British Commonwealth International Newsfilm Agency Ltd v Mahany
| Jurisdiction | England & Wales |
| Judge | Lord Chancellor,Lord MacDermott,Lord Cohen,Lord Jenkins |
| Judgment Date | 20 December 1962 |
| Judgment citation (vLex) | [1962] UKHL J1220-1 |
| Date | 20 December 1962 |
| Court | House of Lords |
[1962] UKHL J1220-1
House of Lords
Lord Chancellor
Lord MacDermott
Lord Cohen
Lord Jenkins
Lord Guest
Upon Report from the Appellate Committee, to whom was referred the Cause British Commonwealth International Newsfilm Agency Limited against Mahany (Inspector of Taxes), that the Committee had heard Counsel, as well on Wednesday the 14th, as on Thursday the 15th, days of November last, upon the Petition and Appeal of British Commonwealth International Newsfilm Agency Limited, whose registered office is at 10 School Road, Acton, N.W.10, in the County of Middlesex, praying, That the matter of the Order set forth in the Schedule thereto, namely, an Order of Her Majesty's Court of Appeal of the 1st of March 1962, might be reviewed before Her Majesty the Queen, in Her 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 Her Majesty the Queen, in Her Court of Parliament, might seem meet; as also upon the Case of Edgar Arthur Mahany (Her Majesty's Inspector of Taxes), 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 Her Majesty the Queen assembled, That the said Order of Her Majesty's Court of Appeal, of the 1st day of March, 1962, 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 Respondent the Costs incurred by him in respect of the said Appeal, the amount thereof to be certified by the Clerk of the Parliaments.
My Lords,
I agree with the Opinion about to be delivered by my noble and learned friend, Lord Cohen.
My Lords,
In my opinion this appeal fails. Although the payment in question may have had the recurrent quality of a payment within Case III of Schedule D, it is clear that, both in substance and in form, it was a payment made to a trading company (the Appellant) as a supplement to its trading revenue and in order to preserve its trading stability. This being the position, it seems to me that the Special Commissioners were entirely justified in holding that this payment was a trade receipt in the hands of the Appellant. There is ample evidence to support that determination in so far as it is a question of fact, and there is nothing that I can discover in the authorities to compel a different conclusion in point of law. Indeed, I have some difficulty in seeing how, on the material before them, the Commissioners could have arrived at any other finding. And if they were right in thus holding, I do not think it can be doubted, in the circumstances of this case, that they were also right in holding that the payment was not an annual payment of pure income profit within Case III.
While that suffices to dispose of the matter, I hope I may not be thought lacking in respect for the arguments advanced on behalf of the Appellant if I do not enter into detail on the facts or proceed to an examination of the cases. Since coming to the conclusions stated I have had the advantage of reading the Opinion prepared by my noble and learned friend, Lord Cohen, and I agree so fully with his reasoning that it would serve no useful purpose to say more.
My Lords,
The Appellant claims repayment of tax under the provisions of section 341 of the Income Tax Act, 1952, and section 15 (3) of the Finance Act, 1953, in respect of a loss sustained in the trade carried on by the Appellant for the year of assessment 1957/58. The claim is made in respect of tax deducted at source from a payment made to the Appellant under a deed of covenant in the circumstances hereinafter described. The substantial issue in the case is whether this payment (from which tax was in fact deducted at source by the covenantor) was taxable in the hands of the Appellant as an item of income under Case III of Schedule D or whether it was a trading receipt of the Appellant's trade which should have been included as an ingredient in the computation of the profit or loss of the Appellant's trade under Case I of Schedule D.
The Appellant contends that the payment received under the deed of covenant was taxable under Case III of Schedule D with the result, which is common ground, that the deduction of tax was properly made by the covenantor and that the Appellant, having made a loss in its Case I trade, was entitled to make a claim of the tax deducted. The Respondent contended that the payment under the covenant was a receipt of the Appellant's Case 1 trade with the result, which is common ground, that the deduction of tax by the covenantor was not properly made and that there was no loss in the trade carried on by the Appellant.
To appreciate the dispute between the parties it is necessary to go into the history of the matter. The Appellant was incorporated on the 8th March, 1957, and memorandum and articles were in a usual form for a commercial company. They contained common form articles as to dividends and reserves. But it is clear from the Case Stated that Rank Corporation Limited (to whom I shall refer hereinafter as "Rank") and the B.B.C., who were primarily responsible for the foundation of the Appellant, were not actuated entirely or indeed mainly by commercial motives but believed that it was in the national interest to supply visual news on a world-wide basis in a form sufficiently British in character to interest British viewers and cinema goers. They contemplated that in the first few years the Appellant might make substantial losses which were to be financed by temporary loans from the promoters. They interested in the proposal the Canadian Broadcasting Corporation and the Australian Broadcasting Commission (to whom I shall refer hereinafter as C.B.C. and A.B.C. respectively).
On the 31st October, 1957, an agreement was entered into by the B.B.C., Rank, C.B.C. and A.B.C. In form this agreement purported to provide for the incorporation of the Appellant but they had in fact been incorporated in March of that year. This, however, is immaterial. The agreement provided for the execution of a trust deed designed to secure that the news supplied by the Appellant should be impartial and that the control of the Appellant should remain within the British Commonwealth of Nations. It contains a provision that the trust should continue in force until the expiration of the fifth financial year or other financial period of the company or until the expiration of five years from its date (which was the 31st October, 1957) and thereafter unless determined by not less than twelve months' notice in writing given as therein mentioned. It further provided that notwithstanding any such notice, if the members to whom the same was given should so desire, the trust should continue in force for such further period and on such terms as such members might mutually agree. It is plain, therefore, that it was competent to the parties at the expiration of five years to change the character of the trust and alter the way in which the Appellant dealt with its profits, if any.
I return to the agreement. The important clauses are clauses 8 and 9 (a), which are in the following terms:—
"8. If in any year the moneys paid or payable to...
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...On this point he referred to the decision of the House of Lords in British Commonwealth International Newsfilm Agency Ltd. v. Mahany(1)40 T.C. 550. It seems to me, however, that this argument falls to the ground once it is accepted, as Mr. Magnus contends and as the Special Commissioners ha......
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Rank Xerox Ltd v Lane
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