TMI Blog1957 (3) TMI 59X X X X Extracts X X X X X X X X Extracts X X X X ..... e taxpayer's deposit account with the Colmore Row, Birmingham, branch of Barclays Bank, and the question for determination by the commissioners was the correct method of computing the income tax in respect of such interest. 3. (1) The assessment for 1952-1953 was made under the provisions of the Income Tax Act, 1952. The assessment for 1951-1952 was made under the provisions of the Income Tax Acts in force prior to the coming into operation of the Income Tax Act, 1952. The appeal was argued before the commissioners by reference to the latter provisions (i.e., the earlier enactments), it being common ground between the parties that there was no material difference between such provisions and those contained in the Income Tax Act, 1952. In stating this case the commissioners followed the same course and made references to the earlier enactments as if they applied to the 1952-1953 assessment in the same manner as they applied to the 1951-1952 assessment. (2) The assessments under appeal were made upon the basis that the income in question had to be computed in accordance with the Finance Act, 1951, s. 21, which deals with cases where a person acquires a new source or an addi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a withdrawal without this notice could do so, but would lose 14 days' interest on the sum withdrawn. The taxpayer withdrew ? 253,000 on March 30, 1951, without giving the 14 days' notice, and 14 days' interest on this sum was deducted in calculating the interest credited on the following June 20. The sum of ? 2,215 3s. 1d. was credited for interest on June 20, 1951...................... 6. It was contended on behalf of the taxpayer:- (1) That when the taxpayer paid in ? 2,000,000 to the credit of his deposit account on March 17, 1951, he did not acquire a new source, or an addition to a source of income within section 21 of the Finance Act, 1951, or section 30 of the Finance Act, 1926. (2) That income tax upon the interest on the taxpayer's deposit account should be computed for 1951-1952 and 1952-1953 on the preceding year basis in accordance with paragraph 2(1)(b) of the Rules applicable to Case III of Schedule D to the Income Tax Act, 1918. (3) Alternatively, that if the taxpayer did acquire a new source, or an addition to a source, of income when he paid in the said sum of ? 2,000,000, income first arose therefrom prior to April 6, 1951; that sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 1951-1952 assessment we reduced to ? 53; the 1952-1953 assessment we reduced to ? 7,032. The inspector of taxes appealed to the court. On July 3, 1956, the appeal was allowed by Vaisey J. who held that the source or origin of the interest on the ? 2,000,000 was the deposit of the money coupled with the contract between the taxpayer and the bank; that it was not to be found in an existing contract but that a new contractual relationship resulted from and was brought into existence by the tender of that sum by the taxpayer and its acceptance by the bank on the date in question; that, accordingly, the taxpayer acquired a new source, or an addition to a source, of income chargeable under Case III of Schedule D on March 17, 1951; that income first arose therefrom after April 6, 1951, namely, on June 20, 1951, when the income was placed to the credit of and at the disposal of the taxpayer; and that income for the years to which the appeal related was properly computed by reference to section 21 of the Finance Act, 1951. The taxpayer appealed. F. Heyworth Talbot Q.C. and G.A. Grove for the taxpayer. The question is whether in respect of the assessments for income tax under Sc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ely trivial amounts, but each deposit would have to be segregated for three years and the interest on it would have to be dealt with as income from a new and separate source. That would cause very great practical difficulties. Roy Borneman Q.C. and Sir Reginald Hills for the Crown. There is a new contract every time a sum is accepted on deposit. Even if it be held that there is a single continuing contract throughout the existence of a deposit account, that of itself produces no income. It is the operation of that contract on the particular sums of money deposited that produces the income, where there is a contractual right to receive interest, and accordingly new deposits of money in a deposit account are new sources or additions to sources of income within Case III of Schedule D. Heyworth Talbot Q.C. replied. LORD GODDARD C.J. This is an appeal from a judgment of Vaisey J., who reversed the decision of the special commissioners, who adjusted certain assessments for the years 1951-1952 and 1952-1953 made upon Sangster in respect of certain interest which he received on a deposit account which he kept at Barclays Bank. Sangster, who evidently had the handling of very la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it there were a deposit of money without an agreement to pay interest there would be no interest arising from it. There is no difference between a deposit account and a current account so far as the relationship of banker and customer is concerned. The relationship is perfectly clear. The leading case, of course, is Foley v. Hill [1848] 2 H.L. Cas. 28, mentioned in Atkin L.J.'s judgment in Joachimson v. Swiss Bank Corporation [1921] 3 K.B. 110; 37 T.L.R. 534. It is that of debtor and creditor; the banker borrows the money from the customer under terms to repay it. As a general rule he does not pay interest on a current account, although bankers do at times agree to allow interest on a current account if a certain credit balance is maintained. We need not consider current amounts in this case at all. We are only concerned with deposit accounts under which money is paid in at 14 days' notice; that is to say, that the customer cannot withdraw the money without giving 14 days' notice, though he may be allowed to do so if he gives up interest. Interest at the current rate is allowed by the banker, and the current rate generally is regulated by the Bank rate. Sangster had ..... X X X X Extracts X X X X X X X X Extracts X X X X
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