TaxTMI 
TaxTMI 
1942 (4) TMI 13
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....nnual licence, on the other hand, is in ordinary circumstances renewed every year as a matter of course. On the grant of a new on-licence the justices are bound to attach conditions "for securing to the public any monopoly value which is represented by the difference between the value which the premises will bear in the opinion of justices, when licenced, and the value of the same premises if they were not licenced." These conditions must be imposed whichever of the two forms above mentioned the licence may take but in practice there is a difference in application, since in the case of the licence for a term it is only payment of the part or "slice" of the monopoly value which is referable to the term of the licence that is exacted. The advantage of this method of procedure is that the payments which the licensee is compelled to make for one period can be adjusted in a subsequent period so as to reflect what experience shows to be the real monopoly value. It will be seen, therefore, that in the present case the sums fixed by the Justices in the case of each of the three grants was intended to represent that part or "slice" of the monopoly value which was referable to the period cov....
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....ch justices are to fix in respect of monopoly has been considered in a number of cases. It is true that these cases were not concerned with questions arising under the Income Tax Acts. They do, however, show what the nature of the payment is as between the licensee and the public and as between a hypothetical tenant and his landlord. In other words they show what it is that the licensee is paying for. Thus, in Inland Revenue Commissioners v. Truman, Hanbury, Buxton & Co., Lord Haldane, L.C., observed (82 L.J.K.B., at p. 1047; [1913] A.C., at p. 659) that the corresponding section which he was there considering dealt "not with the annual value of the licence but with its capital value." In R. v. Sunderland Customs and Excise Commissioners, [1914] 83 L.J.K.B. 555; [1914] 2 K.B. 390 justices had omitted to estimate the monopoly value at a definite capital sum and had instead exacted payment of an annual sum representing a percentage of gross takings. This it was held they were not entitled to do. Lord CozensHardy, M.R., said (83 L.J.K.B., at p. 577; [1914] 2 K.B., at p. 397): "This is a lump sum, to be ascertained once for all, though when so ascertained it is competent to the justice....
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....to justices to do this. But in any case, Scott, L.J., clearly regarded payment in respect of a five and a quarter years' period (which was the case before him) as a capital nature since later in his judgement he treats the acquisition of the monopoly as being on the same footing as any capital improvement of the property effected before the licensed house was open for business, such as a swimming pool. It is to be noted that the provisions as to fixing monopoly value appear in sub- section (1), and there is nothing in the section to suggest that any change in the character of the payment or the method of fixing it takes place were a licence for a term is granted under sub-section (2). It is true that in the two earlier cases the observations which I have quoted were not directed to the case of a licence granted for a term, and it is argued that for Income-tax purposes at any rate the payments in such a case fall into a different category. This argument cannot, in my opinion, be sustained. The fact that under sub-section (2) the licence is granted for a term and the payments are made in respect of term gives a false appearance of periodicity to the payments. In the normal case t....
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.... is correct, it is unnecessary to discuss the authorities in which questions relating to deductions have been considered, or to refer to the various attempts which have benumbed to find a formula for describing what is a proper item to be charged when computing profits in case which do not fall within the list of prohibited deductions. I need only say that I have considered carefully the authorities to which we have been referred. They have been quoted again and again in the books and I do not propose again to quote them. But the conclusion to which I have come in the present case that the sums claimed are not deductible is, I think, entirely consonant with those authorities. One other argument must be mentioned. It was said that whatever the position might be in the case where, for example, a freeholder obtains a licence and makes the necessary payments, there is a difference where the payments are made by a lessee under a covenant in that behalf contained in his lease. I do not follow this. If a payment is of such a nature as to preclude its deduction when made spontaneously, I cannot see that its nature is affected by reason of the fact that it is made nude a convenient with ....
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....or them the right to open the Grafton Hotel as a licensed house: without that right they must either have ceased to trade there altogether, or carried on some different trade, but they could not have continued in business as licensed victuallers in those premises. In other words, when the licence dies, the trade dies, unless the grant of a new licence enables it to be carried on for a further period. Thus the question which we have to consider comes to be whether a payment of a lump sum made to obtain permission to trade for a term of years is of such a character that it "is proper and necessary" to deduct it "in order to ascertain the balance of profits and gains": (see the speech of Lord Parker in Usher's Wiltshire Brewery Co. v. Bruce (84 L.J.K.B., at p. 429: [1915] A.C., at p. 458). It is conceded that if the payment was in the nature of a capital payment, it is not deductible. Unfortunately the expression "capital payment" does not appear to be capable of precise definition. At any rate I will not attempt to define it, but will confine myself to dealing with the facts of the present case. Here each sum in question was part of a total amount paid to acquire the right to ....
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....se licence is no doubt properly regarded as part of the working expenses for the year. For these reasons I have come to the conclusion that the Commissioners were wrong; not in their findings of fact, which are not disputed, but in the inference which they appear to have drawn from the facts, and that the decision of Lawrence, J., was right, and should be affirmed. SINGLETON, J., after stating the facts, continued: It is to be remembered that under the Licensing (Consolidation) Act, 1910, Section 14(4), a new justices' on-licence granted for a term under the section may be forfeited if any condition imposed under the section is not complied with, by order of a Court of summary jurisdiction. Thus, failure to make any one of the payments might have resulted in loss of the licence, without which the business could not have been carried on. It becomes necessary, therefore, to consider what is the nature of the payment made as one of the conditions of the grant of a new justices' on-licence under Section 14(1)(a) of the Act of 1910. The sub-section speaks of it as "any monopoly value which is represented by the difference between the value which the premises will bear, in the....
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....n into consideration by way of diminishing the estimated rent which a hypothetical tenant would pay for the premises. The Divisional Court had held that the payments ought not to be taken into consideration, and from two of the judgments at least it is clear that the payments were to be regarded as payments of a capital nature. The Court of Appeal affirmed the decision of the Divisional Court on somewhat different grounds. Reliance was placed by counsel for the appellant on the judgment of Scott, L.J., in this case: on the other hand, the Attorney-General submitted that if it were carefully examined it was really support for the case of the Crown. Scott, L.J., said (166 L.J.K.B., at p. 698: [1937] 2 K.B., at p. 66): "The Divisional Court have, however, decided that the amount of rent which the hypothetical tenant would be willing to pay is not in law affected by the payments of monopoly value. The main reason for the decision, as explained by the Lord Chief Justice, was that a payment to be made for monopoly value is, according to the decision of the Divisional Court, affirmed by this Court, in R. v. Sunderland Customs and Excise Commissioners [1914] 83 L.J.K.B. 555; (1914) 2 K.B. ....
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....looked that sub-section (1) alone deals with the payment which may have to be made and it is not easy to see that a payment required under that sub-section may sometimes be a capital payment and at other time something quite different. Moreover, the monopoly value for which the payment is required attaches in a sense to the premises. The amount of it is determined in a normal case very much in the same way as compensation was determined in the case of a redundant old on-licence. That was always regarded as a capital sum and so I venture to think has monopoly value been. I cannot help feeling that there has been some misunderstanding as to Section 14 of the Licensing (Consolidation) Act, 1910, which was in the same terms generally as Section 4 of the 1904 Act. I have always understood that the reason for sub-section (2) enabling a licence to be granted for a period was because of the difficulty of arriving at the amount to be paid by way of monopoly value. If the licensing justices granted the ordinary licence (spoken of as an annual licence) and fixed a sum to be paid for monopoly value, they could not afterwards after that sum, however unfair it might turn out to be to the one sid....
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....had the help of the Customs and Excise (as representing the public) in arriving at the proper sum and if they can be said to be parties to the fixing of a sum to be paid annually for these so-called period licences the position is indeed confused. The case stated does not give the reasons for the decision of the Commissioners. If they had found as a fact that the justice had on either of the last two applications decided that GBP 190 a year was the amount to be paid for the licence to trade during that year, it seems to me that it would have been difficult for any Court to interfere with their decision. In the absence of any such finding we must come to the conclusion that the justices did that which was their duty and fixed a capital sum as the value of the monopoly. If that be so, the company is not entitled to have the amount of an installment of a capital sum allowed as a deduction in calculating its yearly profit, any more than it would be if it had entered into a contract with the owners to rebuild or to make structural alterations (as distinct from repairs) which the licensing justice might require during the currency of the lease. I have dealt with the Licensing Act, 191....