J. R O'Kane & Company v Revenue Commissioners

• Jurisdiction: Ireland
• Judgment Date: 01 January 1922
• Date: 01 January 1922
• Court: House of Lords (Ireland)

H. of L.,

J. & R. O'Kane & Co., Appellants, and The Commissioners of Inland Revenue

Respondents

Computation of profits and gains for purposes of income tax -Traders realising stock on winding up business -"Profits arising from any trade or business" -Finance (No. 2) Act, 1915 (5 6 Geo. V., c. 89), ss. 38 (1) (2), 39, 40, 41, 42, 45 (3) -Finance Act, 1916 (6 7 Geo. V., c. 24), s. 45 -Finance Act, 1918 (8 9 Geo. V., c. 15), ss.31, 34, 35.

Section 38 (1) of the Finance (No. 2) Act, 1915, provided that excess profits duty should be charged on the amount by which "the profits arising from any trade or business"in any accounting period exceeded the pre-war standard of profits as defined by the Act. The appellants carried on business as wholesale wine and spirit merchants at Belfast. In March, 1916, they resolved that they would close their business and not dispose of it as a going concern. They proceeded to sell stock andobtain the benefit of advantageous supply contracts, which terminated in the spring of 1917 with some alterations in their mode of dealing with their customers, who retained casks and took spirits out of bond; the appellants carried on their business until the spring of 1918. In the year 1917, which was the accounting period, very large profits were made, amounting to £35,918, and were assessed at £27,903, which sum was fixed by the Commissioners as the sum payable under the statute for excess profits duty. On appeal by way of a special case stated by the Commissioners for the Special Purposes of the Income Tax Acts this assessment was upheld by the Court of Appeal:—Held, that the profits for the year to the end of 1917 arose from carrying on the business as a continuing concern and not in the process of realisation under an altered method of trading. Whatever the intentions of the appellants, their acts, as found by the Commissioners, amounted in fact to a trading, the profits from which were profits arising from a trade or business. On the facts as found by the Commissioners the result was the same, whether or not s. 35 (1) of the Finance Act, 1918, is read together with, or as a gloss on, s. 38 (1) of the Finance (No. 2) Act, 1915.

H. of L.,

J. & R. O'Kane & Co., Appellants, and The Commissioners of Inland Revenue

Respondents

Computation of profits and gains for purposes of income tax -Traders realising stock on winding up business -"Profits arising from any trade or business" -Finance (No. 2) Act, 1915 (5 6 Geo. V., c. 89),...