The Gazette 1967/71

TAX LAW Building Contract Unconditional Subject to No Tax Mr. Justice Goff said that the taxpayers argued that a contract could not be conditional in itself and that the contract in question was absolute, subject to no condition preventing it from arising or placing it in abeyance. Alternatively, they said that one must distinguish a contingent condition operating outside the contract and not under the control of the parties from a promissory note and that as the condition was promissory it could not on any showing make the contract conditional. In His Lordship's judgment, a contract could not properly be regarded as conditional where there was no condition which was a prerequisite to the formation of any binding agreement as in "subject to contract cases or those kept in abey ance" ; per Lord Justice Jenkins in Parway Estates Ltd. v I.R.C. (37 A.T.C. 166). If he was wrong the further question arose whether, the term or condition being promissory, the contract was in any event not conditional. It was impossible to hold that a contract to acquire an asset subject to no term or condition save the due performance of one's own obligations could properly be described as a conditional contract to acquire it. The appeal would be dismissed with costs. [Eastham (Inspector of Taxes) v Leigh, Lon don, and Provincial Properties Ltd. (in voluntary liquidation), before Mr. Justice Goff; Chancery Division; 28 July 1970.] TAX LAW Papers win Tax Relief on Hospitality Expenses Money spent by newspaper publishers in giving meals and drinks to contributors, informants and other contacts who provided news and features was part of the cost of providing the newspapers. Mr. Justice Megarry ruled in the High Court yesterday. In 1965 Associated Newspapers, who publish the Daily Mail, Daily Sketch and Evening News, spent £67,143 in entertainment expenses, and claimed tax relief on that sum in computing their taxable profits. They won an appeal to the Special Com missioners of Income Tax, who determined their net loss at £701.418 for that year. If tax relief

had been allowed the loss would have been only £634,275. The Commissioners had decided that the expen ses were deductible because they were incurred in the provision by any person of anything which it is his trade to provide and which is provided by him in the ordinary course of that trade for pay ment. "Anything" in that context they held included newspapers. The Crown appealed against that decision, arguing that "Anything" was confined to the enter tainment actually provided by that expenditure. The judge rejected that contention. "Experience has shown," he said, in a reserved judgment, "that the provision of hospitality, in the form of meals or drinks or both, assists in obtaining information and encourages existing or potential contributors to provide, or continue to provide, material." Such a decision was not "driving a coach and four" through the Act, the judge said. If Parlia ment had meant to confine the saving clause in the way suggested by the Crown, more specific language would have been used. [Regina v Associated Newspapers; Megarry J.; 29 July 1970.] SET-OFF When Banks can Set-off in Liquidation Where there is an existing agreement between banker and customer to keep separate banking accounts and the customer becomes bankrupt or goes into liquidation during the currency of the agreement, the banker has no "lien" or right to combine the accounts and set off debit and credit unless he can show that the agreement had that degree of mutality as to bring it within the set-off provisions of Section 31 of the Bankruptcy Act, 1914. The Court, Lord Justice Buckley dissenting, on the applicability of Section 31, so held in allowing an appeal by the liquidator of Halesowen Press- work & Assemblies Ltd. from Mr. Justice Roskill, who had held in favour of Westminster Bank that the bank was entitled to set-off a credit balance of £8,600 in the company's No. 2 account at the bank against a debit balance of £11,338 in its No. 1 account, (see Section 25 of the Bankruptcy (Ireland) Act, 1857.) The question was whether, if a customer had one account in credit and another account in debit, the banker had a right to combine the two accounts, set off the debit against the credit, and 81