TMI Blog1933 (7) TMI 19X X X X Extracts X X X X X X X X Extracts X X X X ..... e-and a dispute arises with regard to this-which in effect is a prohibition, but it has been said by a great authority that though in form a prohibition it is really an allowance, and in effect it allows, disbursements incurred wholly and exclusively for the purpose of the business. Now here, if this rent which is found to be a fair and proper rent were paid to an outsider, it would, I think, be deductible, and deductible as a disbursement, and it would be immaterial that there was a wide divergence between the disbursement, that is, the rent, and the annual value. That would afford no answer if it were paid to an outsider. But here what is said-and I have come to the conclusion correctly said-on behalf of the Crown is that that cannot appl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... round, though not without hesitation, I have arrived at the conclusion that, accepting fully the finding of fact of the Commissioners, none the less, on the ground which I have tried to state fairly, their deduction cannot stand. The result is that the appeal in this case will be allowed, with costs. The partners appealed. Needham K.C., and T. Donovan, for the appellants. The Attorney-General (Sir Thomas Inskip, K.C.), J.H. Stamp and R.P. Hills, for the Crown. LORD HANWORTH, M.R.-This seems, to my mind, a very plain case. It is necessary just to state the facts, because the propositions of law are not in dispute. It seems that one of these partners, the senior partner, acquired some premises in March, 192 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is an indication it would seem that the capital of the senior partner was 2,700 at March, 1931, and no more, but it does appear from that that he still was entitled to receive the rent for that year of 1,250 which would seem to indicate that the premises were still held by him as they had been before the partnership deed, and that nothing had intervened to make the sum of 1,250 per annum otherwise than payable out of the partnership assets. There is no doubt about it-and the Attorney-General does not contend otherwise-that if these premises had belonged to some entirely independent owner, the partnership would have been entitled to pay that owner 1,250 and that sum would have been deductible as a proper outgoing in ascerta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses instead of purchasing the leasehold interest. They have come to the conclusion definitely that they accept the view that this story told in the partnership deed was a true story. I quite agree that the matter is not concluded as a question of fact, but it is open to review as a question of law, because it is a mixed question of fact and law, and we have to construe and determine what is the result of Clause 4 of the partnership deed. But I am prepared to give very considerable weight to the conclusion reached by the Commissioners, who are quite within their province in telling us that the 1,250 was a fair and proper rent for these premises. Under those circumstances, I cannot see any evidence whereby one can turn this habitation of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en I think that concludes the matter. I would only add that the Attorney-General has argued difficult cases about complications which may arise with regard to the payment of salaries and the introduction of capital into the firm. With regard to salaries, those are the cases, as I understand, where it is held that the partner cannot be treated as receiving a salary where money is paid to him in respect of the partnership business in one form or another. I am far from saying that, if a payment were made to a partner for something altogether disconnected with the partnership business as such, he might not be entitled strictly to remuneration on an independent contract. We have not to consider that case. As regards interest upon capital, that i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ne business and supplies wine to the partnership, it would be idle to suggest, would it not, that for the purpose of ascertaining the profits of the hotel you could not deduct the sums paid to the partner who was the wine merchant? The fact that such a deduction would be permissible is, I think, made clear by Rule 10 of the Rules applicable to Cases I and II, which says that for the purposes of taxation under Schedule D a partnership is treated as a separate entity from individual partners composing the firm. In the present case it appears to me that the premises were supplied for the use of the partnership by the partner who owned them, not in his capacity of partner at all, but in his capacity of landlord of the premises. Now if it were t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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