CITY of DUBLIN STEAM PACKET COMPANY v O'BRIEN (Surveyor of Taxes)

• Jurisdiction: Ireland
• Judgment Date: 28 June 1912
• Date: 28 June 1912
• Court: King's Bench Division (Ireland)

NO. 331.-HIGH COURT OF JUSTICE, IRELAND (KING'S BENCH DIVISION).-

CITY OF DUBLIN STEAM PACKET COMPANY

and

O'BRIEN (Surveyor of Taxes)

Income Tax (Schedule D). - Profits. - Deduction. A Company is empowered by Act of Parliament to raise money upon mortgage for the purpose of carrying out a Government contract, but is required by the same Act to establish a sinking fund for the extinction of the mortgage debt. A sum is to be set aside for payment into the sinking fund out of each quarterly payment received under the contract or out of other moneys belonging to the Company.

Held, following the decision in Mersey Docks and Harbour Board v. Lucas, that the sums thus set aside are not allowable as a deduction in arriving at the Company's assessable profits.

1. At a meeting of the Commissioners for the Special Purposes of the Income Tax Acts, held in the Custom House, Dublin, on the 28th November, 1911, for the purpose of hearing Appeals, The City of Dublin Steam Packet Company (hereinafter called the Appellants), whose Office is situate on Eden Quay, Dublin, appealed against assessments made upon them under Schedule D of the Act 16 and 17 Vict., ch. 34, for the year ended 5th April, 1912, as well as for earlier years in respect of the profits of the business carried on by them.

2. As there is only one-and that the same-point in dispute as regards each and all of the assessments under appeal, it has been thought desirable, with a view to simplifying the matter as far as possible, and particularly with the object of saving the time of the High Court of Justice, to restrict the statement of the case to the year ended 5th April, 1912, it being of course agreed that the ultimate decision of the Court shall apply to all the years for which assessments are under appeal.

3. The assessment for the year ended 5th April, 1912, viz., £56,623, less an allowance of £25,615 for wear and tear, was based on the average profits of the three years ended 28th February, 1911, and the sole ground of appeal is that certain sums, viz., £8,000 each half year, as set forth in the accounts, paid into the Sinking Fund established by Section 10(1) of the City of Dublin Steam Packet Company's Act, 1895 (58 and 59 Vict., cap. cxxxiii.), have not been allowed as deductions in arriving at the assessment.

4. The Appellants claimed that the payments in question should be allowed as a deduction in arriving at their assessable profits, for the reason that Section 10(1) of the Act referred to in paragraph 3 of this Case, constituted such payments a statutory charge on the annual Post Office subsidy (so called), and other available moneys of the Company, the Appellants being merely the "channel" through which the moneys-in no sense "profit"-were to be transmitted from the Postal Authorities to the Mortgagees.

It was contended-alternately-that the sums in question were necessarily expended in carrying on the Appellants' business, the main profits of which were attributable to the Post Office contract, and that such sums were in no sense payable out of profits or gains.

5. The Appellants referred-inter alia-to the provisions of Section 7 of the Act of 1895, as also to Clauses 16 and 20 of the contract with the Post Office, dated 1st July, 1895 (videparagraph 7), of this Case.

6. The Surveyor of Taxes, who appeared for the Crown, contended that the payments were not admissible deductions for the purpose of arriving at the Appellants' liability under Schedule D.

7. The following documents, copies of which are hereunto annexed1, form part of the Case:-

The City of Dublin Steam Packet Company's Act, 1895 (58 & 59 Vict., cap. cxxxiii).

The Contract (The City of Dublin Steam Packet Company and Her Majesty's Postmaster-General), dated 1st July, 1895.

The reports and accounts of the City of Dublin Steam Packet Company for the six half-years ended 31st August, 1908, 28th...