Dolan v A.B. Company Ltd

• Jurisdiction: Ireland
• Judgment Date: 01 January 1970
• Date: 01 January 1970
• Court: Supreme Court

(S.C.)

Dolan

and

A.B. Ltd

Profits - Method of computation - Capital or revenue expenditure - Exclusive trading contracts - Payments by petrol company to retailers to secure their agreement to purchase petrol from company exclusively for periods of years - Whether payments should be deducted from receipts in calculating company's profits - Income Tax Act, 1918 (8 9 Geo. 5, c. 40), s. 209; r. 3 (f) applicable to Cases I and II (Sch. D.) - Finance Act, 1929 (No. 32 of 1929), s. 9.

The taxpayer, a wholesale oil company, sold its petrol to retailers pursuant to contracts whereby each retailer, in consideration of a sum of money paid to him by the taxpayer, agreed to buy from the taxpayer only all the petrol required by the retailer during a period of years, subject (in most cases) to the right of the retailer to terminate the contract before it expired. This method of effecting the sale of petrol, known as the Solus system, was the only practicable method by which wholesalers could trade in petrol and it had superseded recently, by the initiative of the taxpayer's trade competitors, a system in which most retailers sold to the public the brands of petrol of several wholesalers. Threequarters of the relevant contracts specified periods of three to five years, but 3% of these contracts specified periods of 11 to 20 years. In assessing the liability of the taxpayer toincome tax, the sums so paid by the taxpayer to retailers in each year were not allowed as deductions from the taxpayer's receipts in the year. On appeal from the judgment of His Honour Judge Binchy of the Circuit Court, who had held that such sums should be so deducted, it was held by Teevan J. that the payments made by the taxpayer, being in the nature of capital expenditure, were not deductible for the purposes of income tax. On further appeal by the taxpayer it was held by the Supreme Court...