O'Connell v Tara Mines Ltd
| Jurisdiction | Ireland |
| Judge | Mr. Justice Roderick H. Murphy |
| Judgment Date | 04 April 2001 |
| Neutral Citation | [2001] IEHC 60 |
| Court | High Court |
| Date | 04 April 2001 |
[2001] IEHC 60
THE HIGH COURT
BETWEEN
AND
Citations:
INCOME TAX ACT 1967 S428
CORPORATION TAX ACT 1976 PART IV
CORPORATION TAX ACT 1976 S58(9)
FINANCE (TAXATION OF PROFITS OF CERTAIN MINES) ACT 1974
CORPORATION TAX ACT 1976 S54
CORPORATION TAX ACT 1976 S58(3)
CORPORATION TAX ACT 1976 S1
FEDERAL COMMISSIONERS OF TAXATION V UTAH DEVELOPMENT COMPANY 1996 76 ATC 4119
DE BRUN (INSPECTOR OF TAXES) V KIERNAN 1981 IR 117 1981 3 ITR 19
FEDERAL COMMISSIONER OF TAXATION V BROKEN HILL LTD 1969 120 CLR 240
MARA (INSPECTOR OF TAXES) V HUMMINGBIRD LTD 1982 ILRM 421
EDWARDS V BAIRSTOW 1956 AC 14
O CULACHAIN (INSPECTOR OF TAXES) V MCMULLEN BROTHERS LTD 1995 5 ITR 200 1995 2 ILRM 498
CLARK V BRITISH TELECOM PENSION SCHEME TRUSTEES 2000 STC 222
FINANCE (PROFITS OF CERTAIN MINES)(TEMPORARY RELIEF FROM TAXATIONH) ACT 1956
FINANCE ACT 1967 S9
FINANCE (PROFITS OF CERTAIN MINES)(TEMPORARY RELIEF FROM TAXATION) ACT 1956 S15(1)(b)
FINANCE (PROFITS OF CERTAIN MINES) ACT 1974
O'CONNELL V FYFFES BANANA PROCESSING LTD UNREP SUPREME 24.7.2000
MCGRATH V MCDERMOTT 1988 IR 258 1988 ILRM 647 1988 3 ITR 683
MCCANN V O CULACHAIN 1986 3 ITR 304
INCOME TAX ACT 1967 S428(6)
BROSNAN V MUTUAL ENTERPRISE LTD 1997 3 IR 257
FINANCE ACT 1980 S50(2)
CORPORATION TAX ACT 1996 S 96(2)
CORPORATION TAX ACT 1976 S58(4)
KERRANE V O'HANLON LTD 1987 3 ITR 633
UTAH DEVELOPMENT COMPANY V FEDERAL COMISSIOMER OF TAXATION 1995 75 ATC 4103
FEDERAL COMMISSIONER OF TAXATION V UTAH DEVELOPMENT COMPANY 1996 76 ATC 4119
MP METALS LTD V FEDERAL COMMISSIONER OF TAXATION 117 CLR 631
MARBRIDGE MINES LTD V MIN FOR NATIONAL REVENUE 1971 71 DTC 5231
REVENUE COMMISSIONERS V O LOINSIGH 1994 5 ITR 98
O'KEEFFE V BORD PLEANALA 1992 ILRM 69
CRONIN V STRAND DARIES LTD 1985 3 ITR 441
MCCAUSLAND V MIN FOR COMMERCE 1956 NI 367
IRISH AGRICULTURAL MACHINERY LTD V O CULACHAIN 1987 IR 458
IRISH AGRICULTURAL MACHINERY LTD V O CULACHAIN 1990 1 IR 535 1989 ILRM 478
CORPORATION TAX ACT 1976 S58(1)
FINANCE (TAXATION OF PROFITS OF CERTAIN MINES) ACT 1974 S(1)
Synopsis:
REVENUE
Corporation tax
Statutory interpretation - Definition of "mining operation" — Whether respondent entitled to export sales relief - Income Tax Act, 1967 section 428 - Corporation Tax Act, 1976 Part IV (2000/56R - Murphy J - 4/4/01)
O'Connell (Inspector of Taxes) v Tara Mines Ltd
The proceedings concerned the entitlement of the respondent to tax reliefs in conjunction with its mining activities. The Appeal Commissioners had found in favour of the respondent in relation to one of the issues. The Inspector of Taxes appealed. Murphy J. held that the decision of the Appeal Commissioners did not appear to be supported by the facts and allowed the appeal.
Mr. Justice Roderick H. Murphy delivered the 4th day of April, 2001
The issues in this case stated, under Section 428 of the Income Tax Act, 1967are twofold:-
(a) Is Tara Mines Limited entitled to export sales relief under the provisions of part (IV) of the Corporation Tax Act, 1976in respect of ten accounting periods ending on 31st December, 1988? Alternatively is Tara Mines Limited outside the terms of this relief by virtue of the words contained in Section 58 (9) of that Act?
(b) In computing its income for these accounting periods, is Tara Mines Limited entitled to mining development allowance under the provisions of the Finance (Taxation of Profits of Certain Mines) Act, 1974in respect of certain foreign exchange loses on its capital borrowings?
The Appeal Commissioners found in favour of Tara Mines Limited (the Company) on issue (a) and against the company on issue (b).
The Inspector of Taxes appeals by way of case stated against the decision on issue (a) The company reserves its position in relation to the decision on issue (b) pending the outcome of this appeal.
The question arose during the hearing before the Appeal Commissioners, which extended from January 1995 to July 1996, as to whether the concentrates produced by the company constitute "goods" within the meaning of part four of the Corporation Tax Act, 1976. The Inspector accepted that the concentrates are "goods" within the meaning of that part.
Section 54 of the Act defines goods as follows:-
"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."
In relation to export tax relief Section 58 (3) of the 1976 Act provides that:-
"Where a company claims and proves as respect a relevant accounting period-
…
(b) that, during the relevant accounting period, goods were in the course of trade, exported out of the State."
Section 58 (9) of the Act states that:-
"A reduction shall not be made under this section in respect of Corporation Tax payable on income from any mining operations."
A capital allowance is available for development expenditure in relation to a qualifying mine under the 1974 Act referred to above. Development expenditure is defined in Section 1 of that Act as:-
"Capital expenditure-"
(a) on the development of a qualifying mine, or
(b) on the construction of any works in connection with the qualifying mine which were such a nature that, when the mine ceases to be operated, they are likely to have so diminished in value that their value would be little or nothing, and includes interest on money borrowed to meet such expenditure, but does not include-
(c) expenditure on the acquisition of the site or the mine or the site of any such works or of rights in or over any such site,
(d) expenditure on the acquisition of a scheduled mineral asset, or
(e) expenditure on works consisting wholly or mainly for subjecting the raw product of a mine to any process accept a process designed for preparing the raw product for use as such."
The Commissioners made extensive findings - 22 in all - including many sub-findings under the heading of steps carried out in extracting the ore (7 sub-findings) and the status of processing (12 sub-findings).
This Court is, of course, bound by such findings.
These findings may be reduced to the following relevant findings on which submissions were made by the parties.
The company extracts lead and zinc ores from the earth… which are then processed to produce the finished product of lead and zinc concentrates. A major constituent (approximately 90%) of the concentrates are sphalerite and galena. Sphalerite is a naturally occurring substance containing zinc in the form of zinc sulphide. Galena is a naturally occurring substance containing lead in the form of lead sulphide. (Finding (b))
The ore contains an average of 8% zinc and 2.5% lead. All the concentrates sold by the company during the accounting periods were exported out of the State. (Finding (d))
The company's whole operation at Tara is divided into two major divisions under the management of the Production Manager and the divisions are entitled the Mining Division and the Processing Division respectively. (Each division has a separate manager who gave evidence before the Appeal Commissioners). (Finding (f))
In summary (the Manager of the Mining Division) is responsible for the exploration and development of the mine, together with the extraction of ore from the mine and its transportation to the storage tepee located on the surface. His responsibilities end at that point. The Manager of the Processing Division is responsible for all activities after the ore arrives in the tepee, including the manufacture of lead and zinc concentrates. (Finding (j))
This type of specialisation exists throughout the industry. Exploration is generally managed by Geologists, mining managed by Mineral Engineers and processing managed by Mineral or Chemical Engineers. There is some overlap, with the core professional capabilities of these specialities differing (Finding (k))
The personnel working in the Mining Division, with the exception of the Mobile Equipment Department personnel, work exclusively in that division. Likewise, Processing Division personnel do not work in the Mining Division. (Finding (m))
The steps carried out by the company in extracting the ore appear, from the further findings of the Appeal Commissioners, to extend from surface drilling, access tunnelling, blasting, excavating blasting of broken ore, crushing, back filling transferring to coarse or bin and from that to surface storage bin or tepee.
The main stages of processing appear from the three pages of findings of the Appeal Commissioners to be more complex. The first of these is as follows:-
"(1) the coarse ore is subjected to a highly sophisticated process which is carried out at the company's on-site milling plant. The object of this process is to produce precisely calibrated lead and zinc concentrates suitable for sale in other European countries."
It would appear that this finding encompasses some or all of the eleven findings which follow, in relation to the detail of processing which would seem to involve further discreet activities:-
Comminution (the reduction to minute particulars by way of further dry crushing and wet grinding),
Processing (separating galena and, then, sphalerite by way of a flotation process using organic and inorganic chemicals which react with and change the surface characteristics of the lead mineral (galena) making it water repellent.
Following that the zinc mineral (sphalerite) is floated as described for galena. The zinc concentrate is reground to produce a zinc flotation concentrate.
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