Californian Copper Syndicate (Ltd and Reduced) v Inland Revenue
| Jurisdiction | Scotland |
| Judgment Date | 01 July 1904 |
| Docket Number | No. 148. |
| Date | 01 July 1904 |
| Court | Court of Session |
Lord Justice-Clerk, Lord Young, Lord Trayner.
Revenue—Income-tax—Profits—Purchase and Resale of Property—Property and Income-tax Act, 1842 (5 and 6 Vict. cap. 35), Sched. D.—
The C Company, with a capital of £28,000, expended £24,000 in the purchase of a mining property and £4000 in its development. Thereafter it sold the property for £300,000 to the F Company, the price to be payable wholly by the F Company transferring 300,000 of its 400,000 £1 shares fully paid to the C Company.
The C Company having been assessed for income-tax under Schedule D on profit arising from the transaction, the C Company appealed, contending that the Company had had no income, and that the sale was truly a transaction by which the Company substituted for its capital in the form of land a capital in the form of shares.
Held that, having regard to the various branches of business for which the C Company was formed, the transaction was a sale in the line of the Company's business, resulting in a profit liable to income-tax under Schedule D, and not a mere change in the mode of investment of the C Company's capital.
This was a case for appeal, under the Taxes Management Act, 1880, which, on the motion of the parties, the Lord Ordinary in Exchequer (Stormonth-Darling) appointed to be heard by the Second Division, in terms of A. S., 9th December 1880.
The case set forth, inter alia, that at meetings of the Commissioners for the General Purposes of the Income-Tax Acts for the Lower Ward of Lanarkshire held at Glasgow on 9th February and 28th April 1904, ‘the Californian Copper Syndicate, Limited and Reduced* (hereinafter referred to as the Company), appealed against the following assessments made upon them under Schedule D of the Income-Tax Acts, in respect of the profits of the business carried on by them, that is to say, an assessment of £10,000 (duty £625) for the year ending the 5th April 1903, and an assessment of £20,000 (duty £916, 13s. 4d.) for the year ending the 5th April 1904. The following facts were admitted or proved:—
‘1. The Company was incorporated on 5th February 1901, under the Companies Acts, 1862 to 1900, as a company limited by shares.’ The registered office of the company was in Glasgow.
‘2. The objects for which the Company was established are set forth in the third article of its memorandum of association, and embrace, inter alia, the following objects, viz.:’—(quoted below.†)
‘3. The fifth article of the memorandum of association sets forth that the capital of the Company is £30,000, divided into 30,000 shares of £1 each. The Company commenced business shortly after the date of its incorporation, and has since continued to carry it on.
‘4. Of the 30,000 shares into which the capital of the Company is divided, 28,332 shares have been issued. The remaining 1668 shares are unissued. Of the 28,332 shares issued, 4,332 shares, representing £4,332 of capital, were subscribed for in cash, and are fully paid up, and 24,000 shares, representing £24,000 of capital, are held as fully paid.
‘5. The Company acquired copper bearing land in the county of Fresno aforesaid, extending to 480 acres, at the price of £24,000, and expended the paid-up capital of the Company in the purchase and development of the property. The accounts shew that the cash capital of £4,332 of the Company was spent in development, preliminary, and head office expenses. In April 1902, the Company sold 80 acres of its property to the Fresno Copper Company, Limited (hereinafter referred to as the Fresno Company), at the price of
£105,000, payable wholly in fully paid shares of the Fresno Company, and in August 1903 the Company sold the remaining 400 acres of its Property to the Fresno Company at the price of £195,000, payable wholly in fully paid shares of the Fresno Company. The shares of the Fresno Company, representing the prices aforesaid, in all 300,000 £1 shares fully Paid, have been allotted to the secretary of the Company meantime in trust for the Company.
‘7. The Fresno Company was incorporated on 2d April 1902, under the Companies Acts, 1862 to 1900, as a company limited by shares. The capital of the Fresno Company, originally £175,000 divided into 175,000 shares of £1 each, was afterwards increased to £400,000 by the creation of 225,000 new shares of £1 each. Of the 400,000 shares 300,000 were allotted to the secretary of the Company, as before mentioned, in payment of the prices of the lands acquired by the Fresno Company from the Company; 75,000 shares have been subscribed for in cash, and 25,000 remain unissued. The...
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