Ó Culacháin v Mcmullan Brothers Ltd

• Jurisdiction: Ireland
• Judge: BLAYNEY J.
• Judgment Date: 07 July 1995
• Neutral Citation: 1995 WJSC-SC 2953
• Court: Supreme Court
• Docket Number: [S.C. No. 104 of 1991],104/91
• Date: 07 July 1995

O CULACHAIN v. MCMULLAN BROTHERS

O'CULACHAIN (INSPECTOR OF TAXES)

v.

McMULLAN BROTHERS LIMITED

1995 WJSC-SC 2953

O'Flaherty J.

Blayney J.

Denham J.

104/91

THE SUPREME COURT

Synopsis:

REVENUE

Corporation tax

Assessment - Trade - Capital expenditure - Plant - Allowance - Entitlement - Petrol stations - Forecourt canopies - Functions of structures - Structures not buildings - Income Tax Act, 1967, s. 241 - Corporation Tax Act, 1976, s. 21 & 1st schedule, para. 6 - (104/91 - Supreme Court - 7/7/95) [1995] 2 I.R. 217 [1995] 2 ILRM 498

|O Culachain v. McMullan Brothers|

WORDS AND PHRASES

"Plant"

Company - Trade - Tax - Allowance - Entitlement - Petrol stations - Capital expenditure - Provision of forecourt canopies - Whether structures had a business function - (104/91 - Supreme Court - 7/7/95) - [1995] 2 I.R. 217 - [1995] 2 ILRM 498 - [1995] ITR 1445

|O Culachain v. McMullan Brothers|

Citations:

INCOME TAX ACT 1967 S241(1)

FINANCE ACT 1971 S26

CORPORATION TAX ACT 1976 SCHED 1 S21

O CULACHAIN V MCMULLAN 1991 1 IR 363

MARA V HUMMINGBIRD LTD 1982 ILRM 421

WIMPEY V WARLAND 1989 STC 273

EDWARDS (INSPECTOR OF TAXES) V BAIRSTOW 1956 AC 14

JARROLD V GOOD 40 TC 681

J LYONS & CO LTD V AG 1944 CH 281

YARMOUTH V FRANCE 1880 19 QBD 646

EMPLOYERS LIABILITY ACT 1880 S1

BREATHNACH V MCCANN 1984 ILRM 679

COLE BROS V PHILLIPS 1981 STC 671

DICKSON V FITCHS GARAGE 1975 STC 480

TAXES MANAGEMENT ACT 1970 S56 UK

FINANCE ACT 1971 S41(1)(a) UK

INCOME TAX ACT 1967 S241

BLAKE V SHAW JOHNS 1880 19 QBD 646

ST JOHNS SCHOOL MOUNT FORD & KNIBBS V WARD 49 TC 523

1 JUDGMENT delivered on the 7the day of July 1995 by BLAYNEY J. [NEM DIS]

2 This is an appeal against a decision of Lardner J. in a revenue case. The appellant is an inspector of taxes and the respondent (to which I shall refer as "Maxol") is the well-known Irish oil company. The issue concerns canopies in the forecourt of a petrol filling station. Maxol appealed against an assessment to corporation tax for the accounting period ended the 31st December 1988 on the grounds that they were entitled to a deduction under s. 241(1) of the Income Tax Act, 1967, as amended by s. 26 of the Finance Act, 1971, extended to corporation tax by s. 21 of the First Schedule of the Corporation Tax Act, 1976by reason of the expenditure of £70,932 in the erection of such canopies. Maxol claimed that the canopies were "plant" and it is common case that, if they were, the expense of their erection was a permissible deduction under the relevant sections. The appeal commissioners held that they were not plant. On appeal to the Circuit Court, His Honour Judge Martin held on the evidence before him that they were plant. The appellant, being dissatisfied with that decision, asked Judge Martin to state a case for the opinion of the High Court, which he duly did on the 17th November 1989. The question posed in the case stated for the opinion of the High Court was as follows:-

"The question of law for the opinion of the High Court accordingly is whether I was correct upon the evidence before me and the findings which I made in holding that the said forecourt canopies qualifies (sic) as "plant" within the meaning of section 241(1) of the Income Tax Act, 1967as amended when properly construed."

3 In a reserved judgment delivered on the 31st July 1990 Lardner J. held that Judge Martin, on the evidence before him, was correct in law in holding that the forecourt canopies qualify as "plant" within the meaning of s. 241(1) of the Income Tax Act, 1967as amended. The appellant now appeals that decision to this Court.

4 The first matter that has to be considered is the manner in which the Court should approach this type of appeal and this is very clearly set out by Kenny J. in his judgment in Mara v. Hummingbird Limited 1982 ILRM 421 at p. 426:-

"A case stated consists in part of findings on questions of primary fact. e.g. with what intention did the taxpayers purchase the Baggot Street premises. These findings on primary facts should not be set aside by the courts unless there was no evidence whatever to support them. The commissioner then goes on in the case stated to give his conclusions or inferences from these primary facts. These are mixed questions of fact and law and the court should approach these in a different way. If they are based on the interpretation of documents, the court should reverse them if they are incorrect for it is in as good a position to determine the meaning of documents as is the commissioner. If the conclusions from the primary facts are ones which no reasonable commissioner could draw, the Court should set aside his findings on the ground that he must be assumed to have misdirected himself as to the law or made a mistake in reasoning. Finally, if his conclusions show that he has adopted a wrong view of the law, they should be set aside. If however they are not based on a mistaken view of the law or a wrong interpretation of documents, they should not be set aside unless the inferences which he made from the primary facts were ones that no reasonable commissioner could draw. The ways of conducting business have become very complex and the answer to the question whether a transaction was an adventure in the nature of trade nearly always depends on the importance which the judge or commissioner attaches to some facts. He will have evidence some of which supports the conclusion that the transaction under investigation was an adventure in the nature of trade and he will have some which points to the opposite conclusion. These are essentially matters of degree and his conclusions should not be disturbed (even if the court does not agree with them, for we are not retrying the case) unless they are such that a reasonable commissioner could not draw them or they are based on a mistaken view of the law."

5 A similar view was expressed by Fox L.J. in the Court of Appeal in England in Wimpey v. Warland 1989 STC 273 at p. 280:-

"...It is necessary to be clear as to the jurisdiction of the Court. The determination of the matter is committed by statute to the Commissioners. The proceedings before the Court are not a rehearing. The Court can only interfere with the decision of the Commissioners if the decision was "erroneous in point of law" (see Taxes Management Act, 1970 section 56) whether something is "plant" for the purposes of section 41(1) (a) of the Finance Act, 1971is a matter of law. There is no precise definition of the word. In most cases the question in the end depends on fact and degree. The Court cannot substitute its own opinion if the Commissioners were properly instructed on the law and could reasonably have concluded as they did. As Lord Radcliffe said of the word "trade" in Edwards (Inspector of Taxes v. Bairstow 1956 A.C. 14 at 33:-

"...the field ... is a wide one and there are many combinations of circumstances in which it could not be said to be wrong to arrive at a conclusion one way or the other. If the facts of any particular case are fairly capable of being so described ... it necessarily follows that the determination of the Commissioners ... that a trade does or does not exist is not "erroneous in point of law"; and, if a determination cannot be shown to be erroneous in point of law, the statute does not admit of its being upset by the Court on appeal."

6 But on appeal the Court may intervene where it appears on the face of the case stated that the Commissioners have misunderstood the law; or where it appears that no person acting judicially and properly instructed as to the relevant law could have come to the determination reached."

7 In the light of these statements of the law it seems to me that when a court has before it a case stated seeking its opinion as to whether a particular decision was correct in law, the following principles apply (I refer in them to a case stated by a judge, as is the position here, but they apply equally where the case is stated by the appeal commissioners or by any other party):

8 (1) Findings of primary fact by the judge should not be disturbed unless there is no evidence to support them.

9 (2) Inferences from primary facts are mixed questions of fact and law.

10 (3) If the judge's conclusions show that he has adopted a wrong view of the law, they should be set aside.

11 (4) If his conclusions are not based on a mistaken view of the law, they should not be set aside unless the inferences which he drew were ones which no reasonable judge could draw.

12 (5) Some evidence will point to one conclusion, other evidence to the opposite: these are essentially matters of degree and the judge's conclusions should not be disturbed (even if the Court does not agree with them, for we are not retrying the case) unless they are such that a reasonable judge could not have arrived at them or they are based on a mistaken view of the law.

13 In the instant appeal no issue was taken by the appellant with the findings of fact made by Judge Martin in the case stated, which were as follows:-

"4. Based upon the evidence of Mr. Noonan, I made the following findings:-"

14 a "(a) The appellants are and have been for a number of years engaged in the business of selling to various filling stations in respect of which franchises have been granted to individuals, their oil products consisting in the main of petrol and diesel.

15 (b) The appellants" customers are mainly but not confined to individual motorists.

16 (c) The appellants are the major Irish Oil company with approximately ten per cent of the market.

17 (d) The appellants" business rivals are large multi-nationals including Texaco, Shell and Esso.

18 (e) Since the commencement of the 1980s the sale of petrol to the public has become highly competitive indeed, and that although stamps have been introduced in the 1980s and credit cards became acceptable in 1985,...