THE HIGH COURT

REVENUE
1999 No. 390R
BETWEEN
B.D. O’SHEA INSPECTOR OF TAXES
APPELLANT
AND

COLLE PARKVIEW SERVICE STATION LIMITED
RESPONDENT

JUDGMENT of Mr. Justice McCracken delivered the 25th day of May 2000.

This is a case stated by a Revenue Appeal Commissioner pursuant to Section 428 of the Income Tax Act, 1967 as applied to value added tax by Section 25 of the Value Added Tax Act, 1972. The hearing before the Appeal Commissioner arose out of a refusal by the Revenue Commissioners to repay value added tax in the amount of £16,075 which was claimed as an input credit by the Respondent and thus such claimed to be deductible by virtue of Section 12(l)(a)(i) of the Value Added Tax Act, 1972. The background to the claim arises from the sale by the Respondent to a Mr. Noel Whelan of certain garage premises at Crowe Street, Gort, County Galway together with a plot of land attached thereto and four petrol pumps, an automatic car-wash and a compressor. Value added tax in the sum of £16,075 was charged to the Respondent by Mr. Whelan in respect of this transaction, and the Respondent seeks to claim this sum as an input credit.

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In the case stated the Commissioner found the following facts:-

“(1) The Respondent was registered for V.A.T. with effect from the 1st June, 1994, as “operators of petrol filling station, convenience shop and ancillary fourcourt activities.” The Respondent submitted a V.A.T. repayment claim in the amount of £1 7,900 for the period July-August, 1994.

(2,) A I/A. T. inspection was carried on the 1st March, 1995.

(3)	VAT. input credit of £16,075 was claimed on foot of three invoices, relating to goods purchased from a Mr. Noel Whelan, copies of which invoices are attached and form part of this case stated

(4)	There was no permission for the transfer of goodwill in any of those invoices.

(5)	There was no stock or product in any of the petrol/diesal tanks at the time of the sale/purchase.

(6)	I accepted the evidence given that there was no negotiation concerning the sale of the business of the vendor i.e. there was no inspection of the vendor’s books of account. Nor were there warranties given by the vendor regarding the nature of his business.

(7)	The contract between the parties did not involve the transfer of staff debtors, nor creditors - neither trade nor bank.

(8)	No direct evidence was given by the taxpayer as to whether the business had ceased. Evidence was given by Mr. Dalton that there was no visible signs of a trade being carried on. Based on this evidence I found that

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the business had ceased prior to the sale of the premises and the equipment.

(9)	The business relationship which the vendor had maintained with Texaco was not sought by the Respondent nor did Texaco enforce any rights which they had under their contract with the vendor.

(10)	The Respondent was formed to carry on the oil distribution business at the location. It is an associated company of Corrib Oil Limited which carries on the business of distributors of Shell products in the west of Ireland.

(11)	The contract for the sale of the premises at Crowe Street, Gort, County Galway, the subject matter of invoices no. ‘s 1108 and 1109, was made between Mr. Noel Whelan and Corrib Oil Limited and is dated the 13th June, 1994.

(12)	Special condition No. 5 of the contract referred to in paragraph 9 above provided that the property was subject to a Texaco agreement. A copy of that contract is attached hereto and forms part of this case stated.”

Special condition number 5 referred to above is in the contract for the sale of the main garage premises and reads as follows:-

“The property is subject to a Texaco agreement as outlined in the documents schedule hereto.

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The purchaser shall purchase with full notice of the Texaco agreement as if the property in sale is charged with such agreement together with all the rights and liabilities therein.

In particular and without prejudice to the generality of the forgoing the purchaser hereby covenants with the vendor to enter into an agreement with Texaco (Ireland) Limited by way of novation or otherwise prior to completion or alternatively, to accept an assignment of the said agreement from the vendor prior to closing.

The purchase(shall indemnify the vendor against all actions, claims, costs, damages and proceedings whatsoever kind and howsoever arising as a result of any breach of the said Texaco agreement.

In this regard the purchaser shall, should the vendor so require, enter into a separate deed of covenant undertaking an indemnity to give effect to the provisions of this special condition”.

In the case stated the Appeal Commissioner also dealt with the direct evidence given before him on behalf of the Respondent by its financial controller, Mr. Eugene Dalton. He stated, inter alia:-

“That Mr. Dalton had been aware of the apparent close-down of the business which had been carried on by Mr. Whelan and he re-opened negotiations with Mr. Whelan which culminated in the agreement to purchase the assets on which the V.A.T. charged is the subject matter of this case stated; that the Respondent had not purchased any stocks for fuel, and he confirmed that,

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following the purchase, the Respondent had organised to clean out sludge which had accumulated in the storage tank which it had acquired. He further confirmed, in a reply to a direct question as to whether or not the filling station business was being carried on by Mr. Whelan immediately prior to the purchase, that he had not seen any sign of business being carried on for some time prior to the purchase “.

Value added tax is generally payable on the supply of goods, and it is accepted by the Appellant in the present case that it would be payable in respect of this transaction were it not for the provisions of Section 3(5)(b)(iii), which provides that:-

“The transfer of ownership of goods.... in connection with the transfer of a business or part thereof to another taxable person, shall be deemed, for the purposes of this act, not to be a supply of the goods.”

It is contended by the Appellant that the transaction in the present case was in connection with the transfer of a business or part thereof of in that these premises clearly had been a filling station at some time prior to the sale, and the Respondent intended to carry on that business in the premises. The Appellant also points to the transfer of the petrol pumps and car-wash, and argues for a liberal construction of the subsection. The Appellant also emphasises that the subsection does not require a transfer of the business as a going concern, and indeed takes issue with the approach of the Appeal Commissioner, who asked himself the question “was there an agreement for the transfer of a business or a part thereof?”

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I accept the Appellants contention that the subsection does not require any formal contract for the transfer of the business, and that it is sufficient to satisfy the subsection if the circumstances are such that the benefit of the business is in fact transferred.

The Respondent contends that the subsection should be construed strictly, in accordance with the principles laid down in Revenue Commissioners -v- Gourley [1933] I.R. 750, and points to the findings of fact in the case stated for which the Appeal Commissioner reached the conclusion that the purchaser acquired no title whatever to the business of the vendor.

In Mara (Inspector of taxes) -v- Hummingbird Limited [1982] I.L.R.M. 421, the Supreme Court set out the basis upon which a judge should approach a case stated. At page 426 he said:-

“A case stated consists in part of findings on questions of primary fact, e.g. with what intention did the tax payers purchase the Baggot Street premises. These findings on primary facts should not be set aside by the Court unless there was no evidence whatever to support them. The Commissioner then goes on in the case stated to give his conclusions or inferences from these primary facts. These are mixed questions of fact and law and the Court should approach these in a different way. If they are based on the interpretation of documents, the Court should reverse them if they are incorrect for it is in as good a position to determine the meaning of the document as is the Commissioner. If the conclusions from the primary facts are ones which no reasonable Commissioner could draw, the Court should set aside his findings on the ground that he must be assumed to have misdirected

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himself as to the law or made a mistake in reasoning. Finally, if his conclusions show that he has adopted a wrong view of the law, they should be set aside. If however they are not based on a mistaken view of the law or a wrong interpretation of documents, they should not be set aside unless the inferences which he made from the primary facts were ones that no reasonable Commissioner could draw.”

It is quite clear from this passage that the whole object of a case stated is that the Appeal Commissioner stating the case is seeking directions from the Court as to the law. He is not seeking directions as to fact, nor as to inferences to be drawn from those facts, and the Court will not interfere with any inferences which can be supported by the facts, even though the Court might have drawn different inferences had it heard the case in the first instance. In the present case the Appeal Commissioners found a number of facts which could reasonably lead to the inference that the business had ceased sometime before the sale, and that there was in fact no transfer of a business. I accept that he was wrong in posing the question as to whether there had been an agreement for the transfer of a business, and I also accept that an agreement as such is not necessary, but his ultimate finding was that the transfer of the goods the subject matter of the invoices referred to was not made in connection with the transfer of a business or part thereof within the meaning of subsection. In my view that was a finding which he was entitled to reach on the evidence given to him, and in so far as that evidence was documentary, the interpretation of the contract for the sale of the lands would support this conclusion. There was nothing in either the evidence, the findings of fact or the terms of the contract for sale to suggest that, at the time of the sale, any business

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whatever existed, and accordingly there was nothing to suggest that any business could be transferred.

Some argument was addressed to me in relation to the equivalent sections in the United Kingdom legislation which is differently worded, but in my view that adds nothing to the approach I should take in this case, and I would answer the question asked by the Appeal Commissioner by declaring that he was correct in law in holding that the transfer of goods, the subject matter of the invoices referred to in the case stated, was not made in connection with the transfer of a business or part thereof within the meaning of Section 3(5)(b)(III) of the Value Added Tax Act, 1972 and that, accordingly, the Respondent was entitled to the input credit as claimed.