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United Kingdom House of Lords Decisions |
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You are here: BAILII >> Databases >> United Kingdom House of Lords Decisions >> Scottish Provident Institution v. Allan [1903] UKHL 605 (30 April 1903) URL: http://www.bailii.org/uk/cases/UKHL/1903/40SLR0605.html Cite as: [1903] UKHL 605, 40 ScotLR 605 |
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Page: 605↓
(Before the
( Ante June 4, 1901, 38 S.L.R. 683, and 3 F. 874.)
Subject_Revenue — Income Tax — Interest from Securities Abroad — Remittances of Interest or Repayment of Capital — Income Tax Act 1842 (5 and 6 Vict. cap. 35), sec. 100, Schedule D, Case 4.
A mutual insurance society in Scotland was assessed for income tax under the fourth case of Schedule D of the Income Tax Act 1842 upon certain sums remitted to them from Australia in 1898. They maintained that they were not liable to be so assessed, upon the ground that the sums so remitted were not remitted in payment of interest but in repayment of capital. Between 1885 and 1890 the society had sent various sums to Australia for investment. The interest on these investments was received by the society's representatives in Australia and paid into a bank account there, and prior to 1893 it was not brought to this country but invested in Australia. In and after 1893 certain sums were remitted to Scotland from Australia, and in 1898 the sum upon which income tax was now claimed was so remitted. After all these remittances had been made there still remained in Australia a sum greater than the total of all the sums originally sent out for investment. Held ( aff. judgment of the First Division) that the remittances to this country having been made by the representatives of the society from their bank account in Australia, in which repayments of capital had been immixed with interest, and the particular remittances not having been definitely identified with any particular repayments of capital, the proper inference in the circumstances was that the remittances were made in payment of interest, and that the society was liable to be assessed for income tax upon the sums remitted.
This case is reported ante ut supra.
The Scottish Provident Institution, appellants in the Court below, appealed to the House of Lords.
Counsel for the respondent were not called upon.
At delivering judgment—
The broad facts, and the only facts I shall consider, are these—this is a large
Page: 606↓
The next question is, whether or not, though earned abroad, the profits have been brought to this country. Here is a large amount, putting these figures together, which to my mind must include, and obviously does include, a large amount of profits. I think it is for the company to show, if the fact be so, that that ought to receive a certain amount of deduction, because a good deal of it was repayment of that which was in truth capital and not profit at all. No attempt has been made to do that, but what has been done in lieu of that is to write out to the local agents and say:—“Whenever you send money to this country do not find out what in strictness is the difference between capital and income, but describe whatever you send back to us as repayment of capital; take care you do not describe it as interest.” It is obvious that the mere nicknaming the sum received and ascribing to it because it is so named the character of capital and not of income cannot defeat the right of the Crown to have the tax levied upon that which in substance and truth is profit earned abroad but brought to this country.
For these reasons I am of opinion that the judgment of the Court below was right and that this appeal should be dismissed with costs, and I move your Lordships accordingly.
The question is, as your Lordship has put it, entirely one of fact. The amount of money which was sent out by the company as capital remains in Australia. It has been gradually increased and not diminished, and that amount of money still remains there. The company, in short, still has in Australia the capital which they sent out. The moneys that have come home were I think therefore, as a matter of fact, interest or profits on capital, and I do not think that the mere circumstance of there being such letters as are here founded upon (and were arranged if possible to avoid income-tax), representing the profits as capital though they were really interest, can have that effect.
Now, what is the profit made from, because I agree with what Mr Haldane said, that under Schedule D you tax the interest received on securities? The profit is only the interest received on the securities. There can be nothing else. That is the only source from which, from the nature of the business carried on, the profit is derived. Therefore I think the Crown is entitled to draw the inference, and your Lordships are entitled to draw the inference, that this extra sum of £1,034,707—I will call it an extra million—which existed at the end of the year 1898, did represent in one way or another moneys which had been received in respect of the interest derived from the securities on which the original million and a-half had been invested.
The whole of the case of Mr Haldane's clients the Insurance Company rests upon this table on page 6 of the case. * Now I must say that this table gives me the impression of being made up for the purpose, because what do we find? I will take the very first entry. We find on the 1st of February 1898 the agent of the company in Australia remitting to this country a sum of £44,000. We are gravely told to believe that that was a remittance of four sums of capital which had been received by the agents in Australia at four different times—three of them in the year 1891 and the other in the year 1896. I must say that that is a draft upon my credulity; a strain upon my powers of belief, which they will not bear. I agree that the mere calling it capital for the purpose of the Inland Revenue Department will not make into capital that which is essentially and in truth profit—a profit made by the interest received on the securities.
_________________ Footnote _________________
* The nature and contents of this table are set forth in the second column of page 684 of 38 S.L.R.
Page: 607↓
The other question which was raised by Mr Blackburn I do not treat as being before us, and I express no opinion upon it. All the parties seem to have agreed that the question of whether this sum of £217,350 represented interest or capital was the question for decision, and upon that point I have no hesitation in saying that I agree entirely with the judgment of the Inner House.
The question then is, was this sum of £212,000, which admittedly was remitted, profits or gains of the year? As the whole money remitted came out of a bank account, it is impossible to identify the money, and the facts of the case must furnish the inference. On this question of fact it seems to me that the judgment of the Court of Session is clearly right. First of all there is the fact of remittance in two consecutive years; for the year 1898 is taken as fairly representing the year 1899. There is no suggestion that any exceptional reason required remittances of capital in either year or in both. On the other hand it is certain that the amount of invested capital left behind in the colony, after these remittances, is larger than before, so that the capital is fully accounted for. Well then, what is done with this so-called capital remitted? The answer is, exactly what would be done with profits. The inference from these facts is that the moneys remitted were in fact profits, and, in the absence of anything to the contrary, profits of the year in which they were remitted.
Appeal dismissed with costs.
Counsel for the Appellants— Haldane, K.C.— Blackburn. Agents— Dundas & Wilson, C.S., Edinburgh; Grahames, Currey, & Spens, Westminster.
Counsel for the Respondent— Attorney-General (Sir R. B. Finlay, K.C.)— Lord Advocate (Graham Murray, K.C.)— A. J. Young. Agents— Philip J. Hamilton Grierson, Solicitor of Inland Revenue for Scotland— F. C. Gore, Solicitor of Inland Revenue.
