9911796707
TMI Blog1938 (3) TMI 16X X X X Extracts X X X X X X X X Extracts X X X X ..... ssioners of income tax for the city of London under Case I, in respect of these profits. The following statement shows, in summary form, the material receipts and expenses of the London branch for the year ending March 31, 1928, upon which the assessment was based, as adjusted for income tax purposes by the additional commissioners:- Dr. Cr. Working expenses 41,070 Exchange and commission (mainly, profits on exporter's bills purchased) 90,600 Interest paid on deposits and balances in London 19,312 Rebates on bills receivable which were immature on March 31, 1928 7,814 Loans to Banks and discount houses 37,209 Commission and exchange 36,482 Interest on overdrawn accounts 25,558 Interest and expenses paid in New Zealand in respect of money borrowed in New Zealand, and used at the London branch 112,868 Interest on dishonoured bills 2,122 Discounts on Treasury bills 68,037 Interest on War Loan 3 per cent. 6,043 (Note-This item includes 41,262 in respect Interest on War Loan 5 per cent. 75,621 Dr. Cr. of money borrowed in New Zealand and used in the purchase of the following assets of the London Branch:- Interest on India 3 per cent. 1,500 War Loan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x Act, 1918, Section 46, which provides: "(1) Where the Treasury have before the commencement of this Act issued or may thereafter issue any securities which they have power to issue for the purpose of raising any money or any loan, with a condition that the interest thereon shall not be liable to tax or super tax, so long as it is shown, in manner directed by the Treasury, that the securities are in the beneficial ownership of persons who are not ordinarily resident in the United Kingdom, the interest on securities issued with such a condition shall be exempt accordingly". 2. As regards the India Government Stock, Schedule C, General Rules, r. 2, which provides: "No tax shall be chargeable in respect of.......(d) the interest or dividends on any securities of a foreign state or a British possession which are payable in the United Kingdom, where it is proved to the satisfaction of the Commissioners of Inland revenue that the person owning the securities and entitled to the interest or dividends is not resident in the United Kingdom; but, save as provided by this Act, no allowance shall be given or repayment be made in respect of the tax on the interest or dividend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in rejecting this contention. I agree with the Court below that, whether as interest or as a component part of the profits of the trade, the exemptions must equally apply. The only question remaining as to the India Government Stock is whether Schedule C, General Rules, r. 2(d), refers only to tax under Schedule C or is of general application. In my opinion, it is clearly not limited to Schedule C in its operation. The opening words of the rule do not limit it to no tax "under this schedule," as is done in both r. 1 and r. 3 and it can hardly have been the intention to limit the exemption of the stock, dividends or no interest of an accredited minister of any foreign state under r. 2(c). Equally, there seems to be no reason in so limiting r. 2(d). But, further, r. 2(d) is a consolidation of the exemption conferred by the Finance Act, 1910, Section 71(2), which was not limited to any particular schedule. A more difficult question arises as to the Grand Trunk Pacific and Auckland Electric Power stocks-namely, as to the extent of the incorporation of the provisions of Schedule C by Schedule D, Misc. Rules, r. 7(2) in view of the words: "relating to the tax to be asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... will refer later. The Crown's main contention is that Rule 7 is not a charging rule, but merely provides machinery for collection of tax, and that it would be out of place to find an exemption from tax in the rule. They claim, with some force, that the terminology of Rule 7(2) substantially reproduces the heading of the small group of rules of Schedule C above referred to, nothing incidentally that dividends are alone referred to, and that it is only in the small group that dividends are alone referred to, coupled with a definition clause. The Court of Appeal held that Rule 7(1) was a charging provision, and that the opening words of Rule 7(2)-"All the provisions of Schedule C relating to the tax to be assessed and charged"-were general, and clearly included the general rules, mutatis mutandis. On the first point, I find it sufficient to say that, in my opinion, rules which are described as miscellaneous, and which contain, for instance, in Rule 2 undoubted exemption, afford a not inappropriate place for the grant of exemptions. It is on the wording of Rule 7(2), however, that I feel doubt, for the words, following the opening words quoted above, have some resembla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ocedure which the provision was apparently designed to obviate. On the first point expressed by the judges I do not feel so clear as to utilise this ex post facto legislation in the construction of the Act of 1918, but again, I am not prepared to reverse, on appeal, the clear decision of the Court of Appeal. If the policy of the Crown is otherwise, it is for them to rectify the ambiguities by amending legislation. I am therefore of opinion that the appeal of the Crown fails on all the main questions. There remains the alternative question as to reduction of the amount of the four credit items so to be excluded from the computation by a proportionate part of the debit item of £ 112,868, which has been agreed at £ 41,262. It is perhaps enough to say that the Crown are unable to point to any statutory provisions in support of their contention, whereas the respondents find full justification for their resistance in the provisions of Schedule D, Cases I and II, Rule 3, which is as follows: "3. In computing the amount of the profits or gains to be charged, no sum shall be deducted in respect of (a) any disbursements or expenses, not being money wholly and exclusively l ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
