said, in the case of Jones v. Leeming* (to which I shall refer later) "four conditions had been approved by the court, one of which must be present to establish liability: (a) the existence of an organisation, or (b) activities which led to the maturing of the asset to be sold, or (c) the existence of special skill, opportunities, in connection with the article dealt with, or (d) the fact that the nature of the asset itself should lend itself to commercial transactions." And they contended that none of these conditions was present in the transaction in question. They distinguished certain cases upon which the appellant relied and urged that the profit was a capital one and that there was no concern in the nature of trade that could be taxed. On behalf of the appellant it was contended "that the buying and selling of the plant constituted a trade or adventure in the nature of a trade and that the profits and gains arising therefrom were assessable" accordingly. The Commissioners expressed their original determination in these terms: "We, the Co....
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....Courts (as, I think, is clear from a citation from the judgment of the latest of them in the judgment of Mr. Justice Upjohn) may have taken a road which diverges from that followed by the English Courts, the two jurisdictions, as it seems to me, can only now be got together again by the House of Lords...". And it is clear that the revenue authorities were anxious to bring this case to your Lordship' House largely because it was apprehended that the courts of England and Scotland had to some degree diverged in their treatment of this subject. That there is some ground for this apprehension will be clear from a comparison of (for example) the observations of Atkin and Warrington L.JJ. in Cooper v. Stubbs**, with those of Lord Russell in Inland Revenue Commissioners v. Reinhold***: "In the Scottish courts, however, it is clear that such a question" (i.e., whether a transaction is an "adventure in the nature of trade") "is regarded as a question of law, or at least of mixed fact and law." It is not to be doubted that, particularly in a matter of taxation, any possible conflict, even if it be only an apparent conflict, should be resolved and that i....
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....nd their subsequent operations. I find "activities which led to the maturing of the asset to be sold" and the search for opportunities for its sale, and, conspicuously, I find that the nature of the asset lent itself to commercial transactions. And by that I mean, what I think Rowlatt J. meant in Leeming v. Jones*, that a complete spinning plant is an asset which, unlike stocks or shares, by itself produces no income and, unlike a picture, does not serve to adorn the drawing room of its owner. It is a commercial asset and nothing else. Your Lordships have examined a large number of cases in some of which the Commissioners have found an adventure or concern in the nature of trade and in others have not. And in each category will be found cases in which the court has upheld and others in which the court has reversed the Commissioners' decision. I do not think it necessary to review them. It is inevitable that the boundary line should not be precisely drawn, but I think that there has been no case cited to us in which the question, however framed, whether the determination of the Commissioners was maintainable, could be answered more clearly and decisively than in the p....
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....ord President (Lord Normand) put it in Inland Revenue Commissioners v. Fraser#:.... the Commissioners here have either misunderstood the statutory language (which I think is the probable explanation of their error) or having understood it have made a perverse finding without evidence to support it. He might equally well have said that the assumption that they were rightly directed in law was displaced by a finding which was upon that assumption inexplicable. The misdirection may appear upon the face of the determination. It did so here, I think, in the case as originally stated : for in effect that determination was that the transaction was not an adventure in the nature of trade because it was an isolated transaction, which was clearly wrong in law. But sometimes, as in the case as it now comes before the court, where all the admitted or found facts point one way and the inference is the other way, it can only be a matter of conjecture why that inference has been made. In such a case it is easy either to say that the Commissioners have made a wrong inference of fact because they have misdirected themselves in law or to take a short cut and say that they have made a wrong inference....
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....ley in the County of York, to whom the respondents appealed against the assessments, determined that the "transaction" which was their subject-matter was not an adventure in the nature of trade and discharged the assessments. In the High Court the Crown's appeal was dismissed by the learned judge (Wynn-Parry J.) on the ground that the determination was "purely a question of fact" and that accordingly it was not open to the court to interfere with it. The matter was treated in exactly the same way in the Court of Appeal. I should not myself have thought that the principles which govern a case of this sort offered much scope for controversy at this date, whether they are sought for in English or in Scottish legal decisions. The only difficulty that I see arises from the fact that in some cases judges have not been at pains to distinguish in their judgments what are the conditions which make the particular question before them no more than a question of fact. My Lords, I think that it is a question of law that meaning is to be given to the words of the Income Tax Act "trade, manufacture, adventure or concern in the nature of trade" and for that matt....
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.... Jones v. Leeming#. The only thing that I would deprecate is too much abbreviation in stating the question, as by asserting that it is simply a question of fact whether or not a trade exists. It is not simply a question of fact. The true clue to the understanding of the position lies, I think, in recalling that the court can allow an appeal from the Commissioners' determination only if it is shown to be erroneous in point of law. Nor do I think that there can be any real divergence of opinion as to what constitutes error of law for this purpose. Naturally, judges have not always expressed it in exactly the same terms. I will take one or two instances. As I have said, where there is an actual statement in the case which shows a misconception of the law, no one feels any difficulty. But, equally, no one supposes that the court's right, or as I would say, duty, to intervene stops at this. For example, in Cooper v. Stubbs(5), Rowlatt J. was prepared to overrule the Commissioners' determination that no trade existed because, as he said: "If one were trying a question of this sort with a jury, one would have to say upon these facts, 'Well, now a trade is proved,'....
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....nd that the true and only reasonable conclusion on the facts found is the conclusion reached by the dissenting Commissioner." My Lords, I must apologise for taking so much time to repeat what I believe to be settled law. But it seemed to be desirable to say this much, having regard to what appears in the judgments in the courts below as to a possible divergence of principle between the English and Scottish courts. I think that the true position of the court in all these cases can be shortly stated. If a party to a hearing before Commissioners expresses dissatisfaction with their determination as being erroneous in point of law, it is for them to state a case and in the body of it to set out the facts that they have found as well as their determination. I do not think that inferences drawn from other facts are incapable of being themselves findings of fact, although there is value in the distinction between primary facts and inferences drawn from them. When the case comes before the court it is its duty to examine the determination having regard to its knowledge of the relevant law. If the case contains anything ex facie which is bad law and which bears upon the determination,....
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....nizing the venture and carrying it through. This seems to be, inescapably, a commercial deal in secondhand plant. What detail does it lack that prevents it from being an adventure in the nature of trade, or what element is present in it that makes it capable of being aptly described as anything else? Well, to judge by the respondents' contentions as recited in the case, there were some circumstances lacking in this deal of which the presence has been regarded as of importance in other cases. I do not think that this line of argument is ever very conclusive; but, in any event, it breaks down completely on the facts that are found. It is said that there was no organization for the purposes of the transaction. But in fact there was organization, as much of it as the transaction required. It is true that the plant was not advertised for sale, though advertisements asking for plant were answered by the respondents. But why should they incur the cost of advertising if they judged that they could achieve the sale of the plant without it? It is said that no work had been done on the maturing of the asset to be sold. But such replacement and renovation as were needed were in fact carri....