EVANS MEDICAL SUPPLIES LTD. Vs. MORIARTY

JUDGEMENT

(1.) The question raised on this appeal is whether a sum of Pounds 100.000 paid to Evans Medical Supplies Ltd. (whom I will hereafter call' the company') by the Government of Burma pursuant to an agreement dated October 20, 1953, was rightly included in the companys assessment for income tax for the year 1954 -1955 as part of 'the annual profits or gains arising to the company from its trade' during the year of assessment under Case I of Schedule D. now incorporated in section 122 of the Income Tax Act, 1952. [His Lordship stated the facts and continued :]

(2.) THE agreement begins by certain recitals, thus : '(1) the Government of the Union of Burma propose to build in Burma a factory and laboratories (hereinafter together referred to as the factory) for the purpose of establishing an industry there for the production of pharmaceutical and other products. (2) Evens Medical has developed and own processes formulae and knowledge relating to the manufacture of pharmaceutical products and to the use of machinery plant appliances and devices used in such manufacture. (3) For facilitating the building and running of such factory Evans Medical propose to supply the Government of Union of Burma with information and to organize the factory in the manner hereinafter mentioned.' The agreement is then divided into separate parts -I, II, III, IV and V - and it may be said that the second and third recitals relate particularly to Parts I and II respectively. The first part, which I will read substantially in full, is as follows : 'Part I. In consideration of the payment to Evans Medical by the Government of the Union of Burma of the capital sum of Pounds 100,000 sterling payable in the United Kingdom free from any deduction whatsoever (A) Evans Medical will provide and make available to the Government of the Union of Burma all drawings designs and plans and technical and other data and know -how necessary for the establishment erection and installation of the factory and the commencement of production thereat of the pharmaceutical and other products mentioned in the schedule hereto. (B) Evans Medical will supply to the Government of the Union of Burma designs and lay -out for the erection of plant including machinery and equipment and all other requisites and shall supply full data and specifications with drawings and instructions and all other information relating to the sources and manufacturers and suppliers of such machinery and equipment. (C) Evans Medical will make available to the Government of the Union of Burma all information relating to the supply of prototype machinery and equipment... (D) Evans Medical hereby undertake that during the currency of this agreement the facilities hereby agreed to be furnished to the Government of the Union of Burma under the preceding sub -clauses of this clause shall be exclusive to the said Government and shall not' - that is, the facilities supplied by Evans Medical shall not -'during the currency hereof be furnished to any other person or corporation in Burma.'

(3.) PART II is of greater length and consists of eight clauses, many of them subdivided. I shall not read them all. But under the first clause Evans Medical undertook to advise the Government about how to proceed with the building and operation of the factory, and also provided that they would act as purchasing agents for the purchase of the plant, Clause 2 put upon the company an obligation to act as managers, and, according to clause 3, they therefore undertook to provide and train all the necessary staff, particularly to train Burmese nationals for the purpose.