Van Den Berghs Ltd v Clark (Inspector of Taxes)

JurisdictionUK Non-devolved
JudgeLord Atkin,Lord Tomlin,Lord Macmillan,Lord Wright
Judgment Date08 April 1935
Judgment citation (vLex)[1935] UKHL J0408-1
Date08 April 1935
CourtHouse of Lords

[1935] UKHL J0408-1

House of Lords

Lord Atkin.

Lord Tomlin.

Lord Russell of Killowen.

Lord Macmillan.

Lord Wright.

Van den Berghs, Limited

After hearing Counsel, as well on Monday the 4th, as on Tuesday the 5th, Thursday the 7th and Friday the 8th days of March last, upon the Petition and Appeal of Van den Berghs, Limited, whose registered office is at Unilever House, Blackfriars, in the City of London, praying, That the matter of the Order set forth in the Schedule thereto, namely, an Order of His Majesty's Court of Appeal, of the 28th of June 1934, might be reviewed before His Majesty the King, in His Court of Parliament, and that the said Order might be reversed, varied, or altered, and that the Petitioners might have the relief prayed for in the Appeal, or such other relief in the premises as to His Majesty the King, in His Court of Parliament, might seem meet; as also upon the printed Case of Alexander Stirling Clark (His Majesty's Inspector of Taxes), lodged in answer to the said Appeal; and due consideration had this day of what was offered on either side in this Cause:

It is Ordered and Adjudged, by the Lords Spiritual and Temporal in the Court of Parliament of His Majesty the King assembled, That the said Order of His Majesty's Court of Appeal, of the 28th day of June 1934, complained of in the said Appeal, be, and the same is hereby, Reversed, and that the Judgment of the Honourable Mr. Justice Finlay, of the 13th day of March 1934, thereby set aside, be, and the same is hereby, Restored: And it is further Ordered, That the Respondent do pay, or cause to be paid, to the said Appellants, the Costs incurred by them in the Court of Appeal, and do also repay, or cause to be repaid, to the said Appellants, the amount of the tax paid by them to the Respondent, together with interest thereon at the rate of 4 per centum per annum, as from the 1st day of July 1932 to the 22d day of March 1934 (inclusive), and also as from the 20th day of July 1934; And it is further Ordered, that the said Respondent do pay, or cause to be paid, to the said Appellants, the Costs incurred by them in respect of the said Appeal to this House, the amount of such last-mentioned Costs to be certified by the Clerk of the Parliaments: And it is also further Ordered, That the Cause be, and the same is hereby, remitted back to the King's Bench Division of the High Court of Justice, to do therein as shall be just and consistent with this Judgment.

Lord Atkin

My Lords,


I have had an opportunity of reading the opinion which is about to be delivered by my noble and learned friend Lord Macmillan. I agree with it, and have nothing to add.

Lord Tomlin

My Lords,


I also have had an opportunity of reading the opinion which is about to be delivered by my noble and learned friend Lord Macmillan, and I concur in it in all respects and have nothing to add.

Lord Macmillan

My Lords,


In the year 1927 the Appellants received payment of a sum of £450,000 from Anton Jurgens Vereenigde Fabrieken of Holland (whom I shall call "the Dutch Company") pursuant to the terms of an agreement between the Appellants and the Dutch Company dated 24th September, 1927. The question is whether this sum ought to be taken into account in computing the balance of the profits or gains of the Appellants' trade for the year 1927 on which they are chargeable to tax for the year 1928-29 under Schedule D of the Income Tax Act, 1918.


The Appellants say that the £450,000 was a capital receipt and ought not to be reckoned as forming any part of the profits arising from the carrying on of their trade. The Crown says that the £450,000 was a trade receipt which ought to be included in the computation of the Appellants' profits or gains for income tax purposes.


The circumstances in which the Appellants received the payment which has now to be examined are set out in the stated case, from which I select the salient facts. The Appellants were incorporated as a limited company in this country in 1895 and have since carried on the business of manufacturing and dealing in margarine and similar products on a very extensive scale both here and abroad. They had as their keenest competitors the Dutch Company, which was engaged in the same business in Holland. On 13th February, 1908, the two companies entered into an agreement whereby they bound themselves for the future to "work in friendly alliance" and to share their profits and losses in conformity with an elaborate scheme detailed in the agreement. Each of the two companies had a controlling interest in a number of other companies and they undertook that, if either of them or any of the companies which they controlled should acquire an interest in any other margarine concern, the fact should be communicated to the other party, who should have an option to require such interest to be brought within the operation of the agreement. Both companies further undertook on behalf of themselves and of their controlled companies not to enter into any pooling or price arrangements with third parties which might be deemed inimical to the interests of the two companies under the agreement. The directors and managers of the respective companies were parties to the agreement and bound themselves for 20 years not to engage in any margarine business other than that of the two companies. Provision was also made for the setting up of a representative joint committee which was empowered to make arrangements with outside companies and firms as to the selling and buying prices of margarine and the limitation of areas of supply. It was further comprehensively agreed that "each of the two companies shall be true and loyal to the other of them and shall do all in the power of such company to promote the commercial, technical, pecuniary, buying and selling and other interests of the parties hereto in relation to the margarine business". It is not necessary to set out the detailed provisions of the agreement, but its elaborate character is sufficiently indicated by the fact that it consists of 35 articles (with numerous sub-heads) and five schedules and extends to 22 pages of print in the case before your Lordships.


A supplemental agreement was entered into between the parties on 17th July, 1913, which recited that the Dutch Company had acquired rights in a process for hardening oils and that the parties were desirous of formulating a scheme for the merger of their assets or the unification of their financial and commercial interests and for the regulation and allocation of their turnover, but that such a scheme could not at present be fully elaborated to their satisfaction, and it was desirable in the meantime to regulate their mutual relations and modify and extend the principal agreement in the manner provided in the supplemental agreement. By this second agreement the parties modified the original basis of ascertaining and sharing profits and subject thereto agreed to continue in force the relative provisions of the principal agreement until 31st December, 1940. Provision was made for the formation of a committee to endeavour to devise the scheme of merger or unification mentioned in the recital, and, failing agreement upon such a scheme by 15th December, 1913, the parties bound themselves to execute a contract confirming and extending to 31st December, 1940, the provisions of the supplemental agreement and of a scheduled document setting out agreed alterations in their existing pool contract.


According to the stated case "each company carried on its business independently, but in general the parties observed the terms of the said agreements for each of the years 1908 to 1913 and the profits of the two companies were accounted for for those years. Payments were in fact made by and to the Appellants under the said agreements in these years. Such payments when made to the Dutch Company were deducted as an expense and when made by the Dutch Company were brought in as a receipt in making up the Appellants' profit and loss accounts for the years in which the payments were made or received. In computing the Appellants' income tax liability for the said years the amounts of such payments or receipts were deducted or brought into the taxable profit respectively and the income tax paid accordingly. It was also agreed by the Appellants when liability for income tax and excess profits duty was under consideration for years subsequent to 1913 that the results of working the said agreements should be charged to income tax and excess profits duty as trading receipts and payments."


During the war the two companies did not operate the agreements, and after peace was restored they found it desirable to enter into a fresh agreement in an endeavour to render workable the two previous agreements which were then running and would not terminate till 1940. This third...

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    ...Accordingly, the Commissioners were wrong in deciding that the payment was a capital receipt. Van Den Berghs, Ltd. v. Clark 19 TC 390; [1935] AC 431, Barr, Crombie & Co., Ltd. v. Commissioners of Inland Revenue26 TC 406; 1945 SC 271, John Mills Productions Ltd. v. Mathias 44 TC 441 CASE Sta......
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