McGARRY (INSPECTOR of TAXES) v HARDING (LORD EDWARD STREET) PROPERTIES Ltd

• Jurisdiction: Ireland
• Judge: Miss Justice Laffoy
• Judgment Date: 27 July 2004
• Neutral Citation: [2004] IEHC 131
• Court: High Court
• Date: 27 July 2004

[2004] IEHC 131

THE HIGH COURT

RECORD NO.112R/2003

McGARRY (INSPECTOR OF TAXES) v. HARDING (LORD EDWARD STREET) PROPERTIES LTD

REVENUE

BETWEEN/

KEVIN McGARRY, INSPECTOR OF TAXES

APPELLANT

AND

HARDING (LORD EDWARD STREET) PROPERTIES LIMITED

RESPONDENT

Citations:

TAXES CONSOLIDATION ACT 1997 S941

TAXES CONSOLIDATION ACT 1997 S943

INCOME TAX ACT 1967 S255(1)(D)

TAXES CONSOLIDATION ACT 1997 S268

INCOME TAX ACT 1967 S255

INCOME TAX ACT 1967 S254

INCOME TAX ACT 1967 S254(1)(A)

INCOME TAX ACT 1967 S255(1)

FINANCE ACT 1969

REVENUE COMMISSIONERS V DOORLEY 1933 IR 750

INSPECTOR OF TAXES V KIERNAN 1981 IR 117

MCCANN LTD V O CULACHAIN 1986 IR 196

O CULACHAIN V MCMULLAN BROS LTD 1995 IR 217

INCOME TAX ACT 1967 S250(1)(D)

O'CONNELL (INSPECTOR OF TAXES) V TARA MINES LTD 2002 IRT 143

CORPORATION TAX ACT 1976 S58(9)

MARA V HUMMINGBIRD 1982 ILRM 421

BROSNAN V MUTUAL ENTERPRISES LTD 1997 3 IR 257

HOTEL PROPRIETORS ACT 1963

Abstract:

Tax - Corporation tax Statutory interpretation - Words and phrases - “trade of hotel keeping” - Whether building in use for purposes of trade of hotel-keeping - Whether trial judge erred in law in so determining - Income Tax Act 1967, section 255(1)(d).

Facts: the Circuit Court found that the respondent’s premises for which it had claimed an industrial building capital allowance in respect of refurbishment costs was a building in use for the purposes of the trade of hotel-keeping within the meaning of section 255(1)(d) of the Income Tax Act 1967 and it was, accordingly, entitled to the said relief. The Circuit Court stated a case under sections 941 and 943 of the Taxes Consolidation Act 1997 upon a request of the appellant as to whether that determination was correct in law.

Held by Laffoy J in finding that the Circuit Court was correct in law in its determination that the respondent’s building was in use for the purposes of the trade of hotel-keeping that a taxing statute was to be strictly construed. In construing the words used in section 255(1)(d) of the Act of 1967, the correct issue to be determined by the Circuit Court was whether the building in question was in use for the purposes of the trade of hotel-keeping and not whether it was a hotel. That the expression the “trade of hotel-keeping” was not a term of art and there was no requirement that a trial court, when considering the expression, include an express definition of the activities involved in the trade of hotel-keeping. The fact that the building was not registered as a hotel with Bord Failte was not determinative of the issue as there was no requirement for registration in section 255(1)(d) of the Act of 1967.

Reporter: P.C.

1 Miss Justice Laffoy delivered on 27,th July, 2004 .The Proceedings.

2 This is a case stated by Her Honour Judge Lindsay of the Circuit Court pursuant to ss. 941 and 943 of the Taxes Consolidation Act, 1997upon a request of the appellant.

3 The case stated arose out of an appeal by way of re-hearing in relation to assessments to corporation tax made on the respondent, which is the owner of the premises known as Kinlay House, which is situate at Lord Edward Street and Copper Alley in the City of Dublin. The respondent claimed for four accounting periods industrial building allowance, which is a capital allowance, in respect of expenditure amounting to IR£627,660.00 incurred on the refurbishment of Kinlay House in the year ending 30th September, 1988.

4 The single issue for determination by the learned Circuit Court judge was whether Kinlay House was a building or structure in use for the purposes of the trade of hotel-keeping within s. 255(1)(d) of the Income Tax Act, 1967(the Act of 1967), which provision is now contained in s. 268 of the Taxes Consolidation Act, 1997. She determined that it was. The question on which the opinion of this Court is sought on the case stated is whether, on the facts as found, she was correct in law in so determining.

Relevant Legislation

5 Section 255 of the Act of 1967 was contained in Chapter II, which was headed: "Industrial buildings and structures: industrial building allowance". The first provision contained in Chapter II, s. 254, as amended, provided as follows in sub-s. (1)(a):

"Subject to the provisions of this Act, where a person incurs capital expenditure on the construction of a building or structure which is to be an industrial building or structure occupied for the purposes of a trade carried on either by him or by such a lessee as is mentioned in paragraph (b) there shall be made to the person who incurred the expenditure, for the appropriate chargeable period, an allowance (in this Chapter referred to as an industrial building allowance) equal to one-tenth thereof."

6 The expression "industrial building or structure" was defined in s. 255 of the Act of 1967. Sub-section (1) of that section, as originally enacted, provided as follows:

"In this Chapter industrial building or structure means a building or structure in use— "

(a) for the purposes of a trade carried on in a mill, factory or other similar premises, or

(b) for the purposes of a dock undertaking, or

(c) for the purposes of growing fruit, vegetables or other produce in the course of a trade of market gardening within the meaning of section 54, or

(d) for the purposes of the trade of hotel-keeping."

7 Sub-section (1) contained a proviso, which, as amended by the Finance Act, 1969, was in the following terms:

"Provided that a building or structure in use as a holiday camp or a building or structure in use as a holiday cottage and comprised in premises registered in any register of holiday cottages established by Bord Faílte Éireann under the provisions of any Act of the Oireachtas passed after the passing of the Finance Act, 1969shall be deemed to be a building or structure in use for the purposes of the trade of hotel-keeping".

8 It is common case that there is no definition of the word "hotel" or of the expression "the trade of hotel-keeping" in the taxation code.

Legal Principles Applicable to construction of a Taxing Act

9 There was no real controversy as to the legal principles applicable to the proper construction of a provision of the taxation code, whether concerned with the imposition of tax or the granting of exemption or relief from tax. In Revenue Commissioners v. Doorley [1933] I.R. 750, Kennedy C.J. summarised the principles as follows at p. 765:

"The duty of the court, as it appears to me, is to reject an a priori line of reasoning and to examine the text of the taxing Act in question and determine whether the tax in question is thereby imposed expressly and in clear and unambiguous terms, on the alleged subject of taxation, for no person or property is to be subjected to tax unless brought within the letter of the taxing statute, i.e., within the letter of the statute as interpreted with the assistance of the ordinary canons of interpretation applicable to Acts of Parliament so far as they can be applied without violating the proper character of taxing Acts to which I have referred.

I have been discussing taxing legislation from the point of view of the imposition of tax. Now the exemption from tax with which we are immediately concerned is governed by the same considerations. If it is clear that a tax is imposed by the Act under consideration, then exemption from that tax must be given expressly and in clear and unambiguous terms, within the letter of the statute as interpreted with the assistance of the ordinary canons for the interpretation of statutes —."

10 In Inspector of Taxes v. Kiernan [1981] I.R. 117, Henchy J. (with whom the other judges in the Supreme Court concurred) stated that, leaving aside any judicial decision on the point, he would approach the construction of a word in the taxation code, which is left undefined, by the application of three basic rules of statutory interpretation, which he set out as follows at p. 121:

"First, if the statutory provision is one directed to the public at large, rather than to a particular class who may be expected to use the word or expression in question in either a narrowed or an extended connotation, or as a term of art, then, in the absence of internal evidence suggesting the contrary, the word or expression should be given its ordinary or colloquial meaning …

Secondly, if a word or expression is used in a statute creating a penal or taxation liability, and there is looseness or ambiguity attaching to it, the word should be construed strictly so as to prevent a fresh imposition of liability from being created unfairly by the use of oblique or slack language …

Thirdly, when the word which requires to be given its natural and ordinary meaning is a simple word which has widespread and unambiguous currency, the judge construing it should draw primarily on his own experience of its use. Dictionaries or other literary sources should be looked at only when alternative meanings, regional uses or other obliquities are shown to cast doubt on the singularity of its ordinary meaning, or when there are grounds for suggesting that the meaning of the word has changed since the statute in question was passed".

11 More recently, in Charles McCann Ltd. v. Ó Culachain (Inspector of Taxes) [1986] I.R. 196, McCarthy J. (with whom the other judges in the Supreme Court agreed) stated that it is necessary to ensure that the ordinary person, so contemplated, is one adequately informed as to the matters relevant to the process or activity under consideration. He also stated that, in aid of construction of the particular word as used in the statute, one must look at the scheme and purpose as disclosed by the statute or the relevant part thereof.

Legal principles applicable to determination of a case stated

12 There was consensus as to the legal principles applicable where a court is asked to give its...