Cunard Steamship Company Ltd, v.Revenue Commissioners
| Jurisdiction | Ireland |
| Judgment Date | 01 January 1932 |
| Date | 01 January 1932 |
| Court | Supreme Court (Irish Free State) |
High Court.
Supreme Court.
Revenue - Income tax - Corporation profits tax - Shipping company - Carriage of passengers to America - Tickets purchased in America - Passengers embarking at port in Irish Free State - Where trade exercised - Contract, where made - Steerage passengers - Contract ticket in form prescribed by British Board of Trade - Merchant Shipping Act,1894 (57 & 58 Vict. c. 60), sect. 320 - Income Tax Act, 1918 (8 & 9Geo. 5, c. 40), Sch. D, par. 1 (a) (iii) - Finance Act, 1920 (10 & 11Geo. 5, c. 18), sect. 52, sub-sect. 2 (b).
A steamship company, having its registered office at Liverpool and a branch office at Cobh (formerly known as Queenstown), owned certain steamships operating on the Liverpool-New York and Liverpool-Canadian services. The majority of these vessels call at Cobh for the purpose of embarking and disembarking passengers to and from America. As many persons desirous of travelling from Europe to America have not the necessary funds to enable them to purchase passage tickets, the company established an organisation for the sale in America of documents known as "Prepaid Certificates," whereby many third-class passengers from Europe to America have the cost of their passages paid for by some one in America. A person in America (hereinafter referred to as "the purchaser") desirous of arranging for the passage to America of a person in the Irish Free State (hereinafter referred to as "the passenger") pays to the company in America the ocean fare of the passenger, and in exchange receives two documents: one, described as "Purchaser's receipt and contract for passage from Europe to America," and the other described as "Notice to passenger." The former document contains a receipt for the money paid, and states that in consideration therefor the company agrees to provide transportation as specified therein for the person mentioned on one of their steamers. The document further states that this contract is made between the purchaser, acting as agent for the passenger, and the company; that a contract ticket for ocean passage will be issued to the passenger in accordance with the laws of the country from which the passenger is booked or embarks; that a refund can be obtained only by returning the "Purchaser's receipt and contract" and also the "Notice to passenger" to the company in America, and after they have received confirmation of the cancellation of the passage. The "Notice to passenger" states that the purchaser should mail this notice to the passenger abroad. And it informs the passenger that a prepaid passage has been purchased in America "as per contract executed between the company and the purchaser, acting as your agent." Although the purchaser is described in the "Purchaser's receipt and contract" as acting as agent for the passenger, the latter may have no knowledge of the transaction and may not have been in communication with the purchaser prior to receiving the "Notice to passenger."If the passenger wishes to go to America he sends the "Notice to passenger" to the company's branch office at Cobh, and furnishes any information required by the company, including the date when he wishes to travel. The company then send from their office at Cobh a form, known as the "Ocean ticket," filled in in accordance with the information supplied by the passenger, and sends it to him with instructions as to when he should leave his home for embarkation. The "Ocean ticket" is headed"Steerage passenger's contract ticket," and is in the form of the contract ticket approved by the British Board of Trade under sect. 320 of the
Merchant Shipping Act, 1894, except that it states that the money has been paid in America.The company was assessed to income tax in respect of the annual profits or gains arising or accruing to the company from a trade exercised within the Irish Free State, and in computing their profits chargeable to income tax under par. 1 (a) (iii) of Sch. D of the Income Tax Act, 1918, there were included the profits made by the company from carrying passengers from the Irish Free State, whose passage money had been prepaid in America under the circumstances mentioned. These profits were also included in the company's assessment to corporation profits tax, chargeable under sect. 52, sub-sect. 2 (b), of the Finance Act, 1920.
The company appealed against these assessments, and the Commissioners for Special Purposes of the Income Tax Acts were of opinion that the company upon issuing an "Ocean ticket" to a passenger in the Irish Free State entered into a contract in the Irish Free State with the passenger, the consideration being the tendering of the "Notice to passenger" to the company by the passenger, which empowered the company to appropriate finally to its own use the money previously entrusted provisionally to the company in America; that the contract made by the purchaser in America was only provisional, and was conditional on the passenger entering into an independent contract with the company in the Irish Free State, the passenger being free to make an agreement or not with the company, as suited himself; and that until the passenger notified his willingness to sail, the arrangement made in America yielded no profit to the company. The Commissioners therefore concluded that the contract made with the passenger was the profit-earning contract; and held that the making of such profit-earning contracts in the Irish Free State constituted the exercise of a trade therein. They therefore determined that the profits derived by the company from carrying such passengers should be included in the income tax and corporation profits tax computations of the profits made by the company from the exercise of its trade within the Irish Free State. On a case stated for the opinion of the High Court:
Held by the High Court, and, on appeal by the Supreme Court (Kennedy C.J. and FitzGibbon J.; Murnaghan J. dissenting), that the Commissioners were wrong in their determination, as the contracts were made in America and not in the Irish Free State, and accordingly the company did not exercise any trade in the Irish Free State within the meaning of par. 1 (a) (iii) of the Income Tax Act, 1918, or carry on any trade or business therein within the meaning of sect. 52, sub-sect. 2 (b), of the Finance Act, 1920, and therefore were not liable to either income tax or corporation profits tax in respect of these contracts.
Two Cases Stated, which were heard together, the facts being the same in both cases, but the question to be determined in the first case related to liability to Corporation Profits tax under sect. 52, sub-sect. 2 (b), of the Finance Act, 1920; while the question to be determined in the second case related to liability to income tax under paragraph 1 (a) (iii) of Schedule D of the Income Tax Act, 1918.
The first case was stated under the Finance Act, 1920, sect. 56, sub-sect. 6, and the Income Tax Act, 1918, sect. 149, by the Commissioners for the Special Purposes of the Income Tax Acts, for the opinion of the High Court; while the second case was stated by them under the Income Tax Act, 1918, sect. 149, only.
The facts in the first case were set out as follows:—
"1. At a meeting of the Commissioners for the Special Purposes of the Income Tax Acts held on the 14th March, 1928, at Dublin, for the purpose of hearing appeals, the Cunard Steam Ship Company, Limited (hereinafter called 'the company'), appealed against estimated assessments to Corporation Profits tax in the sums of £10,500 and £11,000 for the accounting periods of twelve months ended on the 31st December, 1924, and 31st December, 1925, respectively, made upon the company under the provisions of Part V of the Finance Act, 1920, as adapted, in respect of the profits of the company from carrying on in Saorstát Éireann éireann a trade or business, or an undertaking of a similar character.
2. The sole question in dispute is whether, in computing the profits of the company chargeable to Corporation Profits tax under sect. 52, sub-sect. 2 (b), of the Finance Act, 1920, as adapted, there should be included the profits made by the company from carrying passengers from Saorstát Éireann éireann whose passage money had been prepaid in America.
3. The following facts were admitted or proved:—
The company is a limited company, incorporated in England in 1878 under the Companies Acts, with its registered office at Liverpool. It is a foreign company. It has a branch office at Cobh [formerly known as Queenstown]. The business of the company consists in the owning and running of certain steamships under the British flag. Some of its vessels are operated on the Liverpool-New York and Liverpool-Canadian services. The majority of the vessels operating on these services are scheduled for calls both west-bound and east-bound at Cobh for the purpose of embarking and disembarking passengers.
4. The company carries on in Saorstát Éireann éireann a trade or business by making contracts in Saorstát Éireann éireann, and receiving payment in Saorstát Éireann éireann, for the carriage of passengers and goods from Saorstát Éireann éireann. No question arises about this trade, the amount of the company's liability to tax in respect thereof having been agreed with the Revenue authorities. In addition, the company engages in certain transactions, which form the subject-matter of this appeal. Particulars of these transactions are detailed in the following paragraphs:—
5. Many persons desirous of travelling from Europe to America have not the necessary funds to enable them to purchase passage tickets. To meet this difficulty the company has established an elaborate internal organisation for the...
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