Standard Office. At any rate, it is perfectly clear that the decision of the judges dealt solely with the assessment of £185, and could not be quoted as any authority on the subject of the assessment of interest.

The next case of importance1 was heard in 1896. To understand this case at all requires a little preliminary information. For some years the London County Council had been paying their interest to the Bank of England in full, making no deduction for Income Tax. The Bank of England deducted the tax from the recipients and paid the amount so deducted to the Board of Inland Revenue. The London County Council then obtained a repayment which satisfied them in respect of the rents of property which they let. The last repayment of this kind made by the Revenue was for 1889-90. However, for the year 1893-4, the Inland Revenue Department put in a claim in addition to the gross amount of tax on dividends on the London County Council loans, for the tax on the amount of interest received by the Council on loans made to the School Board and various other public bodies for 1892-3, such interest amounting to £352,021 : 6s. 10d. The Divisional Court gave judgment for the Department. The Court of Appeal upheld this decision and dismissed the appeal with costs, on the ground that the assessment appealed against was undoubtedly right, and that they had no concern with anything else. All parties knew, of course, that the assessment was technically correct, and the only hope of the Council was that the Appeal Court would take a large view of the matter by bearing in mind the assessment at the Bank of England. This hope, however, proved to be fallacious. It is evident from the report that neither Lopes, L.J., nor Rigby, L.J., was satisfied with the position of affairs, although they had no power to interfere with an assessment which in itself was perfectly 1 London County Council v. Grove, 45 W. R. 279.

correct and legal. Thus the case was of no use to the Council, who were indeed mulcted in costs for having brought their action in wrong form. It was of no use to the Board of Inland Revenue, who were as far as ever from discovering what they would probably have been glad enough to know, viz., what they were to do with any claim of repayment put in by the Council on the plea of double assessment.

And here I may point out that, by the Taxes Management Act 1880, s. 60, following 5 & 6 Vict., c. 35, s. 171, all claims of double assessment are left entirely at the discretion of the Board, against whose decision there is no appeal in case of any difference of opinion. No doubt it was thought when these Acts were passed that no case could ever arise in which the Board would be a distinctly interested party; nor would it be right to assume that the Board could waive their right, and that then the case would go on. The Courts will not undertake any responsibility not absolutely imposed upon them, nor can they be blamed, as the decision would be over-ruled easily enough; and even if agreed to (by consent of all parties) it would be ultra vires and of no lasting validity, and would be a standing record against the judges who were responsible for it.

The result of these proceedings was, however, to cause the County Council to see the unfortunate position in which they were placed by their own voluntary act, in paying the interest in full to the Bank of England and allowing the latter to pay the Inland Revenue the total Income Tax thereon. It was now clear that in case of any difference of opinion between themselves and the Department (and on this matter there was a strongly defined difference) they were utterly without remedy. They therefore determined that for 1897-8 and subsequent years they would pay the tax themselves under the provisions of the Statute 51 & 52 Vict., c. 8, s. 24 (3); but the Inland Revenue Department forestalled

them by making an assessment upon them for interest, of which they received notice under date 20th November, 1897. The Council appealed against this charge. The Local Commissioners decided that the contention of the Council that they were only liable for Income Tax on so much of the dividends paid to stockholders as was not paid out of income already taxed, was correct. This occurred on 4th January, 1898, but in July of that year the Council were officially informed that the Board of Inland Revenue had abandoned the case, and were going to lay an information under 51 & 52 Vict., c. 8, s. 24 (3). More than twelve months elapsed after this without any steps being taken. On the 10th February, 1899, the Council wrote to the Treasury on the subject. The reply from the Treasury was dated 14th March, 1899, and on the 17th of that month the Council received a copy of the information. The case was heard in the Queen's Bench on the 1st of June, 1899. The Crown on that occasion, through the Attorney-General, gave up their contention that none of the dividends on the stock of the County Council are by law payable out of profits or gains brought into charge under Schedule D. But notwithstanding this, the Council were mulcted in the whole of their costs. The case was heard again by the Appeal Court in December, 1899, and judgment was given dismissing the appeal with costs. The Council now appealed to the House of Lords. The case was heard on the 23rd and 24th June and 26th July, 1900, and on the 10th December in that year the decision in the Courts below was reversed and judgment given in favour of the Council.1

There are some interesting and noteworthy points to be gathered from the Lords' judgments. Lord Macnaghten said:" It is one tax, not a collection of taxes essentially distinct. There is no difference in kind between the duties of Income Tax assessed under Schedule D, and those assessed under Schedule A or any of the other schedules."

1 L. R. [1901], A. C. 26.

Again, the right to deduct and retain a tax from interest or other annual payments holds good even if the profits or gains out of which it is payable are not exclusively charged therewith. On this point Lord Davey says:-"It is not required by the Income Tax Acts, in order to raise the right of deduction and retention, that the interest or annual payment shall be exclusively charged upon or payable out of profits or gains brought into charge. It is enough if the interest is charged upon or payable out of taxable income, although there may be other subjects of charge."

While on the subject of this judgment, it may be useful to give some account of the Birmingham Settlement. This appears to have been stated in a letter to the Corporation of Birmingham dated 18th October, 1892, though the principle was known before. It never had, or pretended to have, any legal basis. The reason it was accepted by Birmingham was simply that they, in compliance with a system then becoming fashionable, had arranged to pay their interest in full through the Bank of England, which circumstance of course placed them in the position which the London County Council were already finding intolerable. It is rather interesting, however, to notice in passing that although the Board of Inland Revenue repudiated any right on the part of the corporations to claim the annual value of properties they occupied, and which therefore brought in no rent, they did not object to bring these very sums into the Birmingham Settlement as a basis for allowance. The Settlement was worked in this way. Suppose the interest, which was the subject of inquiry, amounted to £5,000 (which is then supposed to be the amount raised out of rates), and the rents of property to £4,500, and property occupied by the Corporation to £500, then as

£10,000 £5,000 :: £5,000: £2,500

the amount chargeable on the interest paid out of the rates as distinct from the property, which was supposed to pay the

remainder. The results are most bizarre. Suppose, for instance, that the real property of the corporation amounts to £50,000, and the interest to £5,000, the Birmingham Settlement works out as follows:

as £55,000 £5,000:: £5,000 : £454.

Now supposing that instead of being ten times the amount of the interest the property amounts to one-tenth of the amount of the interest, then as

£5,500 £5,000 £5,000 £4,545.

Let us now collate these three cases :

Or we may consider the matter in this light :

One difficulty which instantly occurs to the mind with regard to this system is this: If it ever was the intention of the Legislature to charge the interest in full, why make these deductions at all? The very making of the deductions appears to prove that there is a feeling somewhere and somehow that the charging of such interest was never intended. It is perfectly plain, too, that the tax mentioned in the last column of the above statement is a tax on the rates, as it represents no income and is payable by the rates