Ingram (J. G.) & Son Ltd v Callaghan
| Jurisdiction | England & Wales |
| Judge | LORD DONOVAN,LORD JUSTICE HARMAN,LORD JUSTICE WIDGERY |
| Judgment Date | 18 November 1968 |
| Judgment citation (vLex) | [1968] EWCA Civ J1118-5 |
| Date | 18 November 1968 |
| Court | Court of Appeal (Civil Division) |
[1968] EWCA Civ J1118-5
In The Supreme Court of Judicature
The Court of Appeal
(Civil Division)
T 251
(From: Mr. Justice Goff)
Lord Donovan
Lord Justice Harman and
Lord Justice Widgery
Mr. DESMOND MILLER, Q.C. and Mr. J. RAYMOND PHILLIPS, Q.C. (instructed by Solicitor of Inland Revenue) appeared on behalf of the Appellant Inspector.
Mr. H.H. MONROE, Q.C. and Mr. J.S. HOLROYD PEARCE (instructed by Messrs. Courtenay, Croome & Finch) appeared on behalf of the Respondent Company.
The periods of the respondent company's life which are under review in these proceedings are: First, the period from incorporation in 1916 up to September, 1961. Before this period ended a company called Redland Holdings Limited acquired all the shares in the respondent company; Secondly, the period from September, 1961, to June, 1962; Thirdly, the period from June, 1962, onwards. At the commencement of this period the respondent company's shares were bought from Redland by another company called Plastage (Sussex) Limited. I can conveniently call these periods Nos. 1, 2 and 3.
During period No. 1, the company's trade consisted of manufacturing and selling surgical and pharmaceutical rubber goods; it added to the rubber portion certain metal components which it bought elsewhere, assembled the complete product, and sold it at home and abroad.
In Period No. 2, in the circumstances which are set out in the Stated Case, the respondent company ceased to manufacture these rubber goods and to add the required metal components. It manufactured nothing. But it sold similar products made of plastic which had been made by another company.
In period No. 3, the respondent company once more manufactured the same kind of product and sold it. The only difference between what it did in period No. 1 and period No. 3 was that now the goods were made of plastic instead of rubber, a difference agreed to be immaterial.
The Special Commissioners came to the conclusion that at the end of period No. 1 the company permanently discontinued the trade of manufacturing, assembling and selling these products. Thereafter the company's trade was, in period No. 2, a different trade, namely that of merchanting similar products made and assembled by somebody else. The Commissioners further concluded that in period No. 3 a new trade was set up and commenced, notwithstanding that it consisted of making, assembling and selling products similar to those made, assembled and sold in period No. l.
The company disputed these conclusions before Mr. Justice Goff. He decided that while the trade in period No. 2 was not the same trade as in period No. 1, yet this latter trade was not permanently discontinued. Such a conclusion was, he held, impossible as a matter of law on the facts found in the Case: the true inference was that the trade carried on in period No. 1 was merely suspended, and resumed in period No. 3.
Against that judgment the Crown now appeals. The main practical importance of the case is that if either of the respondent company's contentions is right, trading losses suffered by it in and prior to period No. 1 can be carried forward and set against its trading profits for subsequent periods. On the Crown's view they cannot.
There is no dispute between the parties that the expression "permanently discontinued" in relation to a trade, where it appears in section 130 of the Income Tax Act, 1952, does not connote a discontinuance which is everlasting. Income tax being a yearly tax, the question has to be answered in relation to the year of assessment in which it arises, and must obviously be answered in the light of the facts which are known at the time when the assessment for that year comes to be made. If in the light of those facts the true conclusion is that the trade has been discontinued indefinitely, the Revenue, and the taxpayer, would be entitled, I think, to say that it had been discontinued permanently within the meaning of the section. If, on the otherhand, the true conclusion from the facts is that the trade is only temporarily in abeyance (for example to allow of extensive reconstruction or repair of the company's trading premises), then clearly it would be wrong to assert that the trade had been permanently discontinued. So far I do not think there is any controversy between the parties.
What is left then is, in my opinion, a question of fact: Was the trade carried on by the respondent company in period No. 1 permanently discontinued in the foregoing sense, or was it merely suspended for a time?
It is first argued for the company that throughout the essence of its trade has been selling. There is not much use (it is said) in simply manufacturing goods and looking at them: what produces the profit — and, incidentally, tax for the Revenue — is the profitable sale of the goods so made. It is immaterial on this view that in one period the goods are made by oneself and in another period are purchased ready-made from somebody else: this is simply a change of means. The end remains the same — a profitable sale. Here that was the end in all the three periods, and on that view the trade has remained one and the same throughout: there has been no discontinuance, and not even a suspension.
I have some sympathy with this view, which I fear, however, derives from somewhat far-off days when I tried to establish it myself. I failed; and looking back at the attempt, I think now that I rightly failed. I doubt if one can, as a rule, segregate the various activities involved in carrying on a trade, select one of them as being of the essence, and then designate the one selected as being the real, trade. There is, I think, an organic unity about a trade which invalidates this sort of dissection; and I think that Mr. Justice Rowlatt was saying much the same thing, though more incisively, when he remarked in Graham v. Green that a trade differs from the individual acts which go to make it up, just as a bundle differs from odd sticks. If the respondent company had been asked in period No. 1 what its trade was, it would have replied: "Making and selling surgical products" - not merely "Selling surgical products". And in period No. 2, if asked the same question, I think the company would have replied, and properly replied, "We have changed over now simply to selling". For what it is worth, moreover, the definition of "trade" for the purposes of the Income Tax Acts includes "every manufacture". This may not be worth much (indeed the whole definition is not worth very much) unless it is to be implied that the definition assumes in this respect that the goods manufactured will be sold. But the definition docs, I think, show that manufacture is to be regarded as more than a means to an end. I respectfully agree on this aspect of the case with the decision of the Court of Session in Gordon Blair Ltd. v. Commissioners of Inland Revenue, which decided in 1962 that Commissioners were entitled to find that a brewery company which discontinued an existing trade of brewing and selling beer, and changed over simply to selling it, had discontinued one trade and started another. I am not able, therefore, to say that there was one continuing trade throughout in this case, namely that of selling these surgical products. Or, to put the matter more accurately, I think there was evidence upon which the Commissioners could rightly reject such a contention. The learned judge below took the same view.
The second string to Mr. Monroe's bow is, however, this. Granted that a different trade was carried on in period No. 2, this does not necessarily involve that the trade carried on in period No. 1 was permanently discontinued. It may simply have been in temporary abeyance, and this is in fact the true conclusion to be drawn from the evidence, Experiments were being carried out to see if plastic could successfully be substituted for rubber,and when that was achieved manufacturing was resumed of the same kind of articles and for the same customers. The learned judge upheld this argument and allowed the company's appeal.
If the position of the company in period No. 2 were as thus described, one would have expected an assertion to that effect, supported by evidence, to be in the forefront of the case before the Special Commissioners. A witness who was a director of the company up to the end of period No. 2 in fact gave evidence; and if the...
To continue reading
Request your trial
-
Marriott v Lane
...of Inland Revenue) for the Crown. The following cases were referred to in the judgment: JG Ingram & Son Ltd v Callaghan (HMIT) TAX(1968) 45 TC 151 Kirk and Randall Ltd v Dunn TAX(1924) 8 TC 663 Robroyston Brickworks Ltd v IR Commrs TAX(1976) 51 TC 230 Wild v Madame Tussaud's (1926) Ltd TAX(......
-
Cronin v Lunham Brothers Ltd
...TAX ACT 1976 S27(1)(b) CORPORATION TAX ACT 1976 S27(3) GORDON & BLAIR V CRONIN 40 TC 358 GRAHAM V GREEN 1925 2 KB 37 INGRAM V CALLAGHAN 45 TC 151 MAXWELL INTERPRETATION OF STATUTES 12ED P270 MAXWELL INTERPRETATION OF STATUTES 12ED P297 TRYKA V NEWALL 41 TC 146 Synopsis: REVENUE Corporation ......
-
Maco Door and Window Hardware (UK) Ltd v HM Revenue and Customs
...Likewise a trade may consist in making as well as selling surgical products (see J G Ingram & Son Ltd v Callaghan (Inspector of Taxes) [1969] 1 WLR 456, 45 TC 151). This is recognised in other legislation (see eg s 163(1) of the Taxation of Chargeable Gains Act 1992 (which provides retire......
-
Bestway (Holdings) Ltd v Luff (Inspector of Taxes)
...(HMIT) TAXTAX[1996] BTC 241; [1998] BTC 24 (CA) Graham v Green (HMIT)ELR [1925] 2 KB 37 Ingram (JG) & Son Ltd v Callaghan (HMIT)WLR [1969] 1 WLR 456 IR Commrs v Scottish & Newcastle Breweries Ltd TAXTAX[1982] BTC 187; 55 TC 252 Kaye v BurrowsELR [1931] AC 454 Kilmarnock Equitable Co-operati......