The Commissioner of Inland Revenue v. Douglas Raymond Humphrey

Case No.CACV 3/1970

Court

Court of Appeal

Date22 Sep 1970

Judge—

Case Document

100%Judiciary

CACV000003/1970

IN THE SUPREME COURT OF HONG KONG

(APPELLATE JURISDICTION)

CIVIL APPEAL NO. 3 OF 1970.

-----------------

BETWEEN:
	THE COMMISSIONER OF INLAND REVENUE	Appellant
	AND
	DOUGLAS RAYMOND HUMPHREY	Respondent

Coram: Scholes, S.P.J., Blair-Kerr and Mills-Owens, JJ.

Date of Judgment: 22 September 1970

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JUDGMENT

-----------------

Scholes, S.P.J.:

1. I have had the advantage of reading the judgment of Mr. Justice Blair-Kerr and I entirely agree with his conclusions and his reasons therefor.

2. It seems to me that the crux of the matter is this. It has long been established that travelling from home to office and back is a matter of a private or personal nature, and that it is the employee's responsibility to get himself to his place of work, and that that does not count as travelling on duty. In the case of Owen v. Pook⁽¹⁾ the taxpayer, the doctor, did the work at both places in question, namely both at his home and at the hospital, and he was therefore travelling on duty while travelling from one place of the work to another place of the work, but there is no question in the case before us of the respondent's home being one of his places of work.

3. It is not in dispute that under an arrangement with the Government the respondent used his car on Government duty after he had arrived at Taipo and he was paid an allowance for doing so, but in the case of Burton v. Rednall⁽²⁾ the taxpayer was required to provide a car for use at his place of work, and in spite of that it was held that he was not driving on duty when driving the car from his home to his place of work, and Upjohn J. stated (p. 439):-

"	.....reasonable though Mr. Burton's claim is, he is not performing his duty when he travels between his home and Ipswich. It is reasonable for him to do so - indeed he is bound to do so - but he is not then in the performance of the duties of his office; he is either going to perform his duties or he is going home after performing his duties and the authorities make it clear that that is the proper construction to give to the Act.
	In those circumstances, therefore, I am, let me say so at once, reluctantly forced to the conclusion that this appeal must fail."

4. It seems to me that it is quite clear that the respondent was not travelling on duty when travelling from his home to his office in Taipo and that it was his responsibility to get to his place of work, and that it was a journey of a private or personal nature; the position is the same on his return journey from Taipo to his home. He could also, of course, if he had wished, left his car at Taipo and travelled from Kowloon to Taipo and back by train.

5. It is not disputed that the respondent was paid something by the Government towards the cost of his journeys from his home to Taipo and back, and it is apparent from E.Rs. 731 and 734(1)(a), those E.Rs. inter alia applicable to this case, and from the arrangement between the Government and the respondent, that the Government did so because the Government would then have the use of the respondent's car for the Government's work when the respondent got to Taipo. However, as I have already stated, the respondent, in my view, was nevertheless not travelling on duty when travelling from home to office and back, and it was, apart from E.Rs. 731 and 734 and the respondent's arrangement with the Government, his responsibility to pay for those journeys, therefore in fact, on account of E.Rs. 731 and 734 and the respondent's arrangement with the Government, he was paid something by the Government towards the cost of the journeys which it was his responsibility to pay and he was consequently, in my view, obtaining an additional benefit in money from his employers, the Government, additional to his normal emoluments for the job. The money being paid to the respondent towards the cost of the journeys, so that the car might be available for use on Government service when the respondent arrived at Taipo, the money was not therefore a gift but arose out of the respondent's office or

Handed Down.

(1) (1969) 2 A.E.R. 1

(2) 35 T.C. 435.

IN THE SUPREME COURT OF HONG KONG

APPELLATE JURISDICTION

CIVIL APPEAL NO. 3 OF 1970

-----------------

BETWEEN
	The Commissioner of Inland Revenue	Appellant
	AND
	Douglas Raymond Humphrey	Respondent

-----------------

Coram: Mills-Owens J.

Date of Judgment: 22 September 1970

-----------------

JUDGMENT

-----------------

6. According to the case stated by the Board of Review certain facts were agreed and the respondent taxpayer also gave oral evidence before the Board. But it does not appear that anything in the agreed facts or in the oral evidence gave rise to any qualification of, or variation in the effect of, Establishment Regulation 734. In the penultimate paragraph of their decision, which was incorporated in the case stated, the Board said -

If Government requires the use of the Appellant's car, the Appellant can reasonably expect that although no charge will be levied by him for such use of the car, Government will defray the expenses (petrol or toll charges) for the daily transportation of the car, So it is not surprising that we find an arrangement on the basis that the Appellant will be entitled to partial re-imbursement of travelling expenses. Those expenses become, in the circumstances, the employer's expenses which by agreement will be defrayed by the employee to be re-imbursed (partially) by the employer. As it is the Appellant's obligation (by virtue of the agreement) to take his car daily to Taipo for official use, the expenses for the purpose relate to the duties of his employment. They were outgoings which were wholly exclusively and necessarily incurred (by virtue of his agreement with Government) in the production of his assessable income."

The Board thus came to the conclusion that the Government was reimbursing an employer's expense, as opposed to contributing to the employee's own expenses. Briggs J., on the appeal to him from the Board, said -

In this case the regulations do form part of the contract of service of the tax-payer. I think it is clear that the fact of the employment was the causa sine qua non of the payment. But I do not think that that was the causa causans. As I understand the facts the payment was not made because the tax-payer was employed by the Government, it was because in addition he had expended certain sums of money, there being an agreement between the parties that if the tax-payer expended certain sums he would be re-imbursed."

He thus took substantially the same view as the Board. As I understand it, neither the Board nor the learned judge held that the respondent was on duty whilst travelling to and from Taipo. In effect, as it appears to me, it was held both by the Board and the learned judge that there was a collateral agreement for the hiring of the respondent's car by the Government in return for an allowance (which, however, only partially reimbursed him) with the result that the tax position was no different from that of the case where a person, whose business it is to hire out vehicles, charges an additional amount to meet the expense of taking a vehicle to the place where the hirer requires the use of it but makes no profit out of the additional amount.

7. In my opinion, regulation 734 is carefully and deliberately drawn or phrased so as to avoid any possible implication that the car-owning employee is acting in the performance of the duties of his office or employment whilst taking his car to and from work; it is so drawn, no doubt, primarily with a view to avoiding any civil liability on the part of the Government in the event of an accident occurring on the way to and from work. In this respect I would refer to the case of Vandyke v. Fender & Ors.⁽¹⁾ Thus the actual decision in the case of Owen v. Pook⁽²⁾, dependent as it was on the tax-payer being held to be acting the performance of the duties of his office, is not of direct assistance to the respondent in the present appeal. The regulation is also so drawn as to recognise that the employee is under an obligation to get himself to work, in that it provides that no mileage allowance is to be paid for the first 250 miles per month, which is some 5 miles each way per working day. Having regard to the authorities, it is not possible, in my view, to regard the regulation as giving rise to some independent or collateral car-hiring agreement between the Government and the respondent, as opposed to it being a term of his employment that if he brings his car to work and uses it at work he will be reimbursed to some extent; rather it is one of the terms of his employment, a term which recognises that there is a basis for an addition to the emoluments of his office or employment to meet, to some extent, his expenses of getting himself to and from work if he provides his own car at work.

8. The appeal is brought solely on the ground of error in law and the argument before us proceeded on the basis of acceptance of the facts found by the Board. In the penultimate paragraph of their decision, the Board said:-

If Government requires the use of the Appellant's car, the Appellant can reasonably expect that although no charge will be levied by him for such use of the car, Government will defray the expenses (petrol or toll charges) for the daily transportation of the car. So it is not surprising that we find an arrangement on the basis that the Appellant will be entitled to partial re-imbursement of travelling expenses. Those expenses become, in the circumstances, the employer's expenses which by agreement will be defrayed by the employee to be re-imbursed (partially) by the employer. As it is the Appellant's obligation (by virtue of the agreement) to take his car daily to Taipo for official use, the expenses for the purpose relate to the duties of his employment. They were outgoings which were wholly exclusively and necessarily incurred (by virtue of his agreement with Government in the production of his assessable income."

It is argued on behalf of the Commissioner that the finding that the respondent taxpayer was under an 'obligation' to take his car to work is not supportable as a matter of law. This depends solely on the construction to be given to regulation 734, in my opinion there is no such obligation, the regulation being so drawn or phrased as to avoid any such obligation. Although at one point the regulation speaks of the officer being 'required' to use his car at work, and at another point of his being 'permitted' to bring his car to work, it means no more than that an officer may claim the mileage allowance, if he brings his car to work and is authorised to use it at work on his official duties. In these circumstances, as it appears to me, his mileage allowance was paid "in reference to the services the employee renders by virtue of his office" or as "something in the nature of a reward for services" (per Lord Upjohn, in a passage cited with approval by Viscount Simonds in Hochstrasser v. Mayes⁽³⁾) and "in return for acting as or being an employee" (per Lord Radcliffe⁽⁴⁾). The allowance paid to the respondent in the present case was not paid to fill a hole in his emoluments (to use the phrase used by Lord Guest in Owen v. Pook (supra)). I would rely also on the observation made by Lord Wilberforce, in the same case -

"	I should add that, if I had not reached this conclusion, I should have difficulty in seeing how the tax-payer could succeed, on his alternative point, in establishing that reimbursement of a non-deductible expense is something other than an emolument."

9. Undoubtedly, an employee may enter into a business arrangement with his employer independently of the contract of employment, when the question will be whether it is a taxable venture; if so, the employee will be allowed to set off any expenses incurred in producing the profit accruing from the venture. Further, it is clear from the authorities cited that the fact that a payment would not be made by the employer to the employee unless he were an employee does not determine the question whether the payment is a part of the emoluments of his office or employment. But, in reference to the use by an employee of his own car at work, I think the authorities are too strongly against the respondent, although in a case such as this there may be little logic in it. In the case of expenses incurred by an employee using his own car in travelling to and from work, the dividing line must be whether or not he is on duty in so doing. Clearly, in my view, the respondent was not on duty. Accordingly, in my judgment, he was receiving a contribution to his expenses, not being reimbursed employer's expenses initially incurred by him on the employer's behalf.

10. For these reasons I would allow the appeal, answering all three questions put by the case stated in the affirmative.

(1) (1970) 1 Lloyd's Rep. 313.

(2) (1969) 2 All E.R. 1.

(3) (1960) A.C. 376, at 387-8.

(4) Ibid. at 391.

IN THE SUPREME COURT OF HONG KONG

APPELLATE JURISDICTION

CIVIL APPEAL NO. 3 of 1970

(On appeal from Inland Revenue Appeal No. 2 of 1969)

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BETWEEN
	The Commissioner of Inland Revenue	Appellant (Appellant)
	AND
	Douglas Raymond Humphrey	Respondent (Respondent)

-----------------

Coram: Scholes, S.P.J., Blair-Kerr and Mills-Owens, JJ.

Date of Judgment: 22 September 1970

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JUDGMENT

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Blair-Kerr, J. :

11. This is an appeal from a judgment of Mr. Justice Briggs in which he upheld a decision of the Board of Review allowing an appeal from a determination by the appellant (The Commissioner of Inland Revenue) who had confirmed an assessment on the respondent in respect of income arising in or derived from the Colony from an office or employment of profit.

12. During the relevant period (1st April 1967 to 31st March 1968) the respondent was a land assistant employed by the Hongkong Government. He was in charge of cadastral survey for the whole of the Taipo District, which includes Shatin; and he was attached to the District Office, Taipo. The nature of his work involved the reconciliation of new survey sheets with old demarcation sheets; and this necessitated his travelling from place to place for which purpose the use of a car was necessary.

13. As an expatriate officer, he was entitled to Government quarters. There were no departmental quarters available to him in the New Territories because they were all occupied; and no non-departmental quarters exist in Taipo. (The distinction between departmental and non-departmental quarters will be referred to later in this judgment.) The respondent was allocated Government accommodation in Kowloon.

14. According to the case stated by the Board of Review, Government was unable to provide the respondent with a car for his official duties; and, by arrangement with Government, he used his own car for such duties. It is not suggested that he was not fully reimbursed for his travelling expenses in connection with the use of his car for official duties; and no question relating to that aspect of his employment arises on this appeal. However, as a result of the arrangement with Government, he became entitled under Establishment Regulations and General Circular No. 41/67 to claim partial reimbursement of expenses incurred in using his car for home-to-office journeys, that is to say from his quarters in Kowloon to Taipo and from Taipo to his quarters in Kowloon. His claim to reimbursement in respect of such expenses was granted and he was paid a "mileage allowance" of $516.30 and a refund of the Lion Rock Tunnel toll charges ($43), making a total of $559.30. In assessing his salaries tax in respect of the year 1968/69, the assessor included this sum of $559.30 as income; and, as I have said, the assessment was confirmed by the appellant.

15. In stating their case for purposes of appeal, the Board of Review framed the following three questions :-

	(1)	Whether the decision of the Board of Review ... that the refund of toll charges for the Lion Rock Tunnel was not income arising in or derived from the Colony from an office or employment of profit and was not therefore chargeable to Salaries Tax under Part III of the Inland Revenue Ordinance was erroneous in point of law.
	(2)	Whether the decision of the Board of Reveiw ... that the partial reimbursement of travelling expenses incurred in home-to-office journeys was not income arising in or derived from the Colony from an office or employment of profit and was not therefore chargeable to Salaries Tax under Part III of the Inland Revenue Ordinance was erroneous in point of law.
	(3)	Whether the decision of the Board of Review ... that the toll charges ..... and travelling expenses incurred in home-to-office journeys were outgoings and expenses wholly exclusively and necessarily incurred in the production of (the respondent's) assessable income and so deductible under section 12(1)(b) of the Inland Revenue Ordinance was erroneous in point of law.

The learned judge in the court below answered the first two questions in the negative; and found it unnecessary to answer the third question.

16. The answer to the first two questions posed by the Board depends upon the interpretation to be placed upon s.8(1) as read with s.9(1) of the Inland Revenue Ordinance Cap. 112. These two sections (so far as relevant) read as follows:-

"8(1)

Salaries tax shall, subject to the provisions of this Ordinance, be charged for each year of assessment on every person in respect of his income arising in or derived from the Colony from the following sources -

(a)

any office or employment of profit ..."

"9(1)

Income from any office or employment includes -

(a)

any wages, salary, leave pay, fee, commission, bonus, gratuity, perquisite, or allowance for high cost of living ..."

17. Clearly, the tax contemplated is not merely a tax on the salary of, but a tax on the income of, the office or employment of profit. It is common ground that the respondent holds an office or employment of profit. The question for decision is whether the $559.30 was income arising from such office or employment of profit.

18. I do not find s.9(1) of much assistance in reaching a conclusion. The section is an "inclusive" one. The legislature has enumerated several of the more common kinds of income; but the section does not purport to define income; and it is perhaps not surprising that no attempt has been made to enumerate all the different kinds of payments which might appropriately be described as "income".

19. The corresponding English statutory provisions are s.156 of the Income Tax Act 1952 and rule 1 of the Rules applicable to Schedule E (9th Schedule to the Act). These provisions read as follows:-

"s.156.............. Schedule E

Tax under this Schedule shall be charged in respect of every public office or employment of profit .........."

"r.1.

Tax under Schedule E shall be annually charged on every person having or exercising an office or employment of profit mentioned in Schedule E ................... in respect of all salaries, fees, wages, perquisites or profits whatsoever therefrom ............."

20. The answer to the third question posed by the Board depends upon the interpretation to be placed upon s.12(1) of the Inland Revenue Ordinance, which reads :-

"12(1)

The net chargeable income for any year of assessment of a person chargeable to salaries tax under this Part shall be his assessable income for that year reduced by the following -

	(a)	......................................
	(b)	all outgoings and expenses ........... wholly exclusively and necessarily incurred in the production of such assessable income ............"

The point for decision in respect of the third question is whether, even if the $559.30 was income, (but quite irrespective of whether or not this sum had been paid to the respondent) the expenses incurred by him in using his car in home-to-office journeys were outgoings and expenses wholly exclusively and necessarily incurred by him in the production of his assessable income.

21. The corresponding English provision is rule 7 of the Rules applicable to Schedule E. It reads:-

If the holder of an office or employment of profit is necessarily obliged to incur and defray out of the emoluments thereof the expenses of travelling in the performance of the duties of the office or employment or of keeping and maintaining a horse to enable him to perform the same, or otherwise to expend money wholly, exclusively and necessarily in the performance of the said duties, there may be deducted from the emoluments to be assessed the expenses so necessarily incurred and defrayed."

The main difference between rule 7 and s.9(1) of the Hongkong Ordinance is that whereas the former speaks of expenses incurred "in the performance of the duties of the office or employment" the phrase used in the latter provision is "in the production of such assessable income". The Hongkong provision appears to have a certain affinity to s.51(1) of the Australian Income Tax and Social Services Contribution Act, which reads :-

All losses and outgoings to the extent to which they are incurred in gaining or producing the assessable income ............... shall be allowable deductions .............."

It would appear, however, that the difference in phraseology is immaterial so far as this appeal is concerned. As Dixon C.J. said in Lunney v. Commissioner of Taxation⁽¹⁾:-

"The relevant provisions of the English Income Tax Acts are not in the same terms as those of the Australian law, but the whole course of English authority involves a like conclusion. To escape from the course of reasoning on which they proceed requires the taking of refined and rather insubstantial distinctions."

And Mr. Ching, who appeared for the respondent, saw no substantial difference in the effect of the two phrases "in the performance of the duties of the office or employment" and "in the production of such assessable income", at least so far as this appeal is concerned.

22. Returning then to the first two questions. It is common ground that it is not everything which "comes in" which may appropriately be described as income. There are dicta in Tennant v. Smith⁽²⁾ to the effect that income is something which goes into the taxpayer's pocket and not something which saves his pocket or cannot be converted into money. For example Lord Halsbury said (p.156):-

I come to the conclusion that the Act refers to money payments made to the person who receives them, though, of course, I do not deny that if substantial things of money value were capable of being turned into money they might for that purpose represent money's worth and be therefore taxable."

And gifts are not taxable. In Seymour v. Reed⁽³⁾ a professional cricketer, on a single occasion towards the end of his career, received from the Kent County Cricket Club the proceeds of a benefit match. It was held that this was not assessable as it was a personal gift and not a profit or perquisite arising from his employment. At p.559 Viscount Cave said:-

The question, therefore, is whether the sum of ..... fell within the description, contained in r.1 of Sch. E of 'salaries, fees, wages, perquisites or profits whatsoever therefrom' (i.e. from an office or employment of profit) ........... These words ............ have been the subject of judicial interpretation ............... and it must now ..... be taken as settled that they include all payments made to the holder of an office or employment as such, that is to say, by way of remuneration for his services, even though such payments may be voluntary, but that they do not include a mere gift or present (such as a testimonial) which is made to him on personal grounds and not by way of payment for his services. The question to be answered is ........: 'Is it ..... a personal gift or is it remuneration?' If the latter, it is subject to the tax; if the former, it is not."

23. Hochstrasser v. Mayes⁽⁴⁾ was a case in which the facts were very different from those before us. They were adequately summed up by the learned judge in the court below in these words:-

"	..... a company required certain members of their staff to be prepared to serve the company wherever the company required. To assist in the housing of married employees a scheme was devised whereby the company assisted such employees with interest-free loans for the purchase of houses. A term of the scheme was that if an employee who participated in the scheme was transferred and it was necessary for him to sell his house he would be guaranteed against any capital loss.
	An employee sustained a loss by such a sale and was compensated by the company and the question was whether that sum was assessable for tax.
	The court held that it was not assessable on the ground that though the fact of employment was the causa sine qua non, it was not the causa causans of the payment, which did not therefore arise from the employment."

In other words, there was a collateral agreement. But the case was relied upon by the Solicitor General for the statements of principle in the judgments of Viscount Simonds and Lord Radcliffe.

24. At p.389, Viscount Simonds said:-

.... if in such cases as these the issue turns, as I think it does, upon whether the fact of employment is the causa causans, or only the sine qua non, of benefit, which perhaps is only to give the natural meaning to the word 'therefrom' in the statute, it must often be difficult to draw the line and say on which side of it a particular case falls."

At pp.387/8 Viscount Simonds said:-

Upjohn J., before whom the matter first came, ........... expressed himself thus in a passage which appears to me to sum up the law in a manner which cannot be improved upon. 'In my judgment', he said, 'the authorities show this, that it is a question to be answered in the light of the particular facts of every case whether or not a particular payment is or is not a profit arising from the employment. ........... in my judgment not every payment made to an employee is necessarily made to him as a profit arising from his employment. Indeed, in my judgment, the authorities show that to be a profit arising from the employment the payment must be made in reference to the services the employee renders by virtue of his office, and it must be something in the nature of a reward for services past, present or future'. In this passage the single word 'past' may be open to question, but apart from that it appears to me to be entirely accurate."

Lord Radcliffe said (p.391):-

The test to be applied is the same for all. It is contained in the statutory requirement that the payment, if it is to be the subject of assessment, must arise 'from' the office or employment. In the past several explanations have been offered by judges of eminence as to the significance of the word 'from' in this context. It has been said that the payment must have been made to the employee 'as such'. It has been said that it must be made to him 'in his capacity of employee'. It has been said that it is assessable if paid 'by way of remuneration for his services', and said further that this is what is meant by payment to him 'as such'. These are all glosses, and they are all of value as illustrating the idea which is expressed by the words of the statute. But it is perhaps worth observing that they do not displace those words. For my part I think that their meaning is adequately conveyed by saying that, while it is not sufficient to render a payment assessable that an employee would not have received it unless he had been an employee, it is assessable if it has been paid to him in return for acting as or being an employee."

25. The Solicitor General cited four further cases on this aspect of the appeal. In Robinson v. Corry⁽⁵⁾ the headnote reads:-

An established Civil Servant was appointed by the Lords Commissioners of the Admiralty to a post which necessitated his residing in a colony for several years. During that time he received, in addition to his salary appropriate to his rank ..... a colonial allowance to provide for the increased cost of living in the colony. During part of the time he occupied an official house provided for him, and during other parts of the time he received a housing allowance in lieu of an official house:-

	Held: (1) that he was assessable to income tax ...... and that the tax was chargeable, not only on the salary, but also on the colonial allowance and housing allowance, which must be brought into charge and were not deductible as expenses;
	(2) that the annual value of the official residence was not income chargeable with tax, since it was not money, nor convertible into money by the Civil Servant."

At p.534 Finlay J. said:-

What it really comes to is this, that extra money does go into the appellant's pocket. Extra money goes into his pocket partly in order that he may be able to provide himself with a house, and partly in order that he may be able to meet those expenses incidental to residence in a far off country ...... There is really very little more to be said about that."

26. In Sanderson v. Durbidge⁽⁶⁾, the facts were:-

...... the respondent was employed by the Southgate Borough Council ............. The duties of the respondent included evening attendances at council committee meetings for which he received no extra remuneration ............. On occasions when he had to work in the evenings he had to buy either tea or dinner at a restaurant. No refreshments were provided by the council. The respondent could claim from the council an allowance at a flat rate of 2/6 for tea or 6/- for dinner, but not both. He ............. had actually to spend money before the allowance would be made. A certificate of expenditure was required by the council."

Before the Commissioners the respondent contended that the allowance was not taxable; but this contention was abandoned before Wynn-Parry J. He contended, however, that if the allowances were taxable they should be treated as a proper deduction under r.7. It was held that no deduction in respect of the cost of the meals could be allowed.

27. On this aspect of the appeal, the Solicitor General cited Sanderson v. Durbidge⁽⁶⁾ for the proposition that, in deciding whether a payment is income, it is immaterial whether it is paid in advance or as a reimbursement after expenditure.

28. In Evans v. Richardson⁽⁷⁾, the facts briefly were that

the appellant ...... while serving in the army was allotted a civilian billet in lieu of barrack accommodation and was paid a lodging allowance. This allowance was included in an assessment to Income Tax ......... under Schedule E ................ the ............. contention (was) advanced .......... that the lodging allowance was not income. It was held that the allowance was assessable."

Wynn-Parry J. cited with approval passages from the judgments of Lords Salvese Skerrington, and Cullen in Fergusson v. Noble⁽⁸⁾. In that case a detective in the Glasgow police force was assessed in respect of an allowance which he had received from the Glasgow Corporation for the purpose of his purchasing a suit of civilian clothing. It appeared that detective officers wore plain clothes, and it was in order to avoid uniformity of appearance that the Corporation paid the allowance to each officer. Lord Cullen is reported as having said:-

The disputed portion of the assessment in question is paid to the respondent in money and is paid to him as part of the consideration to which he is entitled in return for the services he renders under his contract of employment. Prima facie, therefore, it is part of his assessable income."

And Lord Skerrington is reported as having said:-

...... if he could have provided himself with suitable clothing for a smaller sum than .... the difference would have been his own profit ........... On the other hand, if the clothes cost more than that sum it is quite plain he was bound to provide the difference out of his own pocket. That shows that this allowance was simply a contribution towards his expenses, in other words,pecuniary relief given to the man, in other words, an addition to his emoluments."

With reference to these passages, Wynn-Parry J. said (p.185):-

...... every word of the passages I have read applies to the case before me, and that, to adopt the words of Lord Skerrington, the allowance in this case was merely a contribution towards the officer's expenses, in other words, pecuniary relief given to him, in other words an addition to his emoluments. On that basis the allowance is rightly to be regarded as income."

29. In citing Owen v. Pook⁽⁹⁾, the Solicitor General did so merely to distinguish it from the facts of the present case. The headnote reads:-

The taxpayer was a medical practitioner and resided at Fishguard. He held part-time appointments as obstetrician and anaesthetist at Haverfordwest, 15 miles away. Under his appointments he was on stand-by duty for emergencies, as an obstetrician one weekend a month; as an anaesthetist one weekend a month, and on Monday and Friday nights. He had to be accessible on the telephone at those times, and on receipt of a telephone call telling him of an emergency he would give instructions over the telephone to the hospital staff and then, usually, would set off immediately for the hospital by car, although he might advise treatment on the telephone and await a further report. His responsibility for the patient began as soon as he received a telephone call. He was paid travelling expenses at a fixed rate per mile for journeys between Fishguard and the hospital; but the travelling expenses were not payable for a single journey in excess of ten miles, and the taxpayer bore the cost of the additional five miles himself. He was assessed to income tax under Sch. E on the amounts received for travelling expenses as being emoluments of his office, and he claimed to deduct from his income the expenses that he incurred in such travelling to and from the hospital.

	Held: (i) (Lord Pearson dissenting) so far as the taxpayer's actual travelling expenses were re-imbursed they were not emoluments ...........
	(ii) (Lord Donovon and Lord Pearson dissenting) the taxpayer had in respect of the emoluments in question, two places of work, and the expenses which were necessarily incurred in travelling between them in the performance of his duties properly fell within the scope of r.7 ..........."

Lord Pearson said (p.7):-

On the findings of the commissioners the expenses were incurred in the performance of his duties. In my view that finding was correct .........";

that is to say the finding of fact that the taxpayer had two places of work and was on duty when travelling between them.

30. The learned judge in the court below was impressed by the following passage from the judgment of Lord Pearce (p.8):-

It would be a wholly misleading description of an office to say that it had very large perquisites merely because the holder had to disburse very large sums out of his own pocket and subsequently received a reimbursement or partial reimbursement of these sums. If a school teacher takes children out for a school treat, paying for them out of his (or her) own pocket, and is later wholly or partially reimbursed by the school, nobody would describe him (or her) as enjoying a perquisite. In my view, perquisite has a known normal meaning, namely, a personal advantage, which would not apply to a mere reimbursement of necessary disbursements ......... some element of personal profit is intended."

The Solicitor General submitted that this passage could be of no direct assistance to the court in this appeal because in Owen⁽⁹⁾ all the judgments proceeded upon the footing that the commissioners' finding that the doctor was on duty while travelling between his home and the hospital should be accepted; in other words that there was no difference between the doctor's and school teacher's expenditure and the expenditure incurred by the respondent in this case whilst travelling from Taipo to various parts of the New Territories on his official duties; that in all three cases the individuals were on duty and that the expenditure incurred by them was expenditure to be borne by their employers, not being of a private or personal nature.

31. The Solicitor General cited the following passage from the judgment of Lord Pearson (p.14):-

The other question in the appeal is whether the travelling allowance which the taxpayer receives from the hospital authorities constitutes an 'emolument' of his employment. I would arrive at the answer in this way. Suppose A, B, and C are employed each at a salary of £500 per annum, and in the first year each has to pay entirely out of his own pocket the expenses of travelling between his home and his place of work. Then, in the second year the employer reimburses to A the cost of his season ticket or gives him an allowance of (say) 8d. per mile for coming to work and returning home by car. A is better off financially by the amount of the reimbursement or allowance. He is better off than he himself was in the first year, and better off than B and C who still have to pay entirely out of their own pockets the expenses of travelling between their homes and their places of work. As A has effectively a better income than B and C, he ought to pay more income tax than they do. The reimbursement or car allowance is a benefit to A and is a sum of money. In my opinion it is a perquisite, a profit, an emolument."

32. It is not in dispute that Establishment Regulations are part of a Civil Servant's terms of service. E.R. 730(1) reads:-

An officer is not normally eligible to claim reimbursement of any part of expenses incurred in travelling from his home to his place of work."

This would appear to repeat in substance what has always been regarded as a fundamental rule in tax law namely that it is the responsibility of every employee to get himself from his home to his place of work. As Dixon C.J. said in Lunney v. Commissioner of Taxation⁽¹⁾:-

Both in Australia and in England the view has always prevailed that expenses of travelling from home to work or business and back again are not deductible."

E.R. 731(1) reads:-

The following categories of officer may claim partial reimbursement of expenses incurred in home-to-office journeys:

(a)	................
(b)	Those who live outside the New Territories and travel daily to work in any part of the New Territories.
(c)	................
(d)	................"

33. E.R. 732 provides that where public transport is used by an officer qualified under E.R. 731 Government will reimburse him in a particular way; and E.R. 733 provides that where a number of officers are eligible to claim reimbursement of travelling expenses under E.R. 731 and "public transport facilities are established to be inadequate", permission may be sought for the use of Government transport. A certificate relating to the inadequacy of public transport by the District Commissioner will be accepted by Government "as evidence of inadequacy".

34. It would appear therefore that the Regulations contemplate the use of public transport or Government transport in cases where officers qualify under E.R. 731 to claim reimbursement of expenses in home-to-office journeys. However, E.R. 734 states that:-

"(1)

An officer qualified under E.R. 731 will normally be permitted to use his own private vehicle on home-to-office journeys and claim mileage allowances provided:-

(a)	he is required to use his motor vehicle for official duty on arrival at his office; or
(b)	public transport is not available to take the officer from his home to his office or reasonably close to the office or is available, but not at suitable times; or
(c)	circumstances of a special nature exist which render it desirable for an officer to travel by his own private motor vehicle.

(2)

In the circumstances set out in paragraph (1) above the officer himself must pay the cost of the first 250 miles within any period of a month. For mileages in excess of 250 miles per month, his allowance will be computed at the following rates: ......................."

35. It is a matter of common knowledge that the Lion Rock Tunnel was completed towards the end of 1967. Not only did the new road to Shatin relieve traffic congestion, but a journey from Kowloon to Shatin via the tunnel is now shorter than by using the road previously in use.

36. General Circular No.41/67, under which the toll charges were refunded, is a communication from the Colonial Secretariat to the District Commissioner, New Territories. It reads:-

"	Lion Rock Tunnel Toll Charges
	Officers authorised to claim mileage allowance in respect of home/office journeys under E.R. 734 may use the tunnel in the course of such journeys free of charge, provided they pay the toll charges first and then claim reimbursement under arrangements similar to those applicable in respect of the vehicular ferry (E.R. 734(3)), save that receipts/tickets will not be required since none are issued."

37. In resolving the question whether the "mileage allowance" and toll refund arose from the respondent's employment, the Solicitor General invited the court to ask itself two subsidiary questions:

	(1)	Were these payments a benefit to the respondent?
	(2)	If so, were they paid to him as a reward for his services?

38. As regard question (1), the central theme of the Solicitor General's submission was that it is the responsibility of every employee to get himself to his place of employment and that the expenses of his doing so are his own private concern and not the responsibility of his employer. The Solicitor General submitted that it is clear from the Establishment Regulations that Government recognises that there may be hardship in certain cases and that the Regulations accordingly provide for giving partial relief; but that the Regulations do not, and could not, alter the law by giving an officer relief to which he is not otherwise entitled under the law; that if the respondent had not been paid the mileage allowance and toll refund, it would still have been his responsibility to get himself to Taipo to do his job; that to the extent that he was reimbursed, he was financially better off; that the payment to him of $559.30 was a partial discharge by his employer of an obligation which was his, and his alone; that the respondent was in no different position to the taxpayer in Evans v. Richardson⁽⁷⁾ who had to live and keep himself, (a matter entirely personal to him); and that it matters not how one describes an allowance; if the payment is a benefit to the taxpayer, it is income and therefore taxable.

39. As to whether the $559.30 was paid to the respondent as a reward for his services, the Solicitor General submitted that the only basis on which the payment was made was the Establishment Regulations which formed part of the respondent's terms of service and under which he was appointed to his office; that the arrangement between him and Government in regard to the use of his car was not a collateral agreement; that the payment arose because he was a civil servant and in return for his acts as a civil servant.

40. In his judgment, the learned trial judge said (p.8):-

I agree with the Board that a reimbursement transfers certain expenses from the employee to the employer."

In regard to this passage, the Solicitor General submitted that reimbursement alters the burden, but not the character of a payment; that an expense is either an employer's expense or an employee's private expense; and that it is the circumstances in which an allowance is paid to which one has to look in order to decide whether it is paid as a reward for services.

41. Another passage from the judgment reads (p.10):-

......... the fact of the employment was the causa sine qua non of the payment. But I do not think that it was the causa causans. As I understand the facts, the payment was not made because the taxpayer was employed by the Government, it was because in addition he had expended certain sums of money, there being an agreement between the parties that if the taxpayer expended certain sums he would be reimbursed."

The Solicitor General submitted that this passage could not be supported either in law or fact; that the fact that the respondent "had expended certain sums of money" was not the reason for his being reimbursed; that payment by the respondent was merely a pre-requisite to his claim; and that there was no question of the arrangement between the respondent and Government being a collateral agreement as in the case of Hochstrasser⁽⁴⁾.

42. Turning now to the third question posed by the Board, the Solicitor General referred to a passage from the judgment of Vaisey J. in Lomax v. Newton⁽¹⁰⁾. Speaking of the English rule 7, the learned judge said:-

......... the provisions of that rule are notoriously rigid narrow and restricted in their operation ......... it must be shown that the expenditure incurred was not only necessarily but wholly and exclusively incurred in the performance of the relevant official duties ................. The words are indeed stringent and exacting; compliance with each and every one of them is obligatory if the benefit of the rule is to be claimed successfully. They are, to my mind, deceptive words in the sense that when examined they are found to come to nearly nothing at all."

43. The Solicitor General cited two other cases on this aspect of the appeal namely Nolder v. Walters⁽¹¹⁾ and Burton v. Rednall⁽¹²⁾. In Nolder⁽¹¹⁾, an airline pilot operating from Croydon aerodrome chose to reside at Purley to be near the aerodrome. It was necessary for him to keep a motor car as his duties often commenced and ended when ordinary conveyance by public transport was not available. He did not receive any allowance in respect of the car; but he claimed to be entitled to deduct a proportion of the expense of the upkeep of the motor car as being money wholly exclusively and necessarily expended in the performance of his duties.

44. Rowlatt J. said (p.387):-

'In the performance of the duties' means in doing the work of the office, in doing the things which it is his duty to do while doing the work of the office. A man who holds an office or employment has, equally necessarily, to do other things incidentally, and spend money incidentally, because he has the office. He has to get to the place of employment, for one thing. If he had not got the employment he could stay at home. As he has got the employment he has necessarily got to get there, and it costs him something, if it is only shoe leather, to get there; but that is not in the performance of the office, because in getting there he is not doing the duties, or doing the work of the office. Incidentally, he is obliged to do that, but it is not in doing the work of the office, which begins when he arrives, and sets to work to perform his duties ......... I do not think (he) can be allowed the use of his motor car .................. his employers would not be liable for what he did while he was driving his motor car to the office. He is not under their commands while he is going to the office, not in the sense that they govern his going. He has to be at the office, wherever he has to start from ................"

In regard to s.12(1)(b) of the Hongkong Ordinance, the Solicitor General submitted that the respondent could not be said to be "producing" income when travelling on home-to-office journeys.

45. In Burton v. Rednall⁽¹²⁾, the taxpayer was secretary of a cattle society whose offices were in Ipswich. His duties necessitated frequent calls at farms in the surrounding district; and, to do this, he had to have, and was required by his employers to have, a car available in Ipswich. He was also required to live within a reasonable distance of Ipswich. He was unable to obtain accommodation there; but he managed to rent a house at Cotton - 19 miles from Ipswich. When his duties did not entail visiting farms, he travelled by train to his office, otherwise he drove there by car in order that the car would be available in Ipswich. His employers reimbursed him in respect of the cost of business journeys from Ipswich; and when he went straight home from his last business call, and did not return to Ipswich, the reimbursement was based on the mileage to Cotton.

46. The expenses claimed by the respondent as a deduction under r.7 were the expenses incurred by him in bringing his car from his home to Ipswich in order to have it available there, the amount being the difference between the cost of getting the car from home to office and the train fare from Cotton to Ipswich.

47. Upjohn J. said (p.439):-

....... reasonable though Mr. Burton's claim is, he is not performing his duty when he travels between his home and Ipswich. It is reasonable for him to do so - indeed he is bound to do so - but he is not then in the performance of the duties of his office; he is either going to perform his duties or he is going home after performing his duties ...... I am ...... reluctantly forced to the conclusion that this appeal must fail."

The Solicitor General stressed the importance of this case in that the taxpayer was actually required to have a car at Ipswich. Nevertheless, the fact that he had no option as to whether he used his car did not entitle him to the benefit conferred by r.7.

48. Mr. Ching for the respondent did not deal with the three questions posed by the Board in the same order as the Solicitor General. He dealt first with the question of deductibility; and he appeared to repeat his main submission on that aspect of the appeal when dealing later with the question whether or not the $559.30 was income.

49. He began by conceding the general principle that expenses of home-to-office journeys are not deductible under s.12(1) of the Ordinance. However, he almost immediately qualified this by saying that "generally speaking" this was so; but that it depended upon the whole of the circumstances.

50. His first submission, as I have recorded it, was this: that the respondent spent a greater sum of money "in order to get back" $559.30; that "without paying it he would never have got it back"; and that, therefore, in spending whatever he did spend, he was spending it wholly, exclusively and necessarily in the production of assessable income.

51. His next submission was:

that there was some agreement between the respondent and Government, although it is not clear from the case stated what that agreement was; but that it appears that Government did not have enough cars to carry on the administration of the New Territories; that the respondent was required to take his car from Kowloon to the office in Taipo so that Government could use it there on official duties; that consequently, from the moment he entered the car in Kowloon to drive it to Taipo, he was performing his duties (as the doctor in Owen(9) was performing his duties) in that he was acting in effect as a Government chauffeur, and only incidentally getting himself to the office; that, being on duty, he was earning money as he drove from Kowloon to Taipo; that he had no free choice as to where he would live in that he was allotted quarters in Kowloon; and that "by necessary implication" it was within the contemplation of the parties that he would not only use his car to get to the office but would also use it to return home after work; that in return for his agreeing to make his car available in Taipo for official duties, Government agreed to reimburse him in respect of part of his expenses, but only part because the balance of such expenses were the respondent's own concern in getting himself to the office.

Mr. Ching attempted to distinguish Nolder ⁽¹¹⁾ from the present case by submitting that in Nolder⁽¹¹⁾ there was no question of the taxpayer bringing his car to Croydon for the benefit of his employer; that he was not earning money when driving to Croydon; and that in Nolder⁽¹¹⁾ the taxpayer did not receive any money by way of reimbursement. He merely claimed to be allowed to deduct a proportion of the expenses of keeping a car.

52. Mr. Ching attempted to distinguish Burton⁽¹²⁾ from the present case by submitting:-

	(1)	that in Burton⁽¹²⁾ because the taxpayer was required to have his car in Ipswich, he was not allowed to deduct the additional expense of getting it there. But, in this case, the agreement between Government and the respondent was not that the respondent "should have his car available at Taipo but that he should make it available in return for partial reimbursement of his expenses in getting it daily from Kowloon to Taipo."
	(2)	that in Burton⁽¹²⁾ there was no payment to the taxpayer by way of reimbursement.
	(3)	that in Burton⁽¹²⁾ the taxpayer was not on duty when driving from Cotton to Ipswich; whereas in this case the respondent was on duty the moment he began to drive from Kowloon to Taipo and was earning money by the act of driving.
	(4)	that in Burton⁽¹²⁾ the taxpayer could live where he liked provided it was within a reasonable distance of Ipswich; whereas in the present case the respondent had no choice as to where he lived.
	(5)	that in Burton⁽¹²⁾ the taxpayer was not claiming a deduction in respect of his getting from Ipswich to his home - only in respect of his getting from his home to Ipswich.

53. Mr. Ching then turned to the first two questions posed by the Board; and he made what he called three "general observations" applicable to both the mileage allowance and the toll charges. Firstly, he submitted (what is really common ground) that not all money which "comes in" is income. Secondly, he submitted that in this case the $559.30 received by the respondent by way of reimbursement was not income; but, at this stage of his submission, he appeared to abandon his previous submission that the respondent, when driving to Taipo from Kowloon, was "earning money". He said:-

My stand is: The respondent was performing the duties for which he was employed when he drove his car to the office. When he received the mileage allowance, it was in no sense a payment to him. He was expending money on behalf of his employer for which he was subsequently partially reimbursed. So, to an extent, I agree with the appellant and I do not say the respondent was earning any money while driving to the office; but I do say he was performing his duties, although I also say that he was not earning anything over and above his ordinary salary."

Mr. Ching's third "general observation", as I understood it, was in effect that if the appellant's contention that the respondent was not performing his duties when driving from home-to-office is correct, therefore any money paid to him in respect of those journeys can not be income in that if the respondent was not on duty he could not earn assessable income.

54. Mr. Ching's further submissions in regard to the toll charges and mileage allowance did not appear to advance his case to any material extent. He submitted that the phrase "free of charge" in General Circular 41/67 supported his submission that the reimbursement was not taxable; and in regard to the mileage allowance, he reiterated that it was not an "allowance" but a reimbursement.

55. In concluding his submissions, he said that he did not now submit that Owen⁽⁹⁾ laid down any general principle that reimbursements of travelling allowances were not taxable; that he was forced to agree with the Solicitor General's submission that the decision in Owen⁽⁹⁾ was based on a finding that the doctor was on duty when travelling by car from his home to the hospital; and that there was "great force" in the passage from the dissenting judgment of Lord Pearson which had been cited by the Solicitor General. But he reiterated that everything depends upon the contract of employment; and that "there may be circumstances in which an employer may give a pecuniary benefit to his employee which is not taxable"; and that, from the case stated, it would appear that what happened was this: that Government said to the respondent: "I would like you to bring your car to work; it is for my benefit; I do not see why you should be out of pocket".

56. In the case stated it is said that the respondent was "entitled to quarters". This does not, of course, mean that he was entitled to free quarters. There are quarters which are reserved for officers of particular departments (e.g. police quarters) and quarters for which an officer from any department of the Executive Branch of Government (or indeed members of the Judiciary) may apply. They are called non-departmental quarters. Neither type of quarter is free, although officers pay rents which are considerably lower than rents in the open market. But an officer is not bound to accept a Government quarter. He is perfectly free to make his own arrangements as to where he resides. But if he wishes to have the benefit of subsidised accommodation the quarter must be one which Government is prepared to "take over", in which case there are various rules whereby Government pays the landlord the full rent of the quarter and charges the officer a rent appropriate to his grade. The case stated does not say whether, upon being posted to the New Territories, the respondent made any effort to arrange for what is sometimes referred to in Government circles as "a private tenancy".

57. The case stated further indicates that the respondent was "allocated" quarters in Kowloon. For myself, I do not read this as any indication that he was "ordered" or "required" to reside in Kowloon. I think this court may take judicial notice of the fact that lists of quarters about to become vacant are circulated to all officers from time to time. An officer may apply for any quarter suitable to his grade. His application is considered by a committee who balances his entitlement against the claims of other applicants in accordance with a complicated "points system". The applicant with the highest number of points is normally successful; and the quarter is then "allocated" to him.

58. The Board then say that the appellant gave evidence to the effect that "there are many officers who have to use their own vehicles because of shortage of government transport". From this evidence, and from this alone, they appear to have inferred that Government was "unable" to provide the respondent with a car for his official duties.

59. Normally, a court of law is bound by findings of fact in a case stated; but in this case I am not prepared to accept at its face value a finding which, in my view, must be palpably wrong. To conclude that the respondent and many other officers "have" to use their private cars because Government has insufficient transport to carry out its Governmental functions is tantamount to saying that Government officers are subsidising Government in the matter of public transport. If this is so, I should require a specific finding to this effect in the case stated before I would be prepared to act upon it. The respondent was under no obligation to acquire a car when he joined the public service, and Government had no power to order him to do so during his service; and the fact that the respondent happened to own a car could not relieve him of his obligation of getting himself to his office or impose upon him any additional obligation to his employer in the matter of using his car for official duties. There is no evidence that the respondent's free choice as to whether he used the car for home-to-office journeys was fettered in any way by his terms of service or by any special arrangement with Government.

60. In my view, we are entitled to assume that the respondent owned a car for his private use when he was posted to Taipo. There is nothing in the case stated to indicate that he did not wish to use it for home-to-office journeys as a matter of his own choice, as no doubt many car owners in Hongkong do; and there is nothing in the case stated to warrant the inference that Government suggested to the respondent that he use his car for home-to-office journeys because it would be for Government's "benefit" and that Government would see to it that he was not "out of pocket".

61. It seems to me that E.R. 734 says no more than this: that if a Government servant to whom the regulation applies wishes to use his car for home-to-office journeys he may claim a mileage allowance (a) if he is permitted to do so and (b) one of the three alternative situations enumerated in sub-paragraph (1) of the regulation applies. The words "provided he is required" in sub-paragraph (1)(a) of this regulation appear to me to mean simply: "if he needs a car to do his job". I see no reason why this court should conclude that the respondent was "ordered" to use his car for official duty in the absence of a specific finding to this effect. Clearly, some sort of loose arrangement was reached whereby he was reimbursed in full for official journeys, and reimbursed in part as regards his home-to-office journeys.

62. But, even if we assume that Government received some "benefit" as a result of this arrangement, this is a far cry from saying that the respondent was on duty from the moment he entered the car in Kowloon to drive to the New Territories. In my view he was not on duty when travelling to and from the office. Therefore I find it very difficult to see how it can be said that in partially reimbursing him as regards his home-to-office journeys, Government was, to that extent, not discharging the respondent's obligation of getting himself to his place of work. In my view they were discharging in part the respondent's obligation. They recognised that he was in a special position of having to travel to the New Territories to do his job and that he should have additional remuneration which the mileage allowance provides.

63. In Lunney v. Commissioner of Taxation⁽¹⁾ the court was concerned with the question as to whether or not certain home-to-office travelling expenses were deductible under a provision comparable to s.12(1) of the Hong Kong Ordinance. The remarks of Dixon C.J. are not without relevance to this appeal. He refers first to a passage in the judgment of Denning, L.J. in Newsom v. Robertson⁽¹³⁾. It reads:-

"	In the days when Income Tax was introduced, nearly 150 years ago, most people lived and worked in the same place. The tradesman lived over the shop, the doctor over the surgery, and the barrister over his chambers, or at any rate, close enough to walk to them or ride on his horse to them. There were no travelling expenses of getting to the place of work. Later, as means of transport quickened, those who could afford it began to live at a distance from their work and to travel each day by railway into and out of London. So long as people had a choice in the matter - whether to live over their work or not - those who chose to live out of London did so for the purpose of their home life because they preferred living in the country to living in London. The cost of travelling to and fro was then obviously not incurred for the purpose of their trade or profession.
	Nowadays many people have only a very limited choice as to where they shall live. Business men and professional men cannot live over their work, even if they would like to do so. A few may do so, but once those few have occupied the limited accommodation available in Central London, there is no room for the thousands that are left. They must live outside at distances varying from 3 miles to 50 miles from London. They have to live where they can find a house. Once they have found it they must stay there and go to and from it to their work. They simply cannot go and live over their work. What is the position of people so placed? Are their travelling expenses incurred wholly and exclusively for the purposes of the trade, profession, or occupation? I think not. A distinction must be drawn between living expenses and business expenses...."

With these observations in mind, Dixon C.J. in Lunney⁽¹⁾ said:-

Times have changed; the incidence of income tax greatly differs now in scope and weight from its incidence in the days when the law was settled; possibly the justice of the traditional legal view is a little more open to question and certainly its financial significance supplies a motive for questioning it ................................... The relevant provisions of the English Income Tax Acts are not in the same terms as those of the Australian law, but the whole course of English authority involves a like conclusion. To escape from the course of reasoning on which they proceed requires the taking of refined and rather insubstantial distinctions. I confess for myself, however, that if the matter were to be worked out all over again on bare reason, I should have misgivings about the conclusion. But this is just what I think the Court ought not to do. It is a question of how an undisputed principle applies. Its application was settled by old authority long accepted and always acted upon. If the whole subject is to be ripped up now it is for the legislature and not the Court to do it."

These words, said with reference to a course of authority relating to deductibility under the English rule 7 appear to me to be applicable to an equally cogent line of authority as to what is included in the term income.

64. In Owen⁽⁹⁾, Lord Wilberforce, on the special facts as found by the Commissioners, came to the conclusion that the doctors travelling expenses were deductible under the English rule 7. However, he added:-

..... if I had not reached this conclusion, I should have difficulty in seeing how the taxpayer could succeed, on his alternative point, in establishing that reimbursement of a non-deductible expense is something other than an emolument."

65. I have great sympathy with the respondent; but it is not the function of this court to bend the law to fit the facts.

66. For the above reasons, I would, myself, have answered each of the three questions posed by the Board of Review in the affirmative. I am, therefore, of the opinion that the appeal should be allowed.

	(W.A. Blair-Kerr)
	Appeal Judge.

Representation:

Mr. J.W.D. Hobl...(illegible)y, Solicitor General (Acting) for the Appellant.

Mr. C. Ching instructed by Messrs. Hoosenally & Co. for the Respondent.

(1) 32 A.L.J.R. p.139.

(2) (1892) A.C. 150.

(3) (1927) A.C. 554.

(4) (1960) A.C.376.

(5) (1933) 2 K.B. 521.

(6) 36 T.C. 239.

(7) 37 T.C. 181.

(8) 7 T.C. 176.

(9) (1969) 2 A.E.R. p.1.

(1) (1958/59) 32 A.L.J.R. 139.

(10) 34 T.C. at 561/2.

(11) 15 T.C. 380.

(12) 35 T.C. 435.

(13) 33 T.C. at pp.463/4.

(9) (1969) 2 A.E.R. at p.12.