1960 PLP 455 (PTD)

Their Lordships took time for consideration. VISCOUNT SIMONDS (November 25).‑My Lords, the question for your Lordships' determination is whether the Commissioners for the General purposes of the Income tax, Harman, J. and the Court of Appeal were all wrong in holding that the respondent, who is the executor of a well‑known writer of detective fiction, known as Peter Cheyney, is not assessable to Income‑tax under Schedule D in respect of royalties which were received by him as such executor under contracts made by Peter Cheyney during his lifetime. I will summarise the facts as they appear in the case stated by the General Commissioners and the annexed documents. Peter Cheyney was a writer by profession and he carried on his profession, as writers, often do, by entering into contracts with publishers under which, in return for royalties of varying amounts, the copyright in his works became vested in them. These contracts, which were numerous, took various forms. In some cases, notably in a contract made with Faber & Faber Ltd. relating to a work described as "provisionally entitled `Making Crime pay,' " the work in question had not yet been written or at any rate not completed at the date of the contract. In others the work had been completed and there was therefore an existing copyright in it. In one case, which has been regarded as demanding special consideration, the contract took the form of a licence to translate an existing work into French. Subject to what may be said about the last mentioned contract, I do not think that any distinction can validly be made between any of the contracts. In all of them the author carried on his profession by exploiting his work in the usual way. A writer might, I suppose, carry on his profession without doing so, but the Income-tax Acts contemplate the carrying on of a profession for gain, and that is what Peter Cheyney did. He was accordingly assessed during his lifetime under Case II of Schedule D in respect of the royalties so received by him after deducting therefrom all proper and allowable expenses of carrying on his professional. There is no doubt that he was rightly so assessed, and the learned Attorney‑General very properly admitted that he could not lawfully have been assessed under any other Case of any other Schedule. It must be recorded also that he was consistently assessed upon a form of receipts basis, being credited with royalties upon the day when they fell due for payment and no account being taken of the present value of royalties due at a future date. Peter Cheyney died on June 26, 1951. Royalties falling due under the several contracts after his death were received by his executor, and upon him first and additional assessments were made under Schedule D for the years 1951‑52 and 1952‑53 in the sum of 10,000 and 18,000 respectively. The question is whether they were rightly made. The executor also received sums in respect of contracts made by him with publishers after Peter Cheyney's death and admitted his liability to assessment in such sums. He may have been right or wrong in doing so That question has not been in dispute nor have their Lordships seen the contracts. The matter is irrelevant to the present issue. The assessments for 1951‑52 are governed by the Income‑tax Act, 1918 and those for 1952‑53 by the Act of 1952, but there is no material difference between the relevant provisions of the two Acts. It is enough, therefore, to refer to section 123 of the 1952 Act under which income tax is chargeable under Case III of Schedule D in respect of "any interest of money, whether yearly or otherwise, or any annuity, or other annual payment," under Case V "in respect of income arising from possessions out of the United Kingdom" and under Case VI "in respect of any annual profits or gains not falling under any of the [Cases I to VI and not charged by virtue of Schedule A, Schedule B, Schedule C or Schedule E." It was not stated in the assessments under which of the Cases of Schedule D they were made, and I understand that it is not considered necessary to do so. Before the Commissioners and before the Courts below it was contended that they were properly made under Case III or, alternatively, under Case VI. Before this House Case V was also invoked, but in the view which I take nothing turns on this. My Lords, it was inevitable that a large part of the argument should turn on a recent decision of the House in which two of your Lordships and I took part, the respondent contending that it governed the present case, the appellant that it was distinguish able. I refer to Stainer's Executors v. Purchase (1952 A C 280). In that' case I said that I agreed with and adopted every word of the judgment of Jenkins L. J., in the Court of Appeal, and I repeat what I then said in regard to the judgment of the Court of Appeal delivered by the same Lord Justice in the present case. I therefore absolve myself from the need to compare at length the facts of the two cases and will state as shortly as I can the facts and the principles which appear to emerge from the earlier decision. Stainer's case' as I will call it, was concerned with assessments made upon the executors of Stainer, a professional film actor and producer (who went by the name of Leslie Howard), in respect of payments made to them under contracts for the exploitation of films to the making of which Leslie Howard had given his professional services as actor or producer or director. The payments consisted of percentages or shares, of the profits of exploitation. During his lifetime he was assessed under Case II, his receipts in respect of all his professional activities being brought into account against his proper expenses of carrying on his profession. After his death further payments were made to his executors under the same contracts. It was not suggested that anything further had to be done to earn these payments. They were the reward for Leslie Howard's professional services rendered during his lifetime. It was, however, contended on behalf of the Crown, just as it has been contended in the present case, that they had after the death of Leslie Howard acquired a new taxable quality and, as they were no longer assessable under Case II since no profession was being carried on, were assessable under Case III or Case VI. This contention was decisively rejected Jenkins L. J. said (2) : (1950) 32 T C 367, 404 "I think it is equally clear that the assessment to tax of the profits of a profession under Case II of Schedule D down to the date of discontinuance is to be taken as covering all remuneration earned in the course of such profession whether received prior to or after such discontinuance and that, the liability to tax being thus exhausted so far as remuner ation is concerned, nothing which is in truth remuneration so earned can afterwards be charged to tax merely because the mode of ascertaining and paying it is such that it might have been charged to tax under some other Case if it had not been remuneration so earned." In a speach, in which the other members of the House concurred, I expressed the same view with equal emphasis and less felicity. The principle which emerges is clear. Payments which are in historical fact (I adopt the language of the late Lord Asquith of Bishopstone (1952 A C 280, 290) in the same case) exclusively the fruit or aftermath of professional activities do not change their taxable character when the profession is discontinued. But there was another aspect of Stainer's case which (1952 A C 280) is relevant to the present case. Perhaps it is no more than a deferent way of stating the same point. It was urged that the contracts made by Leslie Howard were "income bearing assets" and that the payments made to his executors were the income of such assets. To this the same noble. Lord gave an answer which I venture to quote, so completely does it dispose of a similar argument in the present case. "The contracts, "he said (1952 I C 291), "in the present case enjoy, in my view, no such independent vitality. The consideration for what Mr. Howard was to do‑to act or manage was not the grant of a contract or contracts but the payment of money under the terms of those contracts. Mr. Howard acted for money ; he did not act for contracts. The contracts were mere incidental 'machinery regulating the measure of the services to be rendered by him on the one hand and, on the other, that of the payments to be made by his employers ; they were not the source, but the instrument of payment, and his death in my view, did nothing to divest them of that character." My Lords, I do not see how in the face of this decision the appellant's argument can succeed without a degree of refinement which is to be avoided in the realm of fiscal law. In Stainer's case it could not be denied that the taxpayer acquired under his contracts certain contractual rights nor that those rights could in a certain context be called property. So it was argued that the payments were the income and the contracts were the "income bearing assets." I will again content myself with the description given to this argument by Jenkins L.J. and ask how it is to be distinguished from the argument in the present case. When I do so, I find myself using again the same language that Lord Asquith used and I used in Stainer's case (1952 A C 280). What else were these payments than the Fruit of Peter Cheyney's professional activities? How is it relevant that in order to reap his harvest he had to enter into contracts under which he acquired rights and incurred obligations, as did the publishers with whom he contracted ? And how is it relevant that it was a term of those contracts that there should be vested in the publishers a right created by the law to protect him in the exploitation of his work ? It was by entering into such contracts that he was able to carry on his profession gainfully. It was because he did so that he was assessable to tax under Case II of Schedule D. I reject, therefore, the plea that the royalty payments could, whether during the carrying on of the profession or after its discontinuance, be regarded as "income from property, constituting a substantive subject‑matter of taxation under Schedule D"‑I use the words of the appellant's formal case. I will only add in deference to the ingenious argument of the Attorney‑General that the realities of the situation are not changed by saying that the royalties were throughout paid in consideration of the grant of a licence to use copyright and were therefore the income of property, that during the carrying on of the profession they could be regarded as income under Case II but that, having always the character of income of property, they became taxable in that character when the pro fession was no longer carried on. This is really only saying the same thing in other words and is, to be similarly answered. First and last and all the time the payments are professional earnings, whatever be the mechanism through which they are paid. Upon this part of the case I will offer a final consideration. In Stainer's case ((1952) A C 280, 289). I said : If in all the circumstances it was not possible to bring the sums into account in the years in which they were earned . . . . the result is not to change the character of the payment but to exhibit that some professional earnings may escape the income‑tax net." There, I believe, lies the root of the trouble. Prima facie there is no reason why a professional man should not be taxed on an earnings basis, but in the case of an author, whose earnings depend on the unpredictable popularity of his books in future years, an assessment in the earning year would be so arbitrary as to be patently unfair. But that, I repeat, does not entitle the Crown to regard, payments in future years as anything but what they essentially are. An attempt was made, as I observed some time ago, to distinguish the contract under which Peter Cheyney granted a licence to translate one of his novels into French. Harman, J. felt some difficulty about the royalties paid under this contract, but I have come to the conclusion, as did the Court of Appeal, that the distinction is too fine to be material. It appears to me that by this as by his other contracts the author was exploiting the work of his brain. The fees or royalties that he got were part of his professional earnings and during his life were, no doubt, included in his assessment under Case II. After his death they cannot validly be distinguished. It is not necessary, my Lords, to say anything about Case VI or Case V. The reasons for dismissing an appeal which relies on Case III are fatal to them also. In the course of the argument a number of authorities were referred to. Apart from Stainer's case ((1952) A C 280) and the case of Bennett v. Ogston ((1930) 15 T C 374) concerning which I can say no more than I said in Stainer's case I do not think that any of them can throw any light on the present problem. I doubt not that in a proper context royalties may be described as income of an investment as in Inland Revenue Commissioners v. Sangster ((1920) 1 K B 587) nor that, as in Curtis Brown Ltd. v. Jarvis ((1929) 14 T C 744), copyright royalties may be merged in the receipts of a trade, but I do not think that these cases assist in the solution of the problem now before the House. The appeal should, in my opinion, be dismissed with costs. LORD MORTON OF HENRYTON.‑My Lords, it appears from the case stated that during his lifetime Peter Cheyney had entered into from 50 to 60 agreements with publishers to write books, or for the publication of books already written. Four only of such agreements were put in evidence, and it was agreed between the parties that the decision of the Court as to sums paid under these four agreements should apply to moneys paid under all other agreements, unless the Court should distinguish one of these four agreements from another. It was further agreed that all the agreements made by the deceased from which royalties arose could, as regards form, be classified into one of the categories of which these four agreements are representative. The agreements were exhibited to the case and marked respectively A (i), A (ii), A (iii), and A (iv). My Lords, as regards the agreements A (i) and A (ii), there is, to my mind, no valid distinction between the present case and the case of Stainer's Executors v. Purchase ((1952) A C 280). In the present case Cheyney was remunerated for writing books which were "to be written" : in Stainer's case Leslie Howard was remunerated for producing or directing or acting in films. It is possible to point to differences in the form which the remuneration took, but in each case the remuneration was for professional activities to be carried out by a man carrying on a profession. In the case of A (iii) it is not quite clear whether the four works to be "delivered" to the publishers had been written or were about to be written, but I see no reason for assuming, in favour of the Crown, that they had already been written, and the Attorney‑General did not at any time seek to distinguish this agreement from A (i) and A (ii). Agreement A (iv) is of a some what different nature, in that it related to a work already published entitled "Making Crime Pay." By the agreement, the author granted to' the publishers the sole licence to translate the work and publish, it in volume form in the French language. It could possibly be said that the author had finished his professional activity in regard to the book by writing it, and that the sums to be received under this agreement were income arising from property, namely, from the copyright in the book, within section 122 of the Income‑tax, Act, 1952, and were taxable under section 123 of the same Act, either as coming within Case III or, as the publishers were a French firm, within Case V. However, no point of this kind was raised by the Crown during the author's lifetime, and the Attorney‑General did not seek now to draw any distinction between this agreement and the other three. I think it can fairly be said that these sums had "the essential quality of being the fruit of his professional activity", to quote from the speech of Viscount Simonds L. C. in Stainer's case ((1952) A C 280, 289) and none the less so because they were received in respect of a completed work. As Jenkins L. J. put it, in delivering the judgment of the Court of Appeal ((1958) Ch. 345, 372) : "It" (that is, the copyright) "was brought into existence by his professional activity in the writing of books and by nothing else, and it was just as much part of his profession to turn his literary labours to account by licensing the copyright he had created to publishers as it was to write the books in which the copyright subsisted". If the sums in question had the quality of professional earnings during the author's lifetime. I cannot see that his death in any way changed their quality. I would dismiss the appeal. LORD REID.‑My Lords, Peter Cheyney, who died on June 26, 1951, was a well‑known author. At that date he had some 50 or 60 agreements with publishers in this country and abroad, under which he was entitled to receive from time to time royalties and other sums. During his lifetime he was assessed to Income‑tax under Case II of Schedule D in respect of his earnings in his profession of authorship. The "full amount of the profits or gains" of his profession was computed by taking as his receipts in each year all sums falling due to be paid to him during the year under these agreements, and deducting all allowable expenses incurred by him during the' year. No question arises as to tax due in respect of the period before his death. Royalties due under these agreements continued to be paid to Cheyney's executor after his death, and in, respect of these royalties assessments under Schedule D were made on the executor totalling 10,000 for the year, 1951‑52 and ' 18,000 for the year 1952‑

53. The executor, the respondent in this appeal, appealed against these assessments, and the assessments were discharged by the Com missioners. An appeal against this decision by the present appellant was dismissed by Harman, J., and. a further appeal was dismissed by the Court of Appeal on October 21, 1957. A tax‑payer who in any year earns a right to receive money by trading or by the exercise of his profession may not receive that money or it may not become payable during the year when he acquired the right to receive it. So, when his trade or profession is discontinued, there may be sums, often large sums, outstanding. And there may also be expenses allowable as deductions which he has not yet paid. The question may then arise whether or to what extent such postponed receipts can be taken into computation for income‑tax purposes. By one method of accounting his profits or gains during each year can be computed by taking, not the sums which he has actually received during the year, but the sums which he has earned during the year. Receipts during the year which have been taken into computation in previous years as having been earned then will not swell the computation for the year in question, but this computation will take account of what has been earned during the year in question though 'not yet received. In that way, money earned during the continuance of the trade or profession but not payable or received until after its discontinuance would not escape from computation for income- tax. But that method was not adopted in the present case. Probably it could not have been adopted, if only because it was impossible to determine the amount of royalties which might ultimately accrue : any estimate of their amount would have been a mere guess. In the ordinary case of professional earnings, which are outstanding when the profession is discontinued, and which cannot be brought into computation for the period before the dis continuance, it has long been recognised that there is no provision in the Income‑tax Acts which subjects them ‑ to charge and that they therefore escape from taxation. I need only refer to the statement of the law by Rowlatt, J. in Bennett v. Ogston (15 T C 374. 378) quoted with approval by my noble and learned friend, Lord Simonds, in Stainer's Executors v. Purchase (1952 A C 280, 288) : " When a trader or a follower of a profession or vocation dies or goes out of business and there remain to be collected sums owing for goods supplied during the existence of the business or for services rendered by the professional man during the course of his life or his business there is no question of assessing those receipts to income‑tax they are the receipts of the business while it lasted, they are arrears of that business . . . . . and are taken to be covered by the assessment made during the life of the business, whether that assessment was made on the basis of bookings or on the basis of receipts." That does not expressly deal with the case where the sums remaining to be collected are of such a character that they could be regarded as annual payments. Turning to the facts of the present case, it appears to me that the first question to be determined is whether these royalties were professional earnings assessable under Case II during Cheyney's lifetime ; and the second question is whether, if they were profes sional earnings, they also had some other character by virtue of which they could be assessed to tax under some provision other than Case II either during his lifetime or later. There is no dispute about the first question. These royalties were in fact assessed under Case II in so far as they were payable during Cheyney's lifetime. It is not suggested that that was wrong, and I think it was clearly right. One way, and perhaps the com menest way, for an author to make money out of his profession is to make agreements with publishers under which he receives royalties. And it appears to me, to be impossible to argue that though an instalment of royalties payable the day before Cheyney died was part of his professional earnings, an instalment payable the day after his death was not. It might have some other character in addition, but it could not cease to be a part of his professional earnings. The question, then, is whether these royalties had a dual character : whether in addition to being professional earnings they were of such a character that they could be assessed under some other Case than Case II. The assessments which the Crown seeks to support were, simply made under Schedule D, and they would be valid if they could be justified under any case of that Schedule: The Attorney‑General expressly admitted that during Cheyney's lifetime they could not have been assessed under any Case other than Case II. In my opinion, that admission was properly made, and for this reason. A tax‑payer carrying on a profession is entitled to set against his gross receipts all allowable expenses which he has incurred in earning those receipts : he can do that if assessed under Case II, but he could not do it otherwise. The appellant's case must therefore be that, although royalties payable before Cheyney's death could not be assessed under any Case other than Case II, royalties payable after his death can be so assessed. It is quite possible for receipts to have such a dual character that the Crown can elect under which Case they shall be assessed. We were referred to some of the insurance company cases, where a large part of the receipts of the company consisted of dividends or interest from investments. Instead of assessing the company on the profits of his business under Case I the Crown is entitled to assess under Case III on the amount of the annual payment received by the company.‑ But that right does not arise only after the company has ceased to carry on business. The nature of the payments received by the company is such as to bring there within the scope of Case III whether the company is carrying on business or not. But in the present case it is admitted that that is not so: the nature of these royalties is such that they cannot be assessed under any case other than Case II so long as the author is following his profession. But it is argued that they can 'be so assessed after the profession is discontinued. The nature of the royalties does not change on the death of the author; they are still payable under the same contracts, and, 'as I have said, they are still part of professional remuneration. But the circumstances are different because the profession has been dis continued. No further expenses allowable as deductions can be incurred, and assessment under Case II is no longer possible. Can this change of circumstances bring within the scope of Case III payments which had formerly not been within its scope ? That question arose in Stainer's case (1952 A C 280). But, before I proceed to examine that case, it may be well to see what are the differences between the facts in the present case and the facts in that case. In both cases the payments in respect of which the executors were assessed were payments of royalties due under contracts made by the deceased which only became payable after the date of his death. In Stainer's case, they were royalties due to a producer of films : in this case they are royalties due to a writer of books. In both cases earlier payments under the same contracts made during the lifetime of the deceased were admittedly part of his professional earnings. In Stainer's case, the payment had been earned chiefly by Stainer, who was known professionally as Leslie Howard, giving his professional services as a producer and actor there was also an element of copyright in the case, but I am prepared to regard Stainer's case, as simply a case of payment for professional services, the payment taking the form of royalties spread over a considerable period. In the present case there was an element of rendering professional services because some of the contracts were contracts under which Cheyney undertook to write books for publication by the publishers. But much stress was laid by the appellant on the contention that the contracts were really means adopted by Cheyney for exploiting property which he had created, his copyright in books which be had written. Some of the contracts were of that character, and, if the appellant cannot succeed with regard to these contracts, he certainly cannot succeed with regard to the others. So I shall consider the present case on the footing most favourable to the appellant, i.e., that the sums assessed were instalments of fees payable under contracts obtained by Cheyney in exploiting his copyright in books written by him by licensing publishers to publish or translate them. But I must add that, even so, there is an essential difference between that case and the case of a person who buys a copyright from the author and then proceeds to exploit it by granting licences to publishers. Where the author exploits his own copyright by granting licences to publishers the fees which he receives are admittedly part of his professional earnings, and are not taxable as annual payments under Case III, at least during his lifetime. But, where the author sells his copyright, the price which he receives is part of his professional earnings, and the fees which the purchaser gets from granting licences to publishers are from the beginning taxable as annual payments to him irrespective of whether the author is still practising his profession ; they are no part of the author's professional earnings. In Stainer's case (32 T C 367), the majority of the Court of Appeal held that the payments due after Howard's death were taxable under Case III as annual payments. I think it useful to take some quotations from the judgments because they appear to me to assist in determining what was really decided in that case in this House Evershed M. R. said (32 T C 367) : " The question in each case must be whether the sums in question, once they have ceased to be capable of taxation under Case II by reason of the fact that the professional man who acquired the right to receive them has died or ceased to exercise his profession, nevertheless have such characteristics as fairly bring them within the compass of the relevant words of Case. III," and Somervell L. J., (as he then was) said (32 T C 367, 394) : " Accepting in favour of the executors the Commissioners' view that these sums, if paid, could not, while Mr. Howard was exercising his profession, have been assessed otherwise than under Case II because they were not in his hands `pure income profit' [see Asher v. London Film Produc tions, Ltd. (1944 K B 133)], it does not, in my opinion, follow that their nature may not change if the profession has ceased before they become payable and are paid." Jenkins, L. J., dissented, and with regard to his judgment my noble and learned friend, Lord Simonds, said, with the concurrence of all noble Lords present (1952 A C 280, 287) :, " I am con scious that I can add little or nothing to the dissenting judgment of Jenkins, L. J., with every word of which I agree." I quote two passages from this judgment (32 T C 367, 402) : " It appears to me that the argu ment for the Crown involves not merely the exercise of an option but the assertion of a new and distinct liability to tax arising upon the discontinuance of the profession with respect to payments on account of the shares of receipts or profits received after such dis continuance. Perhaps the best way of putting the point is to describe the shares of receipts or profits as possessing the dual character of (a) professional earnings and (b) annual payments, the argument being in effect that so long as the profession was carried on their character as earnings precluded their assessment as annual payments under Case III of Schedule D, but that on the discontinuance of the profession this obstacle was removed and the sums in question became thenceforth simply annual payments to which the previously potential but suspended liability to tax under Case III of Schedule D, thereupon attached." Having dealt with Bennett v. Ogston (15 T C 374), he noted that the Solicitor‑General had argued that the instalments were income earned by the exploitation of the films after Howard's death just as the interest in Bennett v. Ogston, was income earned after the moneylender's death by the use of the money lent in his lifetime. He then said, after dealing with the case of an income‑bearing asset received as remuneration, a point to which I shall return later (32 T C 367, 404) : "I think it is equally clear that the assessment to tax of the profits of a profession under Case II of Schedule D 'down to the date of discontinuance is to be taken as covering all remuneration earned in the course of such profession whether received prior to or after such discontinuance and that, the liability to tax being thus exhausted so far as remuneration is concerned, nothing which is in truth remuneration so earned can afterwards, be charged to tax merely because the mode of ascertaining and paying it is such that it might have been charged to tax under some other Case if it had not been remunera tion so earned." In this House my noble and learned friend Lord Simonds, after approving the principle stated by Rowlatt, J. in Bennett v. Ogston (15 T C 374), expressed a doubt whether that principle was correctly applied in that case a doubt which I share. He then said, with regard to the instalments, (1952 A C 280, 289) : " It appears to me wholly irrelevant that, they were not payable until after his death and equally so that they were not and could not be quantified until after that event. They retained the essential quality of being the fruit of his professional activity . . . . . . The source of these payments was the professional activity of Mr. Howard : it was never anything else. It is true that his remuneration took the form of annual payments which, if other conditions were satisfied, might fall within Case III. But other conditions were not satisfied, for ex‑hypothesis the source of the remuneration was the exercise of a profession falling within Case II." In my opinion, the ground of judgment in this House in Stainer's case (1952 A C 280), was that payments which are' the fruit of professional activity are only taxable under Case II and cannot be taxed under Case III', even when it is no longer possible when they fall due to tax them under Case II, and when looked at by them selves and without regard to their source they would fall within Case III. I am not sure that I fully appreciate the reasons for the decision, but I have no doubt that that is what was decided, and I am bound by that decision whether I agree with it or not. The basis on which the appellant seeks to distinguish Stainer's case (1952 A C 280), is, if I understood the argument rightly, that although payments under the agreements in this case bad to be treated as falling within Case II and as excluded from Case III so long as Cheyney was alive, they were not truly the fruit of his professional activity but were truly the fruit of his exploitation of property. I did not understand the Attorney‑General to argue that these payments changed their character when Cheyney died : his argument was that they never had been the fruit of professional activity. I must confess that I do not understand how a payment which is not truly the fruit of professional activity can fall within Case II at any time. Section 123 (1) of the Act, provides : "Tax under Schedule D shall‑ be charged under the following cases respectively, that is to say . . . . . . Case II‑tax in respect of any profession or vocation not contained in any other Schedule." I cannot see how "tax in respect of any profession" can be charge able in respect of 'a sum which is not the fruit of a professional activity but is the fruit of something else : it appears to me that, once it is established that these payments were properly chargeable under Case II, it necessarily follows that they must be regarded as the fruit of professional activity and, if that is so, this case appears to me to be indistinguishable from Stainer's case ((1952) A C 280). Finally, I think that I ought to examine certain statements in Stainer's case ((1952) A C 280) about income‑bearing assets because the appellant relied on them. Jenkins, L J., said (32 T C 367, 404) : " I think it is clear that if, in the course of a profession, an income‑bearing asset is received as remuneration, the income produced by that asset after the discontinuance of the profession may be taxed as such, just as the interest accruing after the death of the moneylender was taxed in Bennett v. Ogston (15 T C 374)". Lord Simonds said ((1952) A C 280, 289) : " I can well understand that if a professional man received as remuneration for his services the sum of 1,000 2 percent. Consols and retains them, he will suffer deduction of tax from the interest." And Lord Asquith said (Ibid. 291) : " If Mr. Leslie Howard had stipulated for payment in blocks of shares or bonds, or any other instruments which by their independent vitality generate income, the dividends or interest might well have been taxable in the hands of his executors." To my mind, if a person receives as part of his remuneration an asset which yields income, that income is not the fruit of his professional activity any more than it would be if that person had received his remuneration in money and had then used that money to buy that asset. From the moment when the asset comes into his hands, the source of any income which it yields is that asset and not his professional activities. There would be no question of the income falling under Case II during his life and then being taxable under some other Case after his death. The receipt by a professional man of income yielded by an asset which 'has been transferred to him is not a method of gaining professional income whether or not the asset came to him as professional remuneration. But for an author exploitation of his copyright is a method of gaining professional income. Therefore this matter is of no assistance to the appellant's case. I am of opinion that this appeal should be dismissed. LORD TUCKER.‑My Lords, I agree for the reasons which have been stated that this case is indistinguishable from the decision of this House in Stainer's Executors v. Purchase and that accordingly this appeal should be dismissed. LORD KEITH OF AVONHOLM.‑My Lords, in the view that I take of this case any differences in the specimen agreements produced are immaterial. All are agreements giving certain rights to publishers in respect of books written or to be written in return for remuneration by way of royalties (or sums in advance of royalties) on the books when published and sold. Three of the agreements may be regarded as agreements assigning to publishers under certain conditions, the copyright in certain books written or to be written and the fourth as conferring rights of translation and publication in French of a book already published in English. It is conceded that during his life Peter Cheyney was assessed to tax on the royalties obtained under these agreements, under Case II of Schedule D, as a person carrying on the profession of author. The question is whether royalties coming in after his death continue to attract tax. In Stainer's case (1952 A C 280) it was held that the remuneration accruing after death for services given during life as actor and producer did not attract tax as the profession in respect of which the profits and gains were taxable had ceased at the death. The Court of Appeal, Harman, J., and the General Commissioners have all taken the view that this case is governed by Stainer's case and that the assessment should be discharged. But this case cannot, I think, be treated as a case of remuneration for services rendered. Some of the agreements relate to books already written and the others relate to rights to be conferred in books when they come to be written. An author is not, in my opinion, making a contract for services by entering into an agreement for the publication of a book already created by him. The position may approximate to a contract for services where the author binds himself to write a book and to transfer the copyright to a publisher, but I do not find in the agreements here any obligation to write a book. Cheyney's own interests were no doubt sufficient to secure that the book, or books, would be written. I prefer to treat the case from the angle of approach taken by the learned Attorney‑General that these are agreements relating to property of Cheyney already in existence or to come into existence. The case for the Revenue, as I understand it, it is that the activities of Cheyney during his life had a dual character. They were the exercise of the profession of an author in writing books and they were at the same time dealing with the property in the books so created. During his life, or until his retirement, it was the professional aspect of his activities with which the Revenue was concerned and in respect of which he was taxed. With his death this aspect of the matter terminated, or disappeared, and we are left, it is said, only with property in the shape of the books and copyrights created by him. These, so the argument runs, are income‑producing assets, on the income from which tax should be levied as income of property. Thus during his life Cheyney was assessable under Case II, of Schedule D, and on his death the royalties from the contracts made by him arising out of the publication of his books were taxable under Case III as annual payments or alternatively under Case VI, or, in the case of royalties accruing abroad, under Case V as income from possessions out of the United Kingdom. The learned Attorney‑General expressly disclaimed any right of the Revenue to opt between Case II and Case III during Cheyney's life. I have reached the view that the contentions for the Revenue fall to be rejected. But first I would emphasise that we are con cerned only with contracts made by Cheyney. If there are any un- exhausted rights in Cheyney's books which his representatives could turn to account after his death, quite different considerations would arise with which we are not concerned in this case. I turn accordingly to consider what is involved in the pro fessional activities of an author during his lift;. An author writes books generally for profit or in the hope of profit. It is only when they make a profit that any question of assessing him on the profits of a profession can arise. It is only by exploiting the work of his brain and his pen that he can make any professional Income. The methods of exploitation may take various forms. He may arrange for publication, of his works and retain the profits of sale, after deduction of publishers' and. printers' and other expenses, for himself. He may sell the copyright of his works in return for lump sum payments, or for royalties on sales, or for both. He may grant use of his works for translation, for film or stage pro duction purposes, for broadcasting or in other ways. He may accept commissions to produce books on agreed terms. Cheyney seems to have adopted all these methods, except possibly the first, according to 'the specimen agreements put before us. In my opinion, whichever of these methods an author adopts he is doing no more than pursuing his profession with a view to pecuniary profit. It would be absurd to treat his professional activities as at an end with the production of his typescript, or manuscript, and to treat the rest as merely turning property to gain. An author, unlike an artist, necessarily looks to large‑scale reproduc tion of his book and the greater the number of copies sold the greater will be his income if he has retained the rights in his work in his own hands or has sold them on a royalty basis. He may, of course, sell the rights for a lump sum, and history records many instances of an author having thus disposed of the fruits of his labour for a very inadequate sum. In this last example the sum received will be a receipt of his profession in respect of which he will be taxable. Equally he will be taxable on receipts in the shape of royalties received, or on the profits of publication where he has retained his rights in the book. It is impossible, in my opinion, to treat these receipts differently for Income‑tax purposes according to the form which they take. They are stamped throughout as the receipts from a professional activity and they do not lose that character on the death of their producer. In principle there is no difference between the case where an author sells the copyright and the case where he retains the copy right. What he has produced is not copyright but a book. Copyright is an incident attached by law to the book, fortifying that which he has produced and giving it a value which it would not have if it could be reproduced illegitimately in the shape of pirated editions. The property, then, from which the author obtains his income is the work produced by him and the method by which that work can be turned to profit during his life is in his own hands and is but a projection of his professional activities, the means by which he earns his livelihood from his professional work. If I take the case where he retains the rights in his work and takes the profits to himself, it seems to me clear that when he dies any profits that come in afterwards from any issue published during his life are still the profits of what was his profession. It is, not possible to say that they are mere income of property, "pure income profit" as it has been called. They are profits not only from writing the book but from bearing all the expenses of selling the book to the public, including the expenses of printing and publishing. They are akin to the profits of a trade but are more properly called the profits of a profession. So it is, in my opinion, where he sells his rights in return for royalties. It is quite unreal to regard these royalties merely as a return from property. They are the reward for all he has put into his work‑his labour, his thought, his skill as a writer‑and the expenses incurred in creating his book. The position is materially different where rights in a book in return for royalties are granted by another than the author. The elements to which I have referred are entirely absent in such a case. The book is there already made and the idea of royalties as merely the income of property is a more intelligible conception. In Cheyney's case the position is, in my opinion, accurately and concisely summed up in the words of Jenkins L.J. when he says ((1958) Ch. 345, 372 ; 35 ITR 494,517) : "It was just as much part of his profession to turn his literary labours to account by licensing the copyright he had created to publishers as it was to write the books in which the copyright subsisted." He was treated by the Revenue as earning money in the exercise of his profession by means of the contracts he made. It is not now said, nor could it, in my opinion, be said, that any change in the character of the payments received took place on his death. What is said' is that what was latent became patent when his professional activities ceased on his death. But for the reasons I have given there is, in my opinion, no sound ground for this contention. The difficulties in this and similar cases arise from the fact that assessments to tax are made on a receipts basis, instead of on an earnings basis. It may be that in some professions no more satisfactory basis can be adopted. If the result be, as was suggested, that a large fund of income is thus to go untaxed the remedy would seem to lie in legislation. This is not a Stainer's case ((1952) A C 280), but the principle of that case, I think, applies. I would dismiss the appeal. Appeal dismissed. Solicitors : Solicitor of Inland Revenue ; Frere Cholmeley & Nicholsons.