Gilbertson v Fergusson

Stated for the opinion of the Court by the Commissioners for the Special Purposes of the Income Tax Acts under the Act 37 & 38 Vict. c. 16. as to Income Tax assessed under Schedule D.

1. The question for the opinion of the Court is whether any portion of the profits made out of the United Kingdom by a Turkish Corporation carrying on business in Constantinople, London, and elsewhere, under the name of the Imperial Ottoman Bank, and not actually remitted to the United Kingdom, is, as profits, or as forming part of dividends paid in the United Kingdom, the subject of assessment to income tax under Schedule D. of the Act 16 & 17 Vict. c. 34. in the circumstances herein-after appearing, and, if any, then whether either of the assessments for the year 1874-75, which have been made by the Commissioners for Special Purposes on the appellant has been made upon the right principle or upon what principle an assessment should have been made.

2. The Commissioners for Special Purposes conceive that it is convenient and advisable to set forth in the first instance the enactments, or the substance of the enactments, which have an especial bearing upon the question.

3. By the Act 16 & 17 Vict. c. 34 certain duties are granted to Her Majesty upon profits arising from property, professions, trades and offices (inter alia), section 2.

SCHEDULE D.

For, and in respect of the annual profits or gains arising or accruing to any person residing within the United Kingdom, from any profession, trade, employment, or vocation, whether the same shall respectively be carried on in the United Kingdom or elsewhere.

And for and in respect of the annual profits or gains arising or accruing to any person whatever, whether a subject of Her Majesty or not, although not resident in the United Kingdom, from any profession, trade, employment, or vocation exercised within the United Kingdom.

[Paragraphs 4 to 18 of the case cite the following provisions of the Income Tax Acts:-16 & 17 Vict. c. 34. s. 5; 5 & 6 Vict. c. 35. ss. 23, 40, 41, 44, 51, 53, 54, 100 (Schedule D.), Rules 1 and 2 of the first case, and No. 3 of the rules apply to the first and second cases, 111, 113, 118, and nine following sections, 131, 132, and 192.]

19. By the Act 5 & 6 Vict. c. 80. s. 2 all persons entrusted with the payment of annuities or any dividends or shares of annuities payable out of the revenue of any foreign state to any persons, corporations, companies, or societies in Great Britain, or acting therein as agents or in any other character, shall without further notice or demand thereof, deliver or cause to be delivered into the head office for stamps and taxes in England an account in writing, containing the names and residences, and a description of the annuities, dividends, and shares entrusted to them for payment, within one calendar month after the same shall have been required by public notice in the "London Gazette," and shall also on demand by the inspector authorised for that purpose by the Commissioners of Stamps and Taxes deliver or cause to be delivered to him for the use of the said Commissioners for Special Purposes true and perfect accounts of the amount of the annuities, dividends, and shares payable by them respectively, and the said Commissioners for Special Purposes shall make an assessment thereon, giving notice of the amount of such assessment to the respective persons intrusted with such payments, who shall respectively pay the duty on the said annuities, dividends, and shares on behalf of the persons, corporations, and companies entitled unto the same out of the moneys in their hands.

20. By the Act 16 & 17 Vict. c. 34. s. 10 the provisions of the last-mentioned Act for the assessing and charging the duties on dividends and shares of annuities payable out of the revenue of any foreign State shall be extended to the assessing and charging of the duties by the now stating Act, granted as well on such dividends and shares of annuities as aforesaid as on all interest, dividends, or other annual payments payable out of or in respect of the stocks, funds, or shares of any foreign company, society, adventure, or concern, or in respect of any securities given by or on account of any such company, society, adventures, or concern, and which said interest, dividends, or annual payments have been or shall be intrusted to any person in the United Kingdom for payment to any persons, corporations, companies, or societies in the United Kingdom, and all persons intrusted with the payment of any such interest, dividends, or other annual payments as aforesaid in the United Kingdom, or acting therein as agents, or in any other character, shall do and perform all such acts, matters, and things in order to the assessing and charging and paying of the said duties on all such interest, dividends, and other annual payments as aforesaid, as by the said Act of 5 & 6 Vict. c. 80. persons intrusted with the payment of annuities of any dividends or shares of annuities are required to do and perform.

21. By a series of subsequent Acts the duties of income tax granted by the Act 16 & 17 Vict. c. 34. have been continued at various rates until the present time. The Act imposing the duty for the year ending on the 5th April, 1875, was the Customs and Inland Revenue Act, 1874 (37 & 38 Vict. c. 16.).

22. Towards the close of the year 1862 the Ottoman Bank of London, which was a banking Company established in London, and carrying on business there with a branch at Constantinople, arranged to transfer its business to the Imperial Ottoman Bank, which was a Turkish corporation incorporated according to the laws of Turkey by a firman of the Sultan.

23. The transfer of the business was completed in the beginning of the year 1863 by the issue of shares in the capital of the Imperial Ottoman Bank to the amount of 250,000l. to the shareholders of the Ottoman Bank of London, and the business in London of the Imperial Ottoman Bank as bankers was then commenced in London under the management of the London members of the committee, herein-after referred to, in the premises theretofore occupied by the Ottoman Bank of London; the remainder of the capital was subscribed in Constantinople, Paris, London, and other places. Immediately on the formation of the Imperial Ottoman Bank preparations were made to commence business in Constantinople, and it actually commenced business there on the 1st June, 1863.

24. The affairs of the Imperial Ottoman Bank (herein-after called the bank) were then and until the 17th February, 1875, continued to be regulated by a concession from the Government of Turkey and certain statutes. A new concession was granted, and new statutes were passed on the last-mentioned day, but the position of the bank, so far as the question in this case is concerned, is not thereby affected. A translation of the original concession and statutes will be found in the Appendix to this case.

25. By the original concession the bank is a State bank for the Ottoman Empire, and is established subject to the general laws of the Empire, with its seat fixed at Constantinople, and power to establish branches and agencies at other places, and it is provided that the bank shall be administered at Constantinople by a board of two or three members, and a council of administrators of three members, both to be named by a committee, chosen by the London and Paris founders, and this committee is to have power in conformity with the statutes to guide, control, and superintend the operations of the bank.

26. By the statutes above referred to it is declared that the bank is formed for the purpose of carrying into effect the privilege of the bank as defined in the concession, and the operations to be undertaken are defined in accordance with the concession. The capital of the bank is divided into shares of 500 francs, or 20l. each, and the liability of the shareholders is limited to the amount of their shares. There is no register of shares, but, according to the provisions of the statutes, all the certificates of shares are made out to bearer, and the shares themselves are transferable by delivery of the certificates, and the dividends payable thereupon are repayable at the option of the holders at Constantinople, Paris, or London by means of coupons attached to the certificates.

27. By the statutes the administration of the bank in Constantinople is confided to a director general, one or two assistant directors, and a council of administration of three directors. These are appointed by a committee of from 20 to 25 members, of whom 10 at least must be English, or resident in England, and 10 at least French, or resident in France, and each member of the council and of the committee must deposit in the treasury of the bank 100 shares therein, which are to remain unalienable during his continuance in office. This committee has the general guidance, control, and superintendence of the operations of the bank, and its members are elected by the general meeting of shareholders. The statutes further require that the committee shall meet four times a year alternately in London and Paris, and the committee has, in fact, met and still does meet sometimes in London and sometimes in...