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Scottish Court of Session Decisions |
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You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> Macpherson & Co. v. Inland Revenue [1912] ScotLR 979 (16 July 1912) URL: http://www.bailii.org/scot/cases/ScotCS/1912/49SLR0979.html Cite as: [1912] ScotLR 979, [1912] SLR 979 |
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Page: 979↓
(Exchequer Cause.)
The Income Tax Act 1842, sec. 41 (as amended by the Income Tax Act 1853, sec. 5), enacts—“Any person not resident in [the United Kingdom], whether a subject of Her Majesty or not, shall be chargeable in the name of … any factor, agent, or receiver, having the receipt of any profits or gains arising as herein mentioned, and belonging to such person, in the like manner and to the like amount as would be charged if such person were resident in [the United Kingdom] and in the actual receipt thereof.…”
The Income Tax Act 1853, sec. 2, Sched. D, imposes income tax, inter alia, “For or in respect of the annual profits or gains arising or accruing to any person whatever, whether a subject of Her Majesty or not, although not resident within the United Kingdom, from … any profession, trade, employment, or vocation exercised within the United Kingdom.…”
Page: 980↓
Circumstances in which held that a Belgian firm which manufactured yarns in Belgium and sold them in this country through a firm of commission agents resident in Glasgow was exercising a trade within the United Kingdom, and was accordingly chargeable in the name of these agents in respect of the profits arising from the said trade.
The Income Tax Acts 1842 and 1853 (5 and 6 Vict. cap. 35, and 16 and 17 Vict. cap. 34), so far as requisite, are quoted supra in the rubric.
H. S. Macpherson & Company, Glasgow, were assessed under Schedule D of the Income Tax Acts as agents for Peltzer et fils of Verviers, Belgium, in respect of profits derived by Peltzer et fils from carrying on the trade of vendors of yarn within the United Kingdom. Macpherson & Company appealed to the Commissioners for the General Purposes of the Income Tax Acts, who held that the appellants were liable to assessment. The appellants thereupon required the Commissioners to state a Case for the opinion of the Court of Session.
In the Case the following facts were stated as having been proved or admitted:—“(1) Peltzer et fils are manufacturers of yarns at Verviers in Belgium. (2) The appellants carry on business as yarn merchants and commission agents in Glasgow, and are agents for the sale of the yarns of Peltzer et fils in the United Kingdom. (3) The appellants stated that they have no written agency agreement between them and Peltzer et fils, but they are paid by commission on the business done, and are liable for one-half of the bad debts. (4) The offers received by the appellants are submitted to Peltzer et fils for approval, and, if approved, contracts are entered into in this country by the appellants on behalf of Peltzer et fils. (5) The goods are consigned to the appellants for delivery to the customers in this country, to whom the goods are invoiced by the appellants in the form of invoice produced. (6) The appellants send account sales to Peltzer et fils monthly. A quarterly statement is rendered for expenses and commission. (7) The appellants receive payment for the goods and discharge the accounts on behalf of Peltzer et fils.”
Certain documents were produced and formed part of the Case, which, inter alia, included correspondence between the appellants and a customer, and also between the appellants and Peltzer et fils, leading up to a contract for the sale of yarn, which showed that to the knowledge of the customer his offer before being accepted had to be referred to Peltzer et fils for approval, and that the appellants had no discretion as to the price at which the yarn was to be sold.
Argued for the appellants—The question was whether Peltzer et fils could be said to be carrying on a trade in this country, keeping in view the distinction between trading with the United Kingdom and trading within the United Kingdom which was drawn by Lord Herschell in Grainger & Son v. Gough, [1896] AC 325. That was a jury question to be determined on an examination of the whole circumstances. The place where the contracts were made, the place where the goods were delivered to customers, and the place where payment was made were no doubt the most important circumstances— Crookston Brothers v. Inland Revenue, 1911 S.C. 217, 48 S.L.R. 134—but in determining where these various incidents of the trade took place it was necessary to look to the substance of the transaction. The most essential element was the place where the contracts were concluded. In the present case, to the knowledge of the customer, the price was fixed in Belgium, and the making of profit depended on the fixing of the price. Macpherson & Co., moreover, were not responsible for the financial stability of the customers. The sale was therefore in substance made in Belgium. In any case these criteria were not either separately or taken in conjunction conclusive. Here there were other circumstances to be noted. No stock of goods was kept in the United Kingdom, and the appellants merely passed on particular parcels of goods to particular customers. Peltzer et fils had no office and had not their name on any business premises in this country, and they had no bank account here. The appellants were merely the ordinary commercial channel through which the goods of Peltzer et fils were distributed. What the statute was intended to strike at was a foreign firm having a branch in this country. Here there was no branch, but just the normal case of commission agency. There was no person employed by Peltzer et fils in this country at all. Moreover, the appellants did not have any profits in their hands, and had no means of telling whether a profit was made or not. The cases where foreign firms had been held liable to pay income tax were all distinguishable. In Watson v. Sandie & Hull, [1898] 1 Q B 326, the goods were shipped to this country before the contracts were made, and the agents in this country had full discretion as to prices. They invoiced the goods in their own names and guaranteed payment by the customers. In Turner v. Rickman, (1898) 4 T.C. 25, the agents paid freight, were liable for damage in transit, and a stock of goods was kept in this country. In any event that case could not stand with Grainger & Son v. Gough ( cit.) In Pommery & Greno v. Apthorpe, (1886) 56 L.J.Q.B. 155, 2 T.C. 182, the foreign firm kept a stock and had an office and a bank account in this country. In Werle & Company v. Colquhoun, (1888) 20 Q.B.D. 753, there was an office in this country, and the contracts were concluded in the United Kingdom in the fullest sense of the word.
Argued for the respondent—Peltzer et fils were carrying on a trade in this country. If contracts were concluded on behalf of a foreigner, and the goods delivered and payment made, all within the United Kingdom, the foreigner would
Page: 981↓
be held to exercise a trade in this country— Crookston Brothers v. Inland Revenue, cit., per Lord Dundas. These three elements were all present here. In Grainger & Son v. Gough, cit., the contracts were not made, and the goods were not delivered in this country. The fact that the appellants had not the information necessary to make a return was immaterial— Pommery & Greno v. Althorpe, cit., per Denman, J. The person really assessed was the foreigner. The Crown attacked the only person available, viz., the agent in this country. There was no hardship involved, as the agent was entitled to retain so much of the principal's money as was sufficient to pay the assessment.
Coming to the question of whether Peltzer et fils are or are not exercising a trade in the United Kingdom, I rather think that it is truly a jury question. I do not think I should be adding to the store of knowledge in the profession if I went through again the long series of cases which have been decided on these points, all the more so because that has been done with great minuteness by the various learned Judges who delivered opinions in the case of Crookston Bros. v. Inland Revenue, and were I to do so I should be doing little more than repeating what they there said. I therefore go straight to the facts of this case. Although it is a jury question, the facts are found for us. No doubt in these Revenue cases we are always entitled, as an Appeal Court, to draw inferences from the facts, but the facts themselves come before us, not on a proof but in the form of findings. When I turn to the case I find that offers to buy goods at a price named are received by the appellants and are submitted to Peltzer et fils for approval, and, if approved, contracts are entered into in this country by the appellants on behalf of Peltzer et fils; and I find also that the goods are consigned to the appellants for delivery to the customers in this country, to whom the goods are invoiced by the appellants. I find further that the appellants received payment for the goods and discharged accounts on behalf of Peltzer et fils. Now if all those facts are given to me as true, I am driven to the conclusion that Peltzer et fils are exercising a trade in this country, and if so they are liable in respect of the profits they make upon that trade. They are properly attacked through their agents Messrs Macpherson & Company, who if they do not choose, as they have not chosen, to state an account so that the amount of profits may be strictly determined, cannot complain if a random assessment is made upon them by the Crown.
Upon the whole matter I am of opinion that the determination of the Commissioners is right.
The other points made in regard to there being no exhibition of the name Peltzer et fils and their having no banking account must be answered, I think, by applying this test—If anyone desired to get Peltzer et fils' goods in Scotland or in the United Kingdom, would he or would he not be able to get the necessary information to enable him to supply himself with them? I think there is sufficient on the facts before us to enable one to say that such a person would be told—“You can get Peltzers' goods quite well here. Go to their agents Macpherson & Company, in Glasgow.”
With regard to the Solicitor-General's
Page: 982↓
The Court dismissed the appeal.
Counsel for the Appellants— Macmillan, K.C.— Hon. William Watson. Agents— J. W. & J. Mackenzie, W.S.
Counsel for the Respondent—Solicitor-General (Anderson, K.C.)— J. A. T. Robertson. Agent— Sir Philip J. Hamilton Grierson, Solicitor of Inland Revenue.
