Kerrane v N. Hanlon (Ireland) Ltd

• Jurisdiction: Ireland
• Judge: Mr. Justice Murphy
• Judgment Date: 06 February 1987
• Neutral Citation: 1987 WJSC-HC 904
• Docket Number: [1986 No. 1137R],No 1157 R/1986
• Court: High Court
• Date: 06 February 1987

1987 WJSC-HC 904

THE HIGH COURT

No 1157 R/1986

KERRANE v. HANLON (IRELAND) LTD

REVENUE

BETWEEN/

J.G. KERRANE

APPELLANT

AND

N. HANLON (IRELAND) LIMITED

RESPONDENTS

Citations:

CORPORATION TAX ACT 1976 S58

CORPORATION TAX ACT 1976 S58(3)

CORPORATION TAX ACT 1976 S58(4)

CORPORATION TAX ACT 1976 PART IV

GLOBE INSURANCE CO V BENNETT 6 TC 327

OWEN V SASSOON 32 TC 101

BANKLINE LTD V CIR 49 TC 307

BUCKS V BOWERS 1970 CH 431

NORTHEND V WHITE & LEONARD 1975 1 WLR 1037

SOLICITORS ACT 1965

Synopsis:

REVENUE

Corporation tax

Relief - Exported goods - Ambulances - Some customers of taxpayer company paid the price of a vehicle in one financial year in anticipation of delivery in following financial year - So much of the moneys received by the company from such advance payments as was surplus to the company's daily requirements was lodged by the company in a deposit account at its bank - In the financial years 1978 and 1979 the company received considerable sums as interest on such deposits - The deposits were not part of any arrangement between the company and its customers, and the advance payment was repayable if the vehicle was not delivered in the following year - For the purpose of calculating the company's entitlement to relief under s.58, sub-ss.3 and 4, of the Act of 1976, it was necessary to determine whether the interest so received by the company was "income from the sale of goods" so exported - Held in the negative - Corporation Tax Act, 1976, s.58 - (1986/1157 R - Murphy J. - 6/2/87) 1987 IR 259

|Kerrane v. Hanlon (Ir.) Ltd.|

WORDS AND PHRASES

"Income from the sale of goods"

Corporation tax - Relief - Exported goods - Ambulances - Interest received by taxpayer from deposit account funded by advance payments made by customers - ~See~ Revenue, corporation tax - (1986/1157 R - Murphy J. - 6/2/87) 1987 IR 259

|Kerrane v. Hanlon (Ir.) Ltd.|

1 Judgment of Mr. Justice Murphy delivered the 6th day of February 1987.

2 The appeal to this Court by way of Case Stated by the Learned Judge of the Circuit Court assigned to the Midland Circuit raises an interesting question in relation to the proper construction of Section 58 of the Corporation Tax Act 1976which section provides for relief against the Corporation Tax otherwise payable in respect of income receivable from the sale of goods exported out of the State in certain circumstances.

3 The problem arises in this way. The Respondent Company is engaged in the manufacture of ambulances. A large part of the Respondent's output is sold to Health Authorities in the United Kingdom. It appears from the Case Stated that the Health Authorities concerned have from time to time made payments to the Respondents during one financial year in anticipation that such ambulances will be required by and delivered to such Health Authority in the next financial year. In the event of the ambulance not being delivered for any reason the purchase price was repayable by the Respondents to the Health Authority.

4 The advance payments were ordinarily received by the Respondents in the month of February or March and it was the Respondent Company's policy to lodge to a Bank account opened for this purpose so much of those advance payments as were surplus to their day to day requirements. The account would be closed in or about the following September by which time all the ambulances would have been delivered but in the meantime the Respondents would withdraw from the account such moneys as were required for the purposes of their business. The procedure with regard to the opening of these Bank accounts and the lodging and withdrawal of moneys therefrom derived solely from the policy decisions of the Respondent Company and did not form part of any agreement of arrangement between them and the intending purchasers of the ambulances.

5 Deposit interest was received by the Respondent Company on the Bank accounts aforesaid for their financial years ending the 31st December 1978 and 1979 in sums of £8,338 and £12,712 respectively. In effect the question which arises is whether that interest is receivable from the sale of goods.

6 It would be easy to accept that interest payable by a purchaser over and above an agreed purchase price of goods as a result of delays in payment would properly be regarded as part of the amount receivable for the sale. Again, if the purchaser for his own reasons chose to place or, in accordance with the terms of his agreement with the vendor was required to place, the purchase price with a financial institution in his own name or in the joint names of himself and the vendor with the result that on the completion of the sale the vendor received the price of the goods plus a sum for interest that again this additional element by way of interest would properly be seen as part of the proceeds of sale. What is said in the present case is that the interest earned on the deposit account maintained by the Vendor/Respondent by Virtue of the special procedure adopted by it formed "part and parcel" of the sale and accordingly should likewise be treated as part of the...