| 20/5/2012 |
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| Board of Special Commissioners - Cases |
| Case No. 1/60 |
Decided: 8 June, 1960 |
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Instance when a Union's activity is of a trading nature and chargeable to tax; the point is not a question of motive - articles 5 and 8, now 4 and 12, Income Tax Act
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A trade union claimed that it was exempt from tax and, therefore, any access income over expenditure resulting from the holding of a fair was not chargeable to tax.
Sub-article 8(j) of the Act provided that the income of a trade union was exempt "in so far as such income is not derived from a trade or business carried on by such trade union." Appellant held that the scope of the fair was to promote its members in particular and the commercial community in general. Moreover, whereas any other enterprise would have run the risk of making a loss in organising such a fair, in the case of appellant the committee members provided their services free of charge and bound themselves to make personal contributions to offset any resulting loss.
The Board held that the sub-article quoted by the union could not be considered in isolation. Sub-article 5(1)(a) provided that income arising from "a profit making undertaking or scheme" was chargeable to tax. The fair was organised in such a way as to minimise the possibility of incurring a loss and, in actual fact, it did register a profit. The fact that the committee members entered into an obligation to make good any possible loss was irrelevant since any other entrepreneur could have made similar provisions through a contract of insurance or arrangements made with a guarantor.
In Royal Agricultural Society vs Wilson, the court had decided that "Now it is perfectly clear that a body like this, which is a charity, may trade, and if it does and there are profits of that trade, there is no reason why it should not pay income tax.... If you do the operations of trading and make a profit, it seems to me that you are carrying on a trade, which in that case becomes taxable, and you are carrying on a trade whether you make a profit or not, and whether you want to make a profit or not, because it is not a mere question of motive."
The Board held that the fair was in the nature of trade or business and the resulting profit was chargeable to tax.
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