Commissioners of Inland Revenue v Exxon Corporation

JurisdictionEngland & Wales
Judgment Date01 March 1982
Date01 March 1982
CourtChancery Division

Chancery Division.

Inland Revenue Commissioners
and
Exxon Corporation

Mr. M. Nolan Q.C. and Mr. R. Carnwath (instructed by the Solicitor of Inland Revenue) for the Crown.

Mr. D.C. Potter Q.C. and Mr. S.J. Allcock (instructed by N.A. Halton Esq., Esso Petroleum Co. Ltd.) for the taxpayer.

Before: Goulding J.

Corporation tax - Double taxation relief - Dividend paid by US corporation resident in UK to parent corporation resident in US - Whether dividend exempt from UK tax - Double Taxation Relief (Taxes on Income) (USA) Order 1946 - Art. XV - (See now, Double Taxation Relief (Taxes on Income) (USA) Order 1966, Art. II).

This was an appeal by the Crown from a decision of the Special Commissioners.

In March 1973 Esso paid a dividend of £7 million to its parent company Exxon. Both Esso and Exxon were US corporations. For the purpose of UK tax Esso was a UK resident and Exxon was a US resident. Income tax at the rate of 15% was deducted from the dividend and Exxon claimed repayment of that tax under Income and Corporation Taxes Act 1970 section 497 subsec-or-para (1)sec. 497(1) of the Income and Corporation Taxes Act 1970 on the ground that it was exempt from UK tax by virtue of Art. XV of the Double Taxation Relief (Taxes on Income) (USA) Order 1946. The Commissioners, following the decision in Strathalmond v. I.R. Commrs., found that the exemption was available to Exxon.

The Crown argued that the Strathalmond case was wrongly decided. It also contended that if the residence definitions are applied and the corporation paying a dividend or interest is a US corporation that corporation can never, by definition, be a resident of the UK: therefore the provisions of Art. XV cannot apply equally both ways. Since the persons drafting the Convention should not be supposed to have agreed on a provision incapable of any application, the hypothesis importing into Art. XV of the residence definitions contained in Art. II(1)(g) and (h) is incorrect.

The taxpayer argued that the sentence of Art. XV could apply to an entity which was at once an entity created in the US and a judicial person in the UK. Alternatively it was argued that the second sentence of Art. XV should be construed as having failed to achieve the purpose that its framers intended.

Held, appeal allowed.

1. The decision in the Strathalmond case, importing the "residence" definitions into the first sentence of Art XV, is confirmed.

2. To similarly import the "residence" definitions into the second sentence of Art. XV would be to render that sentence incapable of operation. Accordingly that sentence is to be construed without the inclusion of the "residence" definitions, even though this leads to the strange result that similar words mean different things in the two sentences.

JUDGMENT

Goulding J.: This is an appeal by way of Case Stated from a decision of the Special Commissioners. A paper known as Annexure D to the Case Stated contains the Commissioners' summary of the facts of the case, of the evidence adduced and arguments addressed to them and of the relevant legislation. I shall not take time to read Annexure D aloud, but it is to be treated as prefixed to this judgment and I shall not repeat what it contains. I follow it in using the term "the Convention" to mean the Amended Double Taxation Relief Order referred to in para. 1 of Annexure D.

The whole question between the parties is whether the expression "a resident of the other Contracting Party" in the second sentence ofArt. XV of the Convention should or should not be...

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4 cases
  • Union Texas Petroleum Corporation v Critchley (Inspector of Taxes)
    • United Kingdom
    • Chancery Division
    • 31 Agosto 1988
    ...Revenue) for the Crown. Before: Harman J. The following cases were referred to in the judgment: I.R. Commrs. v. Exxon Corporation TAX[1982] BTC 182 Marren (H.M.I.T.) v. Ingles WLR[1980] 1 W.L.R. 983 Whitney v. I.R. Commrs. TAX(1925) 10 T.C. 88 Double taxation relief - Distribution by UK sub......
  • Getty Oil Company v Steele (Inspector of Taxes) and related appeals
    • United Kingdom
    • Chancery Division
    • 7 Mayo 1990
    ...to be paid". For my part I would respectfully adopt the approach of Goulding J in IR Commrs v Exxon Corporation TAXTAX(1981) 56 TC 237; [1982] BTC 182. An officious bystander, understanding taxation, would in my view have no difficulty in relating "the tax credit paid" to "tax credit equal ......
  • Commissioners of Inland Revenue v Commerzbank AG IRC v Banco do Brasil SA
    • United Kingdom
    • Chancery Division
    • 9 Febrero 1990
    ...AC 251 Great West Life Assurance Co v US 678 S 2d 180; 82-1 US Tax Cas (CCH) 9374 IR Commrs v Exxon Corp TAXTAX(1982) 56 TC 237; [1982] BTC 182 James Buchanan & Co Ltd v Babco Forwarding & Shipping (UK) Ltd ELR[1978] AC 141 Strathalmond (Lord) v IR Commrs TAX(1972) 48 TC 537 Corporation tax......
  • Fowler
    • United Kingdom
    • First Tier Tribunal (Tax Chamber)
    • 12 Abril 2016
    ...context for excluding the reference to the domestic tax law meaning. For example, Mr Schwarz referred to IR Commrs v Exxon Corporation TAX[1982] BTC 182 at 183–185, where Goulding J refused to apply a domestic law definition which would have rendered a treaty provision incapable of any appl......

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