Mann v Nash
(1932) 16 TC 523
NO.
814.–HIGH COURT OF JUSTICE (KING’S BENCH DIVISION)
Profits generated from illegal means was considered to be taxed under the Income Tax Act
It was a privy council case. The
appellant who carried on the business of providing automatic machines for the
public use, dealt in and entered into arrangements for exploiting, certain
automatic machines the use of which has been to be illegal. These were the
fruit or diddler machines. It was held illegal by the council and the machine
does not accept the English coins but the metal disk of a special
kind.
The machines were set up in premises to
which the public resorted for public use and the profits arising, therefore,
were divided between the appellant and the occupier of the premises.
In May 1926, the Appellant was warned
by the police authorities in Brighton that the use of these machines was
illegal and must be discontinued. At about the same time he received a similar
warning from the police at Margate. He thereupon caused all his ‘fruit’ or
‘diddler’ machines to be removed and sold them at a loss. The use of his other
machines has been continued without interruption.
He did not include these incomes in his
income tax as according to him they were the income generated from the illegal
means. On an appeal against an assessment to Income Tax made to include profits
so arising, the Special Commissioners held that the provision of the automatic
machines formed part of the Appellant’s ordinary business and that he was not
entitled to claim. He claimed that the portion of his profits derived from them
was immune from taxation on the ground that it had been earned by unlawful
means. Whereas it was contended on behalf of the crown that nether that
business nor the selling of machines were illegal. And hence be assessed in the
income tax.
Held: That the profits were chargeable
with the Income Tax and no such immunity be provided.
Reasoning: The
commissioners came to the conclusion that the Appellant in the course of
carrying on his lawful business of providing automatic machines. The use of
which he had reason to think might prove to be illegal, taking the risk of
interference by the police and discontinuing the use of the machines when he
found that its continuance would lead to legal proceedings.
The commission considered the provision
of these machines formed part of his ordinary business and that he was not
entitled to claim that the portion of his profits derived from them was immune
from taxation on the ground that it had been earned by unlawful means. He had
also engaged for a short time in the trade of dealing in such machines and we
held that the profits of this trade were chargeable to Income Tax.
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