Assam Railways and Trading Company Ltd v Commissioners of Inland Revenue

JurisdictionEngland & Wales
CourtHouse of Lords
JudgeLord Blanesburgh,Lord Warrington of Clyffe,Lord Wright,Lord Atkin
Judgment Date24 July 1934
Judgment citation (vLex)[1934] UKHL J0724-1
Date24 July 1934

[1934] UKHL J0724-1

House of Lords

Lord Blanesburgh.

Lord Warrington of Clyffe.

Lord Atkin.

Lord Thankerton.

Lord Wright.

Assam Railways & Trading Co., Ltd.
and
Commissioners of Inland Revenue

After hearing Counsel, as well on Tuesday the 12th, as on Thursday the 14th, and Friday the 15th, days of June last, upon the Petition and Appeal of the Assam Railways and Trading Company, Limited, whose registered office is at Blomfield House, 85 London Wall, in the City of London, praying, That the matter of the Order set forth in the Schedule thereto, namely, an Order of His Majesty's Court of Appeal, of the 11th of July 1933, might be reviewed before His Majesty the King, in His Court of Parliament, and that the said Order might be reversed, varied, or altered, or that the Petitioners might have such other relief in the premises as to His Majesty the King, in His Court of Parliament, might seem meet; as also upon the printed Case of the Commissioners of Inland Revenue, lodged in answer to the said Appeal; and due consideration had this day of what was offered on either side in this Cause:

It is Ordered and Adjudged, by the Lords Spiritual and Temporal in the Court of Parliament of His Majesty the King assembled, That the said Order of His Majesty's Court of Appeal, of the 11th day of July 1933, complained of in the said Appeal, be, and the same is hereby, Affirmed, and that the said Petition and Appeal be, and the same is hereby, dismissed this House: And it is further Ordered, That the Appellants do pay, or cause to be paid, to the said Respondents the Costs incurred by them in respect of the said Appeal, the amount thereof to be certified by the Clerk of the Parliaments.

Lord Blanesburgh

My Lords,

1

I have found that the more the question raised by this Appeal is considered, the greater is the difficulty it presents. It is only after close examination that the ambiguities of Section 27 (1) of the Finance Act, 1920, become apparent. The section suggests no serious problem when the "part" of the assessee's income brought into charge for the year of assessment to United Kingdom Income Tax is, in its amount, equal to "the same part" of his income brought into charge for the same year to Dominion Income Tax. Nor is the difficulty serious when the section has to be applied to a case in which the "part" of the assessee's income brought into charge for the purpose of Dominion Income Tax is, in its amount, greater than that brought into charge in the United Kingdom. The extent of the relief from United Kingdom Income Tax given by the section is in each of these cases not doubtful. The assessee in respect of the whole of the sum representing the "part" of his income which has been brought into charge in the United Kingdom is entitled to the relief given by the section, and that relief will operate to discharge him to the prescribed extent from the burden of a double taxation, one in the Dominion and the other in the United Kingdom.

2

So far, the relief granted is relief from a double taxation, and nothing more. The real difficulty of the section arises, when it has to be ascertained as in this instance it has, whether that still remains its purpose and result when its provisions have to be applied to a case in which the "part" of the assessee's income brought into charge for the purpose of Dominion Income Tax is in amount less than that brought into charge in the United Kingdom. Is the section, in this case also, effective only to relieve the assessee from payment of double income tax to the prescribed amount and to the extent to which he would otherwise be required to make it? or is the section, in this instance alone, operative in quite a different way, so that when the assessee has met every claim in respect of the "part" of his income charged to Dominion Income Tax however small in amount that "part" may be he is, by the section, relieved in respect of the whole amount, however large, which represents the same "part" of his income brought into charge in the United Kingdom. In other words, are the Appellants here entitled, as they contend, to relief under the section in respect of the whole of their business income brought into charge in the United Kingdom irrespective of what is brought into charge in India, or, as the Attorney-General contends only in respect of so much of that income as has been or will be charged to income tax there.

3

On this point I feel constrained, on consideration, to say that the actual language of the section is not unfavourable to the Appellants' contention. Not adverting for the moment to the question whether the word "part" as used in the section does or does not connote a sum of money brought into charge both in the United Kingdom, and, in this case, in India, that word does certainly, I think, point to the source from which the income is derived, "the part" and "the same part" being brought in the section into relation with each other by their identity of source. The word appears to me to denote what may be described as a "compartment" of the assessee's total income if I may select as a more pregnant term, one suggested by its similarity in sound. Then again, it is not, I think, unfavourable to the Appellants' contention that, in order to entitle an assessee to relief, it is in terms enough that he has paid Dominion Income Tax "in respect of" that same "compartment" of his income. While there is nothing to indicate that the effective compartment must correspond in amount to the United Kingdom counterpart, rather the reverse, yet the extent of relief is, so far as words are concerned, expressed to be invariable. It is always relief at a prescribed rate "from United Kingdom Income Tax paid or payable by him on that part of his income". That is, may it not be said, from the whole of that tax.

4

I have been moved by these considerations which seem to me to have weight. But they are not to my mind final, nor do they, I think, outweigh the reasoning which leads to the conclusion that the section in every case where it has to be applied is really directed against a charge pro tanto of double income tax upon any portion of any "compartment" of the assessee's total income and that there is no sufficient indication in the language employed necessitating the conclusion that any further relief is contemplated or provided for.

5

Accordingly while conscious of difficulty I am ready to accept the construction in that sense placed upon the section by my noble and learned friends Lord Warrington of Clyffe and Lord Wright in their judgments which I have had the advantage of reading and which I accept.

6

With them I agree that this Appeal should be dismissed and I move your Lordships accordingly.

Lord Warrington of Clyffe

My Lords,

7

This is an Appeal from an Order of the Court of Appeal (Lord Hanworth M.R. and Lawrence and Slesser L.JJ.) dated the 11th July, 1933, dismissing an Appeal by the present Appellants from an Order of the King's Bench Division (Finlay J.) dated the 14th February, 1933, which affirmed a decision of the Special Commissioners upon a claim by the Appellants for relief from United Kingdom Income Tax.

8

The question depends upon the true construction and effect in the events which have happened of Section 27 of the Finance Act, 1920. That section so far as it is material to the solution of the question is as follows:—

"(1) If any person who has paid by deduction or otherwise United Kingdom Income Tax for any year of assessment on any part of his income proves to the satisfaction of the Special Commissioners that he has paid Dominion Income Tax for that year in respect of the same part of his income, he shall be entitled to relief from United Kingdom Income Tax paid or payable by him on that part of his income at a rate thereon to be determined as follows:—"

9

There follow provisions for the determination of the rate as to which no question arises in the present case.

10

Sub-section 8 contains the following definitions:—

" (b) The expression 'United Kingdom Income Tax' means Income Tax chargeable in accordance with the provisions of the Income Tax Acts.

(c) The expression 'Dominion Income Tax' means any Income Tax charged under any law in force in any Dominion if that tax appears to the Special Commissioners to correspond with United Kingdom Income Tax."

11

The Dominion Income Tax in the present case is that charged under the law of India, and there is no question that it falls within the above mentioned definition. The Appellants are an English company incorporated and resident in England. They carry on a composite business in India. With some immaterial exceptions of trifling amount the whole of their income for the two years ending the 5th April, 1929, and the 5th April, 1930, arose in India and were charged to United Kingdom Income Tax as profits of trade under Case I of Schedule D. The claim to relief was made in respect of several years, but the year ending the 5th April, 1929, may be taken as typical of the rest, and in fact has alone been the subject of actual decision in the Courts below.

12

The Appellants were charged to United Kingdom Income Tax for that year on their profits from India with £186,750. For the same year they were charged to Dominion Income Tax with £129,365 only. The difference arises from the fact that in India certain debenture interest...

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