Peracha v Miley (Inspector of Taxes)
| Jurisdiction | England & Wales |
| Judgment Date | 18 June 1990 |
| Date | 18 June 1990 |
| Court | Court of Appeal (Civil Division) |
Court of Appeal (Civil Division).
Dillon, Parker and Stocker L JJ.
Mr Robin Mathew (instructed by Clifford Chance) for the taxpayer.
Mr Jonathan Parker QC (instructed by the Solicitor of Inland Revenue) for the Crown.
The following cases were referred to in the judgment of Dillon LJ:
Dunmore v McGowan (HMIT) TAX(1978) 52 TC 307
Furniss (HMIT) v Dawson & Ors TAXTAX(1984) 55 TC 324; [1984] BTC 71
Macpherson v Bond (HMIT) TAXTAX(1985) 58 TC 579; [1985] BTC 538
Income tax - Person entitled to income - Interest - Sum deposited by taxpayer and accrued interest retained by bank as part security for debt - Whether taxpayer a person "receiving or entitled" to interest -Income and Corporation Taxes Act 1970 section 114 subsec-or-para (1)Income and Corporation Taxes Act 1970, sec. 114(1) (now Income and Corporation Taxes Act 1988 section 59 subsec-or-para (1)Income and Corporation Taxes Act 1988, sec. 59(1)).
This was an appeal by the taxpayer against the decision of Vinelott J ([1989] BTC 85) that he was liable to tax under theIncome and Corporation Taxes Act 1970 section 114 subsec-or-para (1)Income and Corporation Taxes Act 1970, sec. 114(1) in respect of interest credited to a deposit account with a bank although it was never paid to him.
In 1971 the taxpayer made a deposit with the London branch of the United Bank ("UB") under the terms of a "letter of lien" by which he accepted liability as principal debtor for advances by the Dacca branch of UB to a company in what was then East Pakistan.
After East Pakistan became Bangladesh in 1972 it was decreed by the new government that the assets and business of the company should become vested in the Bangladesh Jute Board and UB's undertaking in Bangladesh was transferred to the Janata Bank.
In 1974 the taxpayer brought an action against UB claiming that, as a result of the decrees, the debt from the company had ceased to be due to UB so that there was nothing owing by the taxpayer to UB and he was entitled to claim the sum deposited with interest. In those proceedings (General Produce Co v United Bank Ltd (unreported, 30 January 1979)) the judge held that the debt was still outstanding and due from the taxpayer as principal debtor. UB was therefore entitled to retain the deposit. He did not deal with the question of set-off since in the circumstances it was unnecessary.
UB did not at any time assert a right to set off or appropriate the deposited sum in satisfaction of the debt and made no demand for repayment.
The taxpayer appealed against assessments to tax under Income and Corporation Taxes Act 1988Sch. D, Case III in respect of interest accruing to the deposit account between 1973-74 and 1984-85. A special commissioner held that the taxpayer was the person entitled to the interest within the Income and Corporation Taxes Act 1970,Income and Corporation Taxes Act 1970 section 114sec. 114 although he had not actually received it.
The taxpayer contended that although it had not done so, UB was in a position to appropriate the amount deposited and interest in reduction of the outstanding loans so that the taxpayer never became entitled to the interest. Moreover, after successfully resisting the High Court action in 1979, it was bound to set off the whole deposit against the loans so that the crediting of interest to the taxpayer was no more that a book-keeping entry and it could not be said that he was a person "receiving or entitled" to the interest within Income and Corporation Taxes Act 1970...
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