- (1.) THIS is an appeal from a judgment of Ungoed -Thomas J. dated July 24, 1967, dismissing an appeal of the Crown, from decision of the general commissioners of the division of West Goscote in the country of Leicester, on May 19, 1966. The date of the case stated by the commissioners is November 30, 1966. The question to be decided arises upon the provisions in the Income Tax Act relating to childrens allowances obtainable in certain circumstances. [His Lordship read the Income Tax Act, 1952, s. 212(1), (1A) and (4), and the facts set out in the case stated, and continued : The question, therefore is whether in the year of assessment 1965 -66 the son was entitled in his own right to an income exceeding pound 115 within the meaning of section 212(4) of the Income Tax Act, 1952.
(2.) IT must be appreciated, of course, that no part of the earnings of the son in France in the circumstances was taxable in the United Kingdom, as not part thereof was remitted to that country. The Crown claimed that the amount of the pounds 165 allowance should be reduced by a sum of pounds 35, being the difference between pound 115 and pound 150. Both the general commissioners and the judge rejected the Crowns claim and held that the taxpayer was entitled to the full allowance of pound 165.
(3.) ONLY a sum of pound 35, of course, is at stake, but the Inland Revenue Commissioners objected to the decisions because they upset a practice, adopted by the commissioners, so we are told, over the last 40 years, by which, though they could not tax such foreign income, they treated the income receivable abroad, reduced only by the limited expenses allowable under Rule 7 relating to Schedule E to the Income Tax Act, as operating to produce a reduction in any childrens allowance for the purposes of section 212. The idea behind the provisions of section 212 no doubt is that it is not equitable or reasonable that a taxpayer should receive the allowance under the section when by reason of his sons income in his own right the parent is not being putt to any expense or not the whole expense of his sons education. The real point, however, is whether income of the son which is not taxable and may be said, therefore, not be income for the purposes of the Income Tax Act at all, should be taken into account for the purposes of any provision of the Income Tax Act in the absence of any express provision to that effect. A very strong point against the contentions of the Crown is that Rule 7 of Schedule 9 and Schedule E have no application, and there was, so far as I can see, no lawful justification for the Crown to apply that schedule or that rule to the foreign income of the son in the present case. There was, therefore, no method of ascertaining the relevant income of the son, and the application of the rules relating to Schedule E to such income was arbitrary and unlawful. There is no relevant provision for the purposes of this case, as there is in Schedule 5 to that Finance Act, 1957, in relation to the foreign income of British corporations. However, it is necessary to consider the arguments which were put forward for an against the claim of the Crown. Our attention was called to section 458, a general provision exempting scholarship income from income tax, and it was suggested that if income exempted from income tax was not within the terms of section 212(4), the proviso to that subsection was otiose. I am not impressed by the argument, because it may well have though covenant in dealing with childrens allowances to make the point clear. ;