Barclays Bank International Ltd v The Commissioner of Inland Revenue

• Jurisdiction: Guyana
• Judge: Vieira, J.
• Judgment Date: 09 April 1974
• Neutral Citation: GY 1974 HC 12
• Docket Number: 2690 of 1977
• Court: High Court (Guyana)
• Date: 09 April 1974

Supreme Court

Vieira, J.

2690 of 1977

Barclays Bank International Ltd.

and

The Commissioner of Inland Revenue

J. A. King, S. C., for the appellants.

J. C. Nurse, Principal Legal Adviser, for the respondents

Revenue law - Income tax — Whether subscriptions to clubs allowable deductions.

Vieira, J.

1 This is an Income Tax appeal from a Board of Review to a judge in chambers under section 86 (1) of the Income Tax Act, Cap. 81:01 (hereinafter referred to as the Act) against a decision delivered by the said Board of Review on August 20 ^th, 1977 upholding the refusal of the Commissioner of Inland Revenue to allow as deductions (a) the sum of $43.00 being subscription to clubs for Bank Managers and (b) the sum of $77, 173.00 being a portion of administration expenses relating specifically to pensions paid to head office staff in London, England.

A – Club Subscriptions:

2 The relevant section of the first Act in relation to this head is section 16 (1) which provides as follows – under five schedules called SCHEDULES A, B, C, D & E, only two of which are relevant for the purposes of this decision, viz. Schedule A and Schedule E. Schedule D consists of six cases of which we are only concerned with two, namely Cases I and II. Case I relates to profits of a trade carried on in the United Kingdom. Case II relates to profits of a profession or vocation carried on in the United Kingdom, or carried on elsewhere by a resident in the United Kingdom. Schedule E relates to income arising from offices, employments and pensions and consists of three cases only, one of which is relevant and that one is which applies where the person holding the office or employment is resident and ordinarily resident in the United Kingdom, and does not perform the duties of the office or employment wholly outside the United Kingdom in the year of assessment and the emoluments are not excepted as foreign emoluments.

3 Now in relation to expenses that may properly be allowed entertainment, hotel, traveling. subscriptions etc., there is an important difference-between the Ninth Schedule, paragraph 7 of Schedule E and the corresponding rules of Cases I and II of Schedule D. Under the former, if the holder of an office or employment of profit is obliged to expend money in the performance of the duties of the office or employment of profit then the expenses can only be deducted if it can be shown (1) that the expenses were one which the taxpayer was “necessarily” obliged to incur and (2) that it was incurred “wholly, exclusively and necessarily” in the performance of his duties – per Plowman, J. in McKie H. M. Inspector of Taxes v. Warner [1961] 40 T. C. 65 at p. 72. Under the latter, the word “necessarily” is omitted and all that is required is for the taxpayer to prove that the expenses were expended “wholly and exclusively” for the purposes of the trade, profession or vacation. Here the test is – (1) were the expenses incurred for the purpose of enabling the taxpayer to carry on and earn profits in his trade, profession or occupation and (2) if so, were they “exclusively” so incurred? Unless an affirmative answer be given to each of these questions then the expenses cannot fall within the relevant rules applicable to Cases I and II of Schedule D – per Romer L. J., in Newsam v. Robertson (H. M. Inspector of Taxes), and Robertson (H.M. Inspector of Taxes) v. Newsam [1952] 33 T. C. 461 at p. 465.

4 It seems quite clear to me therefore that the rule relating to expenses under Schedule E is much narrower and stricter than the corresponding rules under Cases I and II of Schedule D and this I think, is borne out by a study of the following relevant English cases under the two Schedules.

5 In Simpson v. Tate [1925] 9 T.C. 314, a county medical officer claimed to deduct his subscriptions to certain professional societies in the computation of his liability to income tax under Schedule E in respect of his salary. It was not a condition of his agent that he should be a member of these societies, but such membership was customary for county medical officers. The Special Commissioners, on appeal, allowed the deductions sought. On further appeal to the High Court, it was held that the subscriptions were expenses “wholly, exclusively and necessarily” incurred” in the performance of the duties of the office of County Medical Officer,” and that they were accordingly not admissible deductions in computing his liability to income tax. That great tax Judge Rowlatt J., said at p. 318 –

“I think it is desirable to lay down some principle. I think that all subscriptions to professional societies and all taking in of professional literature and all that sort of expense which enables a man to keep himself fit for what he is doings are things which can none of them be allowed. If they were allowed every professional man would pay ‘I have to belong to this society and I have to belong to that society; I have to take in this publication and I have to take in that publication, and to do all sorts of things,’ and there would be no end of it. I think the principle is quite clear. Nothing of that sort can be allowed. The appeal must be allowed with costs” (Underlining mine).

6 In Nolder H. M. Inspector of Taxes v. Walters [1930] 15 T. C. 380, an aeroplane pilot was employed by a limited company. His flying duties often took him out of England and he often had to spend a night or longer abroad in Europe. The company allowed flat rate of £l per night away from England but no allowance for a day away. It was necessary for the respondent to a motor car and he had a telephone installed at his residence at Purley near Croydon Aerodrome. It was contended on his behalf that he was necessarily obliged to incur and defray expenses in performance of his duties over and above the flat rate granted by the company, and that the expenses for the upkeep of the motor and telephone were monies “wholly, exclusively and necessarily” expended in the performance of his duties. Rowlatt, J. allowed the Crown's appeal in relation to the car and telephone expenses allowed by the Commissioners, but dismissed the Crown's appeal against the decision of the Commissioners allowing the traveling expenses. On this aspect the learned judge said at p. 388 –

“Some office and employments do involve the duty of traveling. It is not a question of getting to the place of employment, but the employment may be actually to travel, as in the common case of the commercial traveler, and, as some people say, in the case of the Member of Parliament. The duties may actually be to travel, and this gentleman's duty is to travel; therefore both, I should have thought, under the general words of the latter part of the section, and, I think, under the head of traveling expenses, he is allowed the expenses of so traveling. The Solicitor-General and Mr. Hills very fairly agree, and I think it always has been agreed, that when you get a traveling office, so that traveling expenses are allowed, those traveling expenses do include the extra expense of living which is put upon a man by having to stay at hotels and inns, and such places, rather than stay at home. Of course his board and his lodging in a sense, eating and sleeping, are the necessities of a human being, whether he has an office, or whether he has not, and therefore, of course, the cost of his food and lodging is not wholly and exclusively laid out in the performance of his duties, but the extra part of it is. The extra expense of it is, and that is the quite fair way in which the Revenue look at it. In this case, therefore, he would be entitled to charge something for the extra expense which he is put to by having to go and spend all the day, and often the night, away from home, because that is part of. his duty; and then it comes to the question really of quantum. Prima facie, that is entirely a matter for the Commissioners, as, indeed, the question of the necessity of it is entirely a matter for the Commissioners, once I see that the class of thing claimed is a class of thing which is allowable as an expense in the performance of the office.” (Underscoring mine).

7 It is to be noted that where the expenditure has “necessarily” to be incurred under a contract of employment, that does not make it allowable, if it is not incurred in the performance of the duties. Thus in Blackwell v. Mills [1945] 26 T. C. 465, a student assistant in the research laboratories of a company was required, as a consideration of his employment, to attend classes in preparation for a University degree. His claim to deduct from his assessment to tax under Schedule E the expenses he incurred in traveling to and from classes and in the purchase of text books was disallowed, because, although he might have “necessarily” incurred those expenses, he did not incur them in the performance of his duties. Macnaghten, J. said at p. 470.

“The deductions that can be made from remuneration received in respect of an office of profit are strictly limited by rule 9. Few people sleep at the place where the duties of their office are performed, but it is well established that you cannot claim deduction for the expenses of getting from the place where you sleep to the place where you perform the duties. The expenses permitted to be deducted must be expenses incurred in the performance of the duties or the office.

The matter has been fully explained by Rowlatt, J., most clearly in the case of Simpson v. Tate, 9 T. C. 314, and Nolder v. Walters, 15 T. C. 380. If any further light on the subject were required, it is to be found in the decisions of the Court of Appeal and House of Lords in the case of Ricketts v. Colquhoun, 10 T. C. 118.”

8 In Ricketts v. Colquhoun [1926] A. C. 1; 10 T. C. 118, a barrister practising in London held the appointment of Recorder of Portsmouth, and he sought to deduct from the emoluments of that appointment the...