INLAND REVENUE COMMISSIONERS Vs. NATIONAL BOOK LEAGUE

JUDGEMENT

(1.) reversed the decision of the commissioners. He concluded his judgment as follows : "I hesitate long before I disturb a finding of fact by the Special Commissioners, but it seems to me quite impossible in this case to say that the evidence establishes that these privileges were merely illusory or were so trifling as to justify the commissioners. describing them as affording no advantage of a substantial character. I cannot accept that. It seems to me to be in the teeth of the evidence afforded by the literature which was annexed to the case an by the ordinary common sense of making, People living in the country, or who have lived in the country, must know perfectly well that this is just the sort of the place for the which countrymen are always on the lookout, where they can lunch comfortable, get a five-shilling lunch and a drink, and a comfortable room where they can sit; and, indeed, we have evidence on the case itself that so much are these privileges valued that there were sometimes companies that they were not always with sufficient frequency available. I have every hesitation in disturbing their finding, and every desire to give the fullest weight to the vies which the commissioners have reached, but it seems to me that their view that these advantages ought to be disregarded as trifling and illusory, with no substance in them at all, is really not justified by the evidence. When the commissioners accept that evidence that the people who joined this convenant scheme did so not for the purpose of anything they could get out of its but merely in order to benefit literature, I think that they paid less attention than I should have paid, or an ordinary recipient of the letter would have paid, to the very flattering and attracting terms which were set out in the circular letter of the chairman of the league. There is no doubt that he was impressing on people that they were going to get some real advantages. I think they were going to get financial benefit, and the incidental benefits of membership which were considerable. Those expressions in the chairmans letter were justified and true. Anyone who received that letter would not have dismissed them as meaning nothing at all, but in many cases undoubtedly must have been induced by that every flattering description-not too flattering because I think it was justified-to go on being members on the league or to join the league. Those expressions were bound to have had, not an occasional or slight effect on peoples minds but one which really went to the root of the matter in the dealing between the league and the members, as is exemplified by the execution of these various convenants.

(2.) P. J. Brennan and Mrs. H. Wilson for the National Book League. The league is admittedly a charity and claim to be entitled to exemption from income-tax under section 447(1)(b) of the Income-tax Act, 1952 in respect of the annual payments made under covenants entered into by its members. It is alleged by the Crown that these payments were trading receipts made pursuant to a contract entered into by the league with the covenantors for the supply of certain goods and services. It is submitted that whether this arrangement between the league and its members was a commercial contract is a question of fact. The Special Commissioners found that the benefits conferred on the covenantors were trifling. They had evidence on which they could so find. That finding was a finding of primary fact and the judge should not have substituted this judgment for theirs. Further, there is no evidence that this arrangement constitutional a binding contract. If there was no contract, then there could not have been a purchase and sale of goods and services. It is unreasonable to take a few words out of a brochure and say these show the true nature of the transaction. The transaction must be looked at as whole in the light of all the circumstances and, so looked at, the payments under these covenants were pure income payments. If the true effect of this arrangement is not a pure question of fact, the court must look at the true position. If the covenantors had contractual rights, they could not have been unilaterally disclaimed. The league was not bound to supply any particular services for its members. There is no finding that the league was carrying on a trade. These payments fall within case III of schedule D and are pure income payments. The onus is on the Crown show that the league is not entitled to tax relief. There being evidence to support the conclusion of the commissioner, their decision should not set aside.

(3.) Geoffrey Cross Q. C. and Sir Reginald Hills and E.B. Stamp for the Crown. With regard to the form of the convent :