Lynch v Commissioner of Inland Revenue

• Jurisdiction: Barbados
• Judge: Hallinan, C.J.,Lewis, J.,Marnan, J.
• Judgment Date: 28 April 1961
• Neutral Citation: BB 1961 HC 22
• Court: High Court (Barbados)
• Date: 28 April 1961

Supreme Court

Halliman, C.J.; Lewis, J.; Marnan, J.

Lynch

and

Commissioner of Inland Revenue

Mr. J. Dear for the appellant.

Mr. C.A. Burton, Q.C., Attorney General, for the respondent.

Income tax - Money paid by taxpayer and another for option to purchase property — Company promoted — Option sold to company which agreed to pay purchase price for property and allot shares credited as fully paid up to taxpayer and other person — Option not exercised — Sum outlaid by taxpayer a capital loss and not deductible from profits realised from other sources — Income Tax Act, 1921 s.19(1).

The appellant and another person paid 161,000 for the option to purchase Pavilion Court, the appellant contributing half. They and others promoted a company, The Barbadian Ltd., as a hotel venture and issued a prospectus offering shares to the public. The company purchased the option for 10 shillings and agreed to pay the purchase price of the property and allot the appellant and his associate 7,360 deferred shares of $5 each credited as fully paid up. The venture was unsuccessful and the appellant sought to deduct for purposes of income tax 16500 from profits from other sources.

He had suffered a capital loss which was not deductible under s. 19 (1) of the Income Tax Act, 1921. Appeal dismissed.

Hallinan, C.J.

1 The appellant in this case contends that a loss of £500 suffered by him should, under s. 19 of the Income Tax Act, 1921, be deducted from the profits realised by him from other sources. The facts as stated succinctly by the court below are as follows:

“On April 23, 1957, the appellant and another person, as promoters, were granted an option to purchase a property known as Pavilion Court. They paid £1,000 for this option and of this sum the appellant contributed £500. They obtained thereby the right to purchase; by themselves or their nominees, Pavilion Court for the sum of $163,200 before August 23, 1957. The promoters purchased this option with the intention and the purpose of forming an hotel company and selling Pavilion Court to said company. Together with other persons the promoters formed and registered a company, The Barbadian, Ltd. On July 26, 1957, a prospectus was issued offering shares in the said company to the public. On July 25, 1957, the promoters granted to the company an option to purchase Pavilion Court. On August 21, 1957, one day before it was due to expire, the promoters' option was extended to October 4, 1957, inclusive, and the option granted to the company was extended to October 2, 1957.”

2 In the agreement of July 25, 1957, the company purchased the option for 10s. and undertook to pay the appellant and his associate–

• (a) the sum of $163,200 cash, and

• (b) the allotment to the promoters of 7,360 deferred shares of $5 each credited as fully paid up.

3 Counsel for the appellant submits that this operation should be viewed as a whole. It was not merely a question of the appellant and his associate buying an option...