TMI Blog1940 (10) TMI 8X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Pacific Company fall to be included in computing the profits of the Company . Paragraph 5 states: In 1923 the Company, for the purposes of its business, acquired land in Mormon Island in California, near Los Angeles, of which the Pacific Company was put into possession and upon which the Pacific Company erected wharves and buildings. Paragraph 7: In 1929 the City of Los Angeles, in order to put itself in a position to obtain wharfage dues and rents from the Company or from the Pacific Company, commenced an action in the Federal District Court of Los Angeles against the Company and the Pacific Company claiming that the Company's title to the land and buildings occupied was invalid, and that such land and buildings were in fact the property of the City. This action was defended by the Company and by the Pacific Company. Para 8: After six years of litigation a new trial was ordered, and the costs incurred by the Pacific Company up to that time amounted to 6,249 , and it was that sum which the Respondent Company sought to deduct for the purposes of income-tax, and which the General Commissioners have held is a proper deduction. The General Commissioners have found ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d out for the purposes of the Company's trade. In my opinion the Scottish Central Electric Power Company's Case [1931] 15 Tax Cas. 761 cannot be cited as an authority for that proposition. It was a case in which the House of Lords was dealing with land in Scotland, in respect of which the owner of the land, who was also the occupier, had to pay owner's rates, and in accordance with the terms of the Income- tax Acts an allowance might be made under Schedule A for such owner's rates; the Company had claimed such an allowance and obtained such an allowance under Schedule A, and after obtaining that allowance under Schedule A the Company attempted to deduct again the amount of the owner's rates as a payment wholly and exclusively laid out for the purposes of the Company's business under Schedule D, but the House of Lords by a majority decided that it could not. It is perfectly true that in my opinion, at any rate, the majority (composed of Lord Hailsham, Lord Warrington, Lord Thankerton and Lord Macmillan) do base that judg- ment upon the ground that the payment of the owner's rates was a pay- ment made qua owner and not qua trader, and it was, therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re was here any alteration in the capital assets of the Respondent Company was that the City of Los Angeles had been removed from the category of possible litigants who might challenge the Company's title. I cannot think that that makes the payments a capital payment. The title of the Company, which must be assumed, in my opinion, to have been a good title, remains the same ; there is nothing added to the title or taken away, and the title has simply been maintained by this payment. All the cases cited by the Crown appear to me to be consistent with the principle which I have stated. The first case cited was Granite Supply Association Ltd. v. Kitton [1905] 5 Tax Cas. 163, where what was held to be a capital payment was a payment for carting materials from an old yard to a new one, and there it seems to me it was looked upon as being a part of the cost of acquisition of the new yard. In the case of John Dow v. Merchiston Castle School, Ltd. [1921] 8 Tax Cas. 149, the matter concerned what is called in Scottish law a duplicand of feu-duty which fell to be paid by the terms of the original feu character at intervals of twenty-one years. It was held that that was not a proper de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 928] 13 Tax Cas. 772., was a case of a payment which was made by a mineral lessee for the privilege of being allowed to surrender seams of coal. That again was, in my opinion, a loss on the realisation of the capital asset. Then in Van Den Bergh's Case [1935] 19 Tax Cas. 390; 3 I.T.R. Eng. Cas. 17. the question was as to a sum of money paid upon the cancellation of a contract which the House of Lords held related to the whole structure of the company. The view taken was that the whole structure of the company was the totality of its capital assets, and the payments made for an alteration of those capital assets was a capital payment. On behalf of the Respondent Company, the case of B.W. Noble Ltd. v. Mitchell [1927] 11 Tax Cas. 372 , was referred to, and attention was drawn to the words of Lord Hanworth, where he said at p. 420: It is a payment made in the course of business, dealing with a particular difficulty which arose in the course of the year, and was made not in order to secure an actual asset to the Company but to enable them to continue, as they had in the past, to carry on the same type and high quality of business unfettered and unimperilled by the presence o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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