F. T. FAULCONBRIDGE (INSPECTOR OF TAXES) v. THOMAS PINKNEY & SONS, LTD.

[1951] 2 Lloyd's Rep. 563

KING'S BENCH DIVISION.

Before Mr. Justice Donovan.

Revenue-Income tax-Assessment-Profits of company-Computation-Deduction of remuneration paid to former directors - Services rendered to company after retirement-Proof-P. & Song incorporated in 1937 to carry on business of shipbroking-Issued capital of £1000 divided into 1000 £1 shares- Shares taken up by following directors: S.P. and D.P. (brothers), 499 shares each; H., one share; K., one share- Decision by brothers to retire from active participation - Discussion between directors as to means whereby H. and K. should acquire share capital and carry on business of P. & Sons- Agreement drawn up between directors whereby the brothers were to sell their 998 shares to H. and K., at a price of £2 per share and H. and K. were to pay to the brothers jointly "50 per cent. of all commissions on new contracts, sales, charters, options, auctions, and valuation fees received by the company" in excess of £3000 during each of the five years ended Oct. 31, 1946, to Oct. 31, 1950, inclusive - Supplemental agreement drawn up between parties in 1947 whereby it was declared "for the sake of clarity" that payments of commissions, etc., were to be made by company-Sums paid to brothers by company and debited in company's profit and loss account as remuneration for services rendered- Claim by company that such payments were an admissible deduction in computing profits for purpose of income tax assessment-Evidence that since retirement the brothers had rendered valuable services to company.