RACECOURSE BETTING CONTROL BOARD Vs. YOUNG

JUDGEMENT

(1.) THEIR Lordships took time for consideration read the following judgment : Two appeals by the Racecourse Betting Control Board (which I shall hereafter refer to as 'the board'), and corresponding cross -appeals on the part of the Crown have been heard together. One appeal and the corresponding cross -appeal are concerned with the boards liability to income tax; the second appeal and cross -appeal relate to profits tax. It has been agreed before us that identical principles apply, so far as is relevant to these appeals, to both income tax and profits tax, so that the answer as regards the one necessarily involves the answer also as regards the other. In the circumstances I shall confine myself in this judgment to income tax.

(2.) THE board has been assessed to income tax under Schedule D of the Income Tax Act, 1952, for the income tax years 1953 -54 and 1954 -55, in reference to its trade as a totalisator operator. Although Mr. Heyworth Talbot was not prepared unreservedly so to admit, it is, in my judgment, clear that the board is in fact carrying on such a 'trade.' In respect of these tax years, the board has claimed that certain payments made by it ought to be deducted from it taxable profits or gains as having been, within the terms of section 137(a) of the Act, 'wholly and exclusively laid out or expended for the purposes of' its 'trade.' The facts as regards these payments have been fully recited in the case stated. They were summarized also in the judgment appealed from of Upjohn J. So far as necessary, I shall treat the case stated as incorporated in this judgment. It is a sufficient recapitulation for me to state that the sums in question have fallen under six heads, namely : (1) Runners allowances, that is, sums paid to racehorse owners who run horses in any race at racecourses with which the board is concerned, at the rate of pound 1 for every runner. (2) Sums paid to 'racecourse executives,' that is, sums paid to racecourse owners for use by them in improvements upon the structures and amenities, etc., on racecourses (being racecourses used for horse races, and approved as such by the board). It is to be noted that the expenditure is in fact subject to a substantial measure of control or supervision by the board in each case. (3) Sums paid to owners and trainers towards their expenses in bringing racehorses to the racecourses, and therefore an encouragement to them so to do. It was clearly proved that the business done by the board varies in direct proportion to the number of runners on the races with which they are concerned, and that, without assistance, the owners and trainers in modern times have found the burden of these travelling expenses a serious financial strain. (4) Sums paid to assist in meeting the administrative expenses of the Jockey Club, the National Hunt Committee and the like, which need no further exposition. (5) Sums paid to assist those responsible in discharging the expenses of point -to -point meetings. And (6) sums paid to assist and encourage racing under the rules of the Pony Turf Club.

(3.) ON the six heads which I have above mentioned, there is a distinction for the purposes of the appeal between the first of them and the other five. The first, the runners allowances, was made by the board as being a working expense, that is, part of the financial obligations to be discharged by the board under the relevant Act regulating their activities, before arriving at what is called in the Act the surplus totalisator fund. The remaining five heads are applications of that surplus totalisator fund. There is evidence before us of correspondence between the board and the Home Secretary as regards this first head of payment, but, in my judgment, the correspondence is not relevant to the problem before us, and I do not further refer to it.