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Issues Involved:
1. Whether the transaction constituted an "adventure in the nature of trade" and thus was subject to income tax under Case I of Schedule D. 2. Whether the determination of the Commissioners was purely a question of fact and thus not open to judicial review. 3. Whether there was a divergence in the interpretation of tax law between English and Scottish courts. Detailed Analysis: 1. Whether the transaction constituted an "adventure in the nature of trade" and thus was subject to income tax under Case I of Schedule D: The respondents, Harold Bairstow and Fred Harrison, were assessed for income tax on profits from the sale of machinery for the years ending April 5, 1947, and April 5, 1948. The primary issue was whether the profits from these transactions constituted an "adventure in the nature of trade" under Case I of Schedule D of the Income Tax Act, 1918. The respondents argued that the transaction did not meet the conditions established in the case of *Jones v. Leeming*, which requires one of four conditions to be present to establish liability: (a) the existence of an organization, (b) activities leading to the maturing of the asset to be sold, (c) the existence of special skill or opportunities in connection with the article dealt with, or (d) the nature of the asset lending itself to commercial transactions. They contended that none of these conditions were met and that the profit was a capital one, not subject to tax. On the other hand, the appellant contended that the buying and selling of the plant constituted a trade or adventure in the nature of trade and that the profits were assessable accordingly. The Commissioners originally found the transaction to be an isolated one and not taxable, but this was deemed unsatisfactory and remitted for reconsideration. Upon further review, the Commissioners again found that the transaction was not an adventure in the nature of trade. The House of Lords found that the primary facts did not justify the Commissioners' conclusion. The facts indicated that the respondents had no intention of holding the plant but aimed for a quick purchase and resale for profit. They undertook various activities such as arranging valuations, negotiating sales, and incurring expenses for commissions, repairs, and insurance, which pointed to a commercial venture. The House of Lords concluded that the transaction was indeed an adventure in the nature of trade and thus subject to income tax. 2. Whether the determination of the Commissioners was purely a question of fact and thus not open to judicial review: The High Court and the Court of Appeal had treated the determination of the Commissioners as a purely factual question, thus not open to judicial review unless it was perverse or without evidence. However, the House of Lords disagreed, stating that while the determination involved an inference of fact, it could be reviewed if it appeared that the Commissioners had acted without any evidence or upon a view of the facts that could not reasonably be entertained. The House of Lords emphasized that the inference drawn by the Commissioners was not supported by the primary facts, which pointed to a commercial transaction. Therefore, the determination was found to be erroneous in law, and the appeal was allowed. 3. Whether there was a divergence in the interpretation of tax law between English and Scottish courts: The appeal also addressed concerns about a potential divergence between English and Scottish courts in the interpretation of what constitutes an "adventure in the nature of trade." The House of Lords noted that while there might be differences in the approach, the principles governing the determination were consistent across both jurisdictions. The court reaffirmed that the determination of whether a transaction is an adventure in the nature of trade involves applying legal principles to the facts and can be reviewed if the Commissioners' decision is found to be unreasonable or based on a misinterpretation of the law. In conclusion, the House of Lords allowed the appeal, confirming that the transaction was an adventure in the nature of trade and thus subject to income tax. The decision clarified the scope of judicial review over the Commissioners' determinations and reaffirmed the consistent application of tax law principles across English and Scottish courts.
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