Olhausen v Irish Exporters and Importers Ltd

• Jurisdiction: Ireland
• Judgment Date: 13 November 1943
• Date: 13 November 1943
• Court: High Court

High Court.

O'Dwyer v. Irish Exporters and Importers, Ltd.

J. M. O'DWYER, Inspector of Taxes, AND THE REVENUE COMMISSIONERS

Appellants

and

IRISH EXPORTERS AND IMPORTERS, Ltd.(In Liquidation), Respondents (1)

Revenue - Income tax - Corporation profits tax - Limited Liability Company - Promotion of private company limited by shares - Whether a carrying on of the trade of company promoters - Agreement by Minister for Agriculture. to supply private Company with cattle - Discontinuance of supply of cattle by Minister - Sum paid as compensation by Minister to Limited Liability Company under terms of an agreement - Whether such sum should be brought into account as a trading receipt - Question of fact to be determined by Revenue Commissioners - Evidence to support Commissioners' finding that such sum was not a trading receipt - Jurisdiction of Court to interfere with Commissioners' finding - Correct test applicable - Definition of "trade" - Case Stated signed by one only of the two Commissioners who heard appeal - Other Commissioner retired before Case Stated ready for signature - Adjournment to obtain signature of retired Commissioner - Ministerial act - Income Tax Act 1918 (8 & 9Geo. 5, c. 40), s. 237; Schedule D, par. 1 (a) (ii); par. 2 Case I.

Case Stated under the Income Tax Act, 1918, s. 149, by a Commissioner for the special purposes of the Income Tax Acts for the opinion of the High Court.

The Case Stated was as follows:—

"1. At meetings of the Commissioners for the special purposes of the Income Tax Acts, held on the 28th June, 1940, and the 18th June, 1941, at Dublin Castle, for the purpose of hearing appeals, the Irish Exporters and Importers, Ltd. (in liquidation) (hereinafter referred to as 'the respondent company') appealed against additional assessments to income tax under Case I of Schedule D of the Income Tax Act, 1918, made upon the respondent company for the years of assessment 1937-38 and 1938-39 in respect of the profits of its trade, and also against assessments to corporation profits tax for the accounting period ending 24th June, 1938.

2. The sole question in dispute is whether, in computing for assessment to income tax and corporation profits tax, the profits of the trade carried on by the respondent company, a sum of £16,888 paid by the Minister for Agriculture to the respondent company under the terms of an agreement, dated 18th October, 1934, should, or should not, be brought into account as a trading receipt of the respondent company.

3 The following facts were admitted or proved:—

The respondent company was incorporated on the 24th February, 1934. Clause 3 of its Memorandum of Association sets out the objects for which it was established. These objects include:—

(i) To carry on the business of exporters and importers of cattle, sheep and other livestock, and of meat, bacon and other foodstuffs generally, and all branches of such respective trades or businesses.

(ii) To buy and sell, by wholesale or retail, in Saorstát Éireann éireann or elsewhere all kinds of meat, pork, bacon and other foodstuffs, and generally to carry on the trades of meat and food contractors, merchants and salesmen in all their branches.

(iii) To carry on the business of importers, exporters, manufacturers of, and dealers in, motor cars, etc.

(ix) To take, or otherwise acquire, and hold shares, etc., in any other company having objects, altogether or in part, similar to those of the respondent company, or carrying on any business capable of being conducted so as directly or indirectly to benefit the respondent company.

(x) To enter into any arrangements with any governments or authorities that may seem conducive to the respondent company's objects, or any of them.

(xxi) To promote any company or companies for the purpose of acquiring all or any of the property, rights and liabilities of the respondent company, or for any other purpose which may seem directly or indirectly calculated to benefit the respondent company.

Under clause 5 of the Memorandum of Association the share capital of the respondent company is £10,000 divided into 10,000 ordinary shares of £1 each. [A copy of the Memorandum and Articles of Association were annexed to and formed part of the Case Stated.]

4. On the 18th October, 1934, an Agreement, referred to as 'the Roscrea Meat Company Preliminary Agreement,' was entered into between the respondent company and the Minister for Agriculture. Under this Agreement the respondent company was to promote a private company limited by shares, to be known as 'the Roscrea Meat Company, Ltd.,' (hereinafter referred to as 'the Roscrea Company'). The Agreement set out the objects of the Roscrea Company and provides that its Memorandum of Association shall inter alia give all necessary powers to carry out the said objects, and that its nominal capital shall be £10,000, divided into 10,000 ordinary shares of £1 each. The respondent company covenants that sufficient shares in the capital of the Roscrea company shall be applied for and allotted in cash to produce (a) not less than £5,000 to be made available towards the cost of building and equipping an abattoir and lairage and factory at Roscrea, and (b) such further sum as may be necessary for working capital.

The Roscrea Company was incorporated on the 8th October, 1934.

On the same date, a second Agreement, referred to as 'the Roscrea Meat Company Operation Agreement,' was entered into between the Minister for Agriculture and the Roscrea Company. Under this Agreement the Roscrea Company undertook to erect and equip the said abattoir and lairage and factory with all convenient speed, and the Minister for Agriculture undertook to deliver for a period of four years to the Roscrea Company not less than specified numbers of cows free of charge on rail at stated periods.

Clause 5 of the Agreement provided that 'the Minister may at any time upon serving one calendar month's previous notice in writing to the Roscrea Company, determine the obligation of the Minister to supply cows as aforesaid, and the obligation of the Roscrea Company to accept such cows shall cease as from the expiration of such notice.'

On the same date a third Agreement, referred to as 'the Roscrea Meat Company Debenture Agreement,' was entered into between the Minister for Agriculture and the Roscrea Company. Under this Agreement the Minister undertook to advance to the Roscrea Company a sum not exceeding £16,000 to build and equip the aforesaid abattoir and lairage and factory, to be secured by the Roscrea Company to the Minister by a debenture, the terms and conditions of which are set out in the Agreement.

A fourth Agreement, referred to as 'the Roscrea Meat Company Option Agreement,' was also entered into between the Minister for Agriculture and the respondent Company on the same date (the 18th October, 1934). The fourth Agreement provided that in the event of the Minister for Agriculture availing himself of the power reserved to him by clause 5 of the Roscrea Meat Company Operation Agreement to determine his obligation to supply cattle to the Roscrea Company as therein set forth, the Minister should pay to the respondent company 'by way of liquidated damages and not as a penalty,' a sum to be determined in the manner set forth in the Agreement. [Copies of the four Agreements and of the Memorandum and Articles of Association of the Roscrea Company were annexed to, and formed part of, the Case Stated.]

5. On the 11th March, 1935), the respondent company made a trust declaration, in which it is recited 'that these presents are intended to be supplemental to the Roscrea Meat Company option Agreement' (that is, the fourth Agreement aforesaid) and that the payments to be made by the Minister for Agriculture to the respondent company are, in fact, to be made by the Minister to the respondent company as trustees for and on behalf of the ordinary shareholders in the Roscrea Company for the time being, at the date of such payment. The respondent company declares, covenants and agrees for divers good, valid and binding considerations that the respondent company will, when, and so often as, any moneys are paid to the respondent company by the...