TRINIDAD PETROLEUM DEVELOPMENT CO Vs. INLAND REVENUE COMMISSIONERS

JUDGEMENT

(1.) In this case a company, the Trinidad Petroleum Development Co., appeal against an assessment which has been made upon them under rule 21 of the General Rules, All Schedules, Income-tax Act, 1918, as amended by Section 26 of the Finance Act, 1927, in the sum of Pounds 46,032 odd in respect of interest paid under deduction of tax to another company, the British Controlled Oil fields, Ltd. The question which has to be decided in this case is whether this payment comes under rule 21 or 19 of the General Rules to which I have referred. It is argued by counsel for the appellants that the proper view is that rule 19 applies to this case, which, so far as material, is as follows : (1) "Where any yearly interest of money, annuity, or any other annual payment...... is payable wholly out of profits or gains brought into charge to tax, no assessment shall be made upon the person entitled to such interest, annuity, or annual payment, but the whole of those profits or gains shall be assessed and charged with tax on the person liable to interest, annuity or annual payment, without distinguishing the same, and the person liable to make such payment, whether out of the profits or gains charged with tax or out of any annual payment liable to deduction, or from which a deduction has been made, shall be entitled, on making such payment to deduct and retain there out a sum representing the amount of the tax thereon at the rate or relates of tax in force during the period through which the said payment was accruing due." It will be observed that rule 19 (1) is dealing with a yearly interest of money payable wholly out of profits or gains brought into charge to tax, and the first question which has to be considered is meaning of the words "brought into charge" in that connection. In my view, having regard to the decision of this Court in Attorney-General V/s. Metropolitan Water Board and to the opinion expressed by all the learned Judges in that case, to which I shall presently refer, it is not possible for us to take any view but one as to the meaning of that language. Thus, Lord Hanworth, M.R. (97 L.J.K.B., at p. 217; [1928] 1 K.B., at p. 843; 13 Tax Cas. at p. 304), considering the meaning of the words in rule 19 "payable wholly out of profits or gains brought into charge to tax" said that they "do not mean payment out of a fund that may be brought into charge, or is, or will be, a factor for the purpose of charge, but refer to a fund brought into charge out of which tax is payable and to be paid." And Sergeant, L.J. (97 L.J.K.B., at p. 218; [1928] 1 K.B., at p. 847; 13 Tax Cas. at p. 307) says this : "In my opinion the words brought into charge are more naturally and satisfactorily satisfied by the meaning placed on them by the Crown. The past principle brought naturally refers to something that has been completed in the year in question, if not by actual payment at any rate by accrued liability to pay. It is only in a looser sense that it can be applied to a payment or liability to pay in respect of a succeeding year." Lawrence, L.J., deals more particularly perhaps with the matter we have here to consider, and be, following Lord Hanworth, said (97 L.J.K.B., at p. 221; [1928] 1 K.B., at p. 852; 13 Tax Cas., at p. 311) : "I have arrived at the conclusion that the expression profits or gains brought into charge to tax in rule 19 means the taxable, and not the actual, profits or gains in the year of assessment

(2.) If that view, so expressed, is applied to the present case and, as I have said, I think it must be applied, we must have regard to its effect on Section 33 of the Finance Act, 1926, which has brought the present problem before the Court. The fact is that though the profits of the company during the year 1932 amounted to Pounds 69,908, the assessable profits in 1933-34 there had been as regards the years 1927-28 and 1928-29 loss to the extent of Pounds 82,085 : so that the balance loss attributable to 1928-29 was Pounds 12,177. Now under Section 33(1) of the Finance Act, 1926, it is provided that : "Where a person has in any trade. sustained as loss. he may claim that any portion of the loss for which relief has not been so given shall be carried forward and, as far as may be, deducted from or set off against the amount of profits or gains on which he is assessed under Schedule D in respect of that trade." Therefore it follows from Section 33 that when the losses are taken into consideration as provided in Section 33, that difference is a balance loss of Pounds 12,177, and, applying the test which, as I say, has to be applied in the present case, I think it is impossible to say that there was during the year of assessment any sum at all of profits to be brought into charge to tax. In fact the result is that the profits computed on the basis of Section 33 amount to nothing, and when regard is had to the language of this Court to the effect that the profits brought into charge to tax refer to the fund brought into charge to tax out of which tax is payable and to be paid, the result is that there is no such tax. Therefore, applying rule 19 in this way there is here no yearly interest of money payable wholly out of money brought into charge to tax, because, in my view, there were no profits

(3.) That, in my opinion, is sufficient to determine this case in favour of the Crown. Counsel for the appellants argues, as I understand, that whatever has been said in the Metropolitan Water Board Case, which was dealing with a liability for the year of assessment, cannot apply to Section 33, of the Finance Act, 1926, assumes an assessment which, in this case, would show an assessment on the profit of Pounds 69,908, and that it is only after that assessment has been ascertained and - he says and, indeed, must say - brought into charge to tax, that the later limb of that section requires that the person assessed may claim that the portion of the loss may be deducted therefrom. In my view, it is impossible to apply that requirement to the judgment in the Metropolitan Water Board Case, because I think, as I have already said, that they are of general application. It is true that we have been referred to a case in the House of Lords, the case of Central London Railway V/s. Inland Revenue Commissioners, in which Lord Macmillan in his speech pointed out the very many difficulties and distinctions which might have to be met in dealing with this rule. But, in my view, it is not necessary here for me to consider how far that case may or may not have thrown light upon the decision of that Court. It is sufficient for me to say that I can find nothing in the speech of Lord Macmillan which in any way exonerates me from feeling bound by what has been said directly in interpreting rule 19 in this Court, and therefore I think that, important as that case may be, it would not be right to allow it to deflect ones judgment as derived from the positive decision referred to. For those reasons I think that this appeal fails.