Charles Mccann Ltd v Ó Culacháin Inspector of Taxes

• Jurisdiction: Ireland
• Judge: Miss Justice Carroll
• Judgment Date: 01 May 1985
• Neutral Citation: 1985 WJSC-HC 1009
• Docket Number: 62 O.R./1984,[1984 No. 620R]
• Court: High Court
• Date: 01 May 1985

1985 WJSC-HC 1009

The High Court

62 O.R./1984

CHARLES MCCANN LTD v. O'CULACHAIN INSPECTOR OF TAXES

Revenue

Between/

Charles McCann Limited

Appellant

and

S. O'Culachain, Inspector of Taxes

Respondent

Citations:

CORPORATION TAX ACT 1976

CORPORATION TAX ACT 1976 PART IV

CORPORATION TAX ACT 1976 S54

CORPORATION TAX ACT 1976 S54(1)

CORPORATION TAX ACT 1976 S54(2)

INSPECTOR OF TAXES V KIERNAN 1981 IR 117 1982 ILRM 13

MCCAUSLAND V MIN COMMERCE 1956 NILR 36

Synopsis:

REVENUE

Corporation tax

Relief - Manufactured goods - Export - Bananas - Fruit ripened in the State by special artificial process - Bananas not manufactured - Corporation Tax Act, 1976, s. 54 - (1984 No. 620R - Carroll J. - 1/5/85).

Charles McCann Ltd. v. O Culachain

WORDS & PHRASES

"Manufactured"

Revenue - Corporation tax - Relief - Manufactured goods - Export - Bananas - Fruit ripened in the State by special artificial process - Bananas not manufactured - Corporation Tax Act, 1976, s. 54 - (1984 No. 620R - Carroll J. - 1/5/85).

Charles McCann Ltd. v. O Culachain

1 Judgment of Miss Justice Carroll delivered on the 1st day of May, 1985 .

2 The matter for determination in this case is whether the process used by the appellant for ripening bananas constitutes manufacturing within the State for the purpose of Part IV of the Corporation Tax Act 1976(referred to as the 1976 Act). In the context of this case, relief from Corporation Tax under Part IV of the 1976 Act arises under Section 54 thereof.

3 Subsection (1) provides:-

"In this Part "goods" means goods manufactured within the State by the person who exports them or some of them and who in relation to the relevant accounting period is the company claiming relief under this Part:"

4 The proviso to that subsection does not apply.

5 Subsection (2) provides:-

6 "The definition of "goods" contained in subsection (1) shall include –

7 (a) fish produced within the State on a fish farm; and

8 (b) cultivated mushrooms, cultivated within the State,

9 and, in a case in which books or greeting cards are printed within the State otherwise than by their publisher and they or some of them are exported by their publisher (not being a case to which the proviso to subsection (1) applies), the books or greeting cards, as the case may be, shall be regarded, for the purposes of subsection (1), as having been manufactured within the State by their publisher."

10 Subsection (3) does not apply.

11 The facts admitted or proved before the learned Circuit Judge are set out in detail in the case stated. While all those facts are relevant, the following is an extract and summary of them.

12 The bananas come from Ecuador and Colombia. They are harvested and transported to Ireland in a green unripened state.

13 Bananas are ripened artificially by ethylene gas in specially constructed and equipped ripening rooms (costing £300,000-00). The process requires special expertise but not professional qualifications. It normally takes between four to nine days, sometimes up to twelve days. The duration of the process can be predetermined depending on the maturity and physical condition of the bananas and the required time of delivery to the wholesaler/retailer.

14 The ripening process has two stages. The initial stage is to bring the fruit to a uniform temperature. This stage requires careful monitoring of temperature and humidity. At a certain point, determined under the control of a skilled manager, the temperature must be reduced and the fruit enters its second stage. Gas is introduced into the chamber, and again, careful control is required. The gas penetrates the cells of the fruit and causes the ripening process to set in earlier than it would normally do. Constant testing is necessary to ensure the ripening process results in a marketable product.

15 Prior to 1972 a different method of ripening was used. Between 1905 and 1972 instead of using ethylene gas, naked gas jets were used in the ripening process and in some cases less sophisticated methods, such as throwing rotten fruit into the ripening rooms, were used.

16 If bananas were allowed to ripen naturally off the plant the quality would be variable, and the process too haphazard for orderly marketing so that economic losses would be enormous. It was the opinion of Mr. Niall McCann, Managing Director of the appellant that bananas ripened naturally in their own environment do not have the same degree of flavour as bananas ripened artificially.

17 It was held by the learned Circuit Judge that the bananas in question were processed in this country but that in order for goods to be manufactured within the meaning of Section 54 of the 1976 Act they have to be manufactured in this country from start to finish. Where a manufacture is partly in this country and partly in another, it does not satisfy the requirements of the Section. The learned Judge held that he could not regard the bananas as manufactured although he regarded them as very much processed in this country.

18 The actual question of law for the opinion of the Court is whether notwithstanding the finding of fact that the bananas were processed in this country by the appellant, the learned Circuit Judge was correct in holding that the ripened bananas were not goods within the meaning of Section 54 of the 1976 Act and, accordingly, that the appellant was not entitled to relief under Part IV of the 1976 Act for the accounting period ending the 31st October, 1978.

19 The question breaks into two elements:-

20 (1) Whether the process described in the case stated is a manufacturing process so as to bring the goods within the meaning of Section 54 and

21 (2) Whether the raw material or natural product for the process must be produced within the State.

22 There is no controversy as to the second element in the question. Both parties agree that the import of the natural product or raw material does not per se prevent relief being claimed under Part IV. But there is disagreement as to whether the ripened bananas are goods "manufactured within the State" within the meaning of Section 54 and it is this element of the question which I have to decide.

23 There is no statutory definition of the word "manufacture" contained in the Act.

24 The process of ripening to which the green bananas are subjected is an artificial process. It produces a different end result to bananas left to ripen naturally, both in relation to uniformity and flavour. But is it a manufacturing process?

25 In Inspector of Taxes .v. Kiernan 1982 I.L.R.M. 13 which concerned the interpretation of a taxation statute, the Supreme Court applied three basic rules of interpretation.

26 (1) If the statute is directed to the public at large, the word or expression should be given its ordinary or colloquial meaning.

27 (2) When a word or expression is used in a statute creating a penal or taxation liability, it should be construed strictly.

28 (2) When the word is a simple word which has widespread and unambiguous currency, the Judge's own experience of its use should be drawn on to construe it.

29 Applying those rules:-

30 (1) The statute is directed to the public generally and accordingly the word "manufacture" should be given the meaning which an ordinary member of the public would...