Dreyfus Foundation Inc. v Commissioners of Inland Revenue
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE JENKINS,LORD JUSTICE HODSON,THE MASTER OF THE ROLLS |
| Judgment Date | 03 June 1954 |
| Judgment citation (vLex) | [1954] EWCA Civ J0603-4 |
| Date | 03 June 1954 |
| Court | Court of Appeal |
[1954] EWCA Civ J0603-4
In the Supreme Court of Judicature
Court of Appeal.
The Master of the Rolls
Lord Justice Jenkins and
Lord Justice Hodson
MR HEYWORTH TALBOT, Q.C., and MR PHILIP SHELBOURNE (instructed by Messrs Linklaters and Paines) appeared for the Appellants.
MR ROY BORNEMAN, Q.C., and MR J.H. STAMP and SIR REGINALD HILLS (instructed by the Solicitor of Inland Revenue) appeared for the Respondents.
THE MASTER OF THE ROLLS. In this case the Camille and Henry Dreyfus Foundation Inc., a corporation which, as its name indicates, is a foreign corporation, constituted according to the laws of the State of New York, and to which I will hereafter refer as "the Foundation", has appealed against the refusal of the Commissioners of Inland Revenue to admit a claim on its part to exemption from Income Tax for the tax years 1946/47 to 1950/51 inclusive. In respect of each of those years the Foundation was in receipt of large sums (the gross amount of which is over a quarter of a million pounds) being payments by way of royalties from an English Company, British Celanese Ltd. It isnot in dispute that tax is properly payable by the Foundation in respect of these sums unless relief therefrom is obtainable under Section 37 of the Income Tax Act, 1918. It is and has, however, been the case of the Foundation that it is entitled to exemption on the ground that the sums in question form part of the income of a "body of persons … established "for charitable purposes only" within the terms of paragraph (b) of Section 37 of the Act, the income in question having in fact been applied exclusively for such purpose.
It has been conceded on the part of the Foundation that by the phrase "for charitable purposes" is meant purposes which are by the law of the United Kingdom understood to be, or defined as being, "charitable", that is, within the scope and intendment of the preamble to the Statute of the First Elizabeth; but it has been the Foundation's case that, though "established" by the laws of New York State (that is, constituted as a Membership Corporation according to New York law) and though carrying on all its activities in that State or in the United States of America, nevertheless the character of its activities, having regard to the terms (as interpreted according to the evidence of New York lawyers) of its Certificate of Incorporation, is such as to qualify them as "charitable" under our law. Upon thispoint the finding of the Special Commissioners was favourable to the Foundation; and in the circumstances Mr Justice Wynn-Parry expressed no view upon it. But the Special Commissioners also held that in order to obtain the privilege of exemption under Section 37 of the Act, the "body of persons" claiming such privilege must be one "established" under and in accordance with the laws of the United Kingdom; in other words, the Foundation being a foreign corporation not subject to the jurisdiction of our Courts, is ipso facto debarred from the benefits of Section 37. Upon this matter Mr Justice Wynn-Parry upheld the decision of the Special Commissioners, regarding himself asbound by the decision and reasoning of Mr Justice Lawrence (as he then was) in Commissioners of Inland Revenue v. Gull, 21 Tax Cases 374, referred to by the Special Commissioners in their Case Stated. In the cited case, Mr Justice Lawrence, after indicating that he would himself have been disposed to construe the words "anybody of persons … established" as comprehending a body established in fact, for the requisite purposes, in any part of the world, "felt constrained" by certain later Acts of Parliament, clearly proceeding upon the basis of the more limited interpretation, to hold that the bodies of persons indicated in Section 37 were bodies established under and inaccordance with our laws.
As the matter is res integra in this Court, it will be necessary for me at a later stageto express my opinion on the view taken by Sir Justice Lawrence, as it will also be desirable, having regard to the argument we have heard, for me to express my view on the validity of the finding of the Special Commissioners in the Foundation's favour that its objects are exclusively "charitable" as understood by our law.
The first question being, as I have said, res integra in this Court, is plainly a matter of the interpretation of the few relevant words in Section 37 and may therefore be said to fall within a small compass. We heard from both sides considerableargument on general considerations addressed to what was called the proper approach to the essential matter of construction. Thus, on the part of the Foundation, we wore reminded of the need in Taxing Statutes - indeed in all Statutes - to interpret the words according to their ordinary sense and to avoid reading into the language used other words not clearly required by the context itself. It was also urged upon us, as a matter of principle, fairness and sense, that if (as in the present case) a non-resident was made liable to suffer tax on income arising in this country no less than a resident, then the non-resident like the resident should be entitled to the benefit of any relevant exemption. Cn the part of the Crown it was submitted that, since all taxation was raised by Parliament for employment for the benefit of the Kingdom, so the logic of exemption was prima facie to be found in the Parliamentary view that the income exempted would be used or applied in a manner so beneficial to the community as to outweigh the claim to tax it - a consideration which could have no place where the income belonged to a non-resident and was used by him outside the United Kingdom. Mr Borneman also cited a number of cases beginning with Jeffreys v. Boosey, 4 House of Lords Cases 815, in support of the general proposition that when Parliament imposes obligations or confers privileges upon any classes of persons specified in its enactments, it must be taken prima facie to be confining its purpose to persons or bodies of persons resident in, or subject to the jurisdiction of the Courts of, the United Kingdom. The proposition, as such, is no doubt incontrovertible. But I cannot think that it plays a useful part in the solution of the present problem. The term "body of persons" is defined thus in Section 257 of the Act:-
"Body of persons' means any body politic, corporate, "or collegiate, and any company, fraternity, fellowship "and society of persons, whether corporate or not "corporate."
The words in the definition are of very wide import. Buteven if, by application of the general principle above cited, they might otherwise prima facio have been confined to bodies of persons within the United Kingdom or subject to the jurisdiction of its Courts, it is quite clear that they are in fact used (and appropriately used) in certain parts of the Act to comprehend foreign or wholly non-resident bodies - See, for example, Rule 1 of the All Schedules Rules when read together with paragraph 1 (a)(iii) of Schedule D.
In these circumstances it does not appear to me that any a priori inference can be relied upon in favour of limiting the term "bodies of persons" in Section 37. I have not indeed, for my part, found any of the more general arguments to which I have alluded of material significance one way or the other in the present case. The answer to the problem posed must, in my judgment, depend upon the true interpretation, according to ordinary principles, of the relevant phrase - and, as I think, of the essential word therein "established" - in the context in which it is found in Section 37.
The Section itself is the first of a group which follows the cross heading "Relief to Charities, Friendly Societies, etc". It is Section 37 which picks up the word "charities" and I will return to it presently. Section 38 is concerned with the British Museum. Friendly Societies form a part of the subject matter of Section 39 and it is not in doubt that by Friendly Societies is meant societies constituted, regulated by and subject to, our own laws. So in the succeeding parts of Section 39 the bodies or corporations, anticipated by the word "etc." in the cross heading, are also bodies or corporations constituted and regulated by, and subject to, the laws of the United Kingdom. The final Section, 40, deals with penalties and is applicable to all the preceding Sections in the group, including 37. The final subsection, (4), may be quoted in full:
"A person who makes a false or fraudulent claim for "exemption under the said sections in respect of any"interest, annuities, dividends or shares of annuities "charged or chargeable under Schedule C shall forfeit "the sum of one hundred pounds, and if such claim is "made by any person in his own behalf he shall in addition be liable to be charged in treble the tax so "chargeable."
As was observed during the argument, this subsection with its penalty of treble tax would be, to say the least, administratively difficult if not inappropriate in the case of a nonresident.
If, then, the "bodies of persons" referred to in Section 37(b) include foreign or non-resident bodies, it must be conceded at least that they are in that respect alone of all the bodies and associations referred to in the group of sections. I turn, then, next to the word "charities" which in the cross heading must be taken to introduce them. And by "charities" must, I take it, be meant "charitable institutions". Now, to my mind, the words "charities" or "charitable institutions" in an ordinary context in an English Act of Parliament or any English document must ( prima facio at least) mean institutions regulated by, and subject to the jurisdiction of, the laws or the Courts of the United Kingdom and constituted for the carrying out of objects or...
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