Irish Agricultural Machinery Ltd v S. Ó Culacháin

• Jurisdiction: Ireland
• Judgment Date: 01 January 1990
• Date: 01 January 1990
• Docket Number: [S.C. No. 132 of 1988]
• Court: Supreme Court

Supreme Court

[S.C. No. 132 of 1988]

Irish Agricultural Machinery Ltd. v. S. Ó Culacháin

Irish Agricultural Machinery Limited

Appellant

and

S. Ó Culacháin ó culacháin, Inspector of Taxes

Respondent

Cases mentioned in this report:—

Charles McCann Ltd. v. Ó Culacháin ó culacháin, Inspector of Taxes [1986] I.R. 196; [1986] I.L.R.M. 229.

The Commissioners of Inland Revenue v. Gribble [1913] 3 K.B. 212; [1913] W.N. 136.

Cronin (Inspector of Taxes) v. Strand Dairies Ltd. (Unreported, High Court, Murphy J., 18th December, 1985).

Inspector of Taxes v. Kiernan [1981] I.R. 117; [1982] I.L.R.M. 13.

Irish Agricultural Machinery Ltd. v. S. Ó Culacháin ó culacháin [1987] I.R. 458 (H.C.).

McCausland v. Ministry of Commerce [1956] N.I. 36.

Magnesium Casting Co. v. U.S.A. (1962) 63 U.S. Tax Cases.

Mara (Inspector of Tares) v. Hummingbird Ltd. [1982] I.L.R.M. 421.

Nevile Reid & Co. Ltd. v. The Commissioners of Inland Revenue 12 T.C. 545.

Prestcold (Central) Ltd. v. Minister of Labour [1969] 1 W.L.R. 89; [1969] 1 All E.R. 69; 5 K.I.R. 449.

Select Imports Inc. v. Director of Internal Revenue (1961) 61-62 U.S. Tax Cases.

Revenue - Corporation tax - Stock relief - Relief confined to profits derived from certain trades - "Trade"defined to include both manufacture of goods and sale to particular trades of plant and machinery.

Statute - Interpretation - Manufacture - Assembly of component parts - Sale - Value-Added Tax Act, 1972 (No. 22), s. 1, sub-s. 1 - Finance Act, 1976 (No. 6) ss. 31 and 31A - Finance Act, 1977 (No. 18), s. 43 and First Schedule, Part V.

Case stated.

The facts and statutory provisions are summarised in the headnote and are set out in the judgment of Griffin J., post.

The case stated was signed by Mr. Justice Thomas Neylon on 29th January 1986, pursuant to ss. 428 and 430 of the Income Tax Act 1967, and s. 146 of the Corporation Tax Act, 1976. The case stated asked the opinion of the High Court (as amended by the High Court) whether:—

"(c) . . . on a correct interpretation of the word "manufacture" I was entitled to hold on the evidence incorporated as part of this case that the appellant was not engaged in manufacturing;

(d) . . . where there was a company involved in the sale but invoices were issued by the company dealer and by the dealer to the farmer this could not be regarded as a class of trading operation involving a sale by the company to the farmer."

The case stated came on for hearing before the High Court (Murphy J.), on 6th December, 1986, and judgment was given on 6th February, 1987. (See [1987] I.R. 458.) The appeal was heard by the Supreme Court (Finlay C.J., Griffin and Hederman JJ.) on 5th December, 1988.

The Finance Act, 1975 (as amended), provided for a reduction in profits chargeable to corporation tax by reference to increases in the value of trading stock held at the beginning and end of an accounting period. The relief was granted to companies engaged in certain trades, and those trades were limited, inter alia, to those consisting, wholly or mainly, of the manufacture of goods or of farming or of sale of machinery, plant or goods to persons engaged in those trades.

The appellant's business consisted of the assembly and sale of farm machinery. A proportion of the sales were made directly to farmers, but a far greater proportion were made to finance houses and dealers. They in turn sold the machinery to farmers in deals procured or arranged by the company.

The company claimed an entitlement to stock relief on the basis that it was carrying on a trade within the meaning of s. 31 of the Act of 1975, viz. that not less than 75 per cent of its receipts came from the manufacture of goods or alternatively from the sale of machinery to qualifying persons.

The company's claim was disallowed by the Inspector of Taxes and his decision was upheld by the Circuit Court. On the application of the company, the Circuit Court judge agreed to state a case for the opinion of the High Court.

The High Court affirmed the decision of the Circuit Court (see [1987] I.R. 458). The case stated contained in a schedule notes of evidence adduced at the Circuit Court hearing in respect of which the Circuit Court judge made no particular finding. The High Court judge disregarded these notes. The appellant appealed the judgment and order of the High Court.

Held by the Supreme Court (Finlay C.J., Griffin and Hederman JJ.), in allowing The appeal, 1, that it was not permissible to import the definition of "manufacturer" in s. 1, sub-s. 1 of the Value-Added Tax Act, 1972, into the Finance Act, 1975, as the two Acts were not made in pari materia and the definition was not expressly incorporated into the Act of 1975.

2. That the word "manufacture", as used in s. 31 of the Act of 1975, was to be given its ordinary or colloquial meaning in the absence of any internal evidence suggesting that a new restricted meaning was intended.

Inspector of Taxes v. Kiernan [1981] I.R. 117 followed.

3. That the appellant's machines had a utility, a quality and a value entirely distinct from the component parts which comprised the whole so, on the accepted facts, The appellant was engaged in the manufacture of goods within the meaning of s. 31, sub-s. 1 of the Act of 1975. The fact that goods had been assembled did not mean that they had not been manufactured within the meaning of the section.

Charles McCann Ltd. v. O'Culacháin [1986] I.R. 196; McCausland v. Ministry of Commerce[1956] N.I. 36; Prestcold (Central) Ltd. v. Minister of Labour[1969] 1 W.L.R. 89 applied.

4. That it was not necessary for the Court to decide whether or not the appellant qualified for relief under paragraph (d) of the definition of trade in sub-s. 1 of section 31.

Per curiam: That the High Court judge had acted correctly in disregarding the notes of evidence appended to the case stated in respect of which the Circuit Court judge had made no particular findings.

Cur. adv. vult.

Finlay C.J.

I have read and agree with the judgment about to be delivered by Griffin J.

Griffin J.

Where the value of the trading stock of a company carrying on a trade at the end of an accounting period (as defined) exceeds the value of the trading stock at the beginning of that period, s. 31 of the Finance Act, 1975, provides for relief to that company from income tax in respect of that increase in stock value (less 20 per cent of the trading profit for that period). This is known as stock relief.

"Trade" is defined in s. 31...