C. A. 1912 (b) That the said three classes of deposits and investments were standing aside from and outside of the carrying on of the business and employment therein, and that the motive why that was so was immaterial, and hence the profits therefrom formed AND GLOBE no part of the profits of the business within case 1 of Sched. D or LIVERPOOL AND LONDON INSURANCE COMPANY BENNETT. BRICE ť. otherwise. (c) That as the interest and dividends arising from the said three classes of deposits and investments had been retained and reinvested abroad neither the interest nor the dividends were NORTHERN ASSURANCE liable to income tax. COMPANY. BRICE OCEAN ACCIDENT AND CORPORA (d) That the case of Gresham Life Assurance Society v. Bishop (1) applied. (e) That as the interest and dividends from the said three GUARANTEE classes of deposits and investments were not remitted to or received in the United Kingdom they are not liable to assessment to income tax, whether under case 4 or case 5 of Sched. D or otherwise. TION. (f) That they are not taxable under case 1 of Sched. D of the Income Tax Act, 1842, as profits or as part of the profits of the business mentioned in paragraph 1 hereof as being carried on by the company. 4. It was contended on behalf of the Crown— (a) That the investment of the company's moneys as specified in classes A, B, and C is an essential part of its business without which it could not undertake or carry on the business of insurers. (b) That the interest and dividends arising from investments necessarily made for the purpose of a business form part of the profits and gains of that business. (c) That the whole of the profits and gains of the company including all such interest and dividends have been properly assessed in one sum under case 1 of Sched. D of the Income Tax Act, 1842. (d) That as the assessments are under case 1 it is immaterial whether the interest and dividends were remitted to or received in the United Kingdom or not. (e) That the case of Gresham Life Assurance Society v. (1) [1902] A. C. 287. C. A. 1912 Bishop (1) does not apply inasmuch as in that case the assessment was not under case 1 in respect of profits, but under case 4 in respect of securities out of the United Kingdom the LIVERPOOL interest on which was not remitted to this country. AND AND GLOBE INSURANCE ፖ. BENNETT. BRICE 6. Having regard to the manner in which the "liabilities" and "assets" are set out in the company's balance-sheet, and to the fact that insurers, in considering what would be the nature and extent of their security, would have regard to the total amount of the assets of the company, and having considered the facts of the case as herein before stated and the provisions of the income ASSURANCE tax law relating thereto, the Commissioners gave judgment as follows: v. NORTHERN COMPANY. BRICE OCEAN AND CORPORA TION. We are of opinion that the contention of the Crown is correct. ACCIDENT We find that the investments in question made by the appellant GUARANTEE company in the foreign countries named were made in the carrying on of, and were part of, its business transactions, and we hold that the interest on such investments should be included as receipts of the company in arriving at its liability under case 1 of Sched. D. We adjourned the case for the parties to discuss figures and to submit to us the sums at which under such judgment on the foregoing point of law the several assessments for the years in question should be respectively fixed 7. At the adjourned meeting held on May 26, 1909, we reduced the assessments to the following sums: For the year 1903, ending April 5, 1904, to £103,359. 9. The question for the opinion of the Court is whether the Commissioners were right in concluding from the facts set out herein that the whole of the interest and dividends arising from the several investments under class A, class B, and class C (whether actually remitted to the United Kingdom or not) formed part of the profits of the company assessable under case 1 of Sched. D of the Income Tax Act, 1842. Hamilton J. affirmed the decision of the Commissioners (2), and the company appealed. (1) [1902] A. C. 287. (2) [1911] 2 K. B. 577. C. A. 1912 LIVERPOOL AND LONDON BENNETT. BRICE v. NORTHERN Danckwerts, K.C., and A. M. Latter, for the appellants. The appellant company has many investments in the United States and in Canada the income of which is never received in this country and is therefore not chargeable with income tax under AND GLOBE S. 100, Sched. D, fourth case, of the Income Tax Act, 1842, which INSURANCE COMPANY and case 5 are the cases which apply to this income. At one time it was said that if foreign income appeared in the accounts of a British company that was a constructive remittance of it to the United Kingdom and it became subject to the tax; but that ASSURANCE theory has been brought to an end by Gresham Life Assurance BRICE Society v. Bishop. (1) This income does not fall within the first case of Sched. D; it does not form part of "the balance of the profits or gains of such trade, manufacture, adventure or GUARANTEE Concern in the nature of trade." The whole of that sentence is CORPORA- governed by the words "in the nature of trade." It is not employed in carrying on the trade of insurance; it is collateral to it: Colquhoun v. Brooks (2); San Paulo (Brazilian) Ry. Co. v. Carter. (3) COMPANY. v. OCEAN ACCIDENT AND TION. It has been said that a company cannot act as an individual and make investments apart from their trade, but the appellants are expressly authorized by their memorandum of association to invest their money. It is one of the objects of the company. A company can carry on two trades, each having a separate capital. The word used in the Act is "trade," not "business," and what is liable to income tax is the profit on the trade: Ashton Gas Co. v. Attorney-General. (4) The appellants carry on distinct trades, namely, fire and life insurance; and by s. 101 they can set off losses in the one against gains in the other. That section applies to corporations: Rex v. Special Commissioners of Income Tax (5); s. 40 of the Act of 1842. [Sir John Simon, S.-G., referred to Curtis v. Old Monkland Conservative Association. (6)] If these were investments of realized funds in foreign stocks they would be taxable only under the fourth case and to the extent to which the interest was received here: Smiles v. (1) [1902] A. C. 287. (2) (1889) 14 App. Cas. 493. (4) [1906] A. C. 10. (5) (1909) 100 L. T. 585. (6) [1906] A. C. 86. C. A. 1912 AND LONDON INSURANCE COMPANY V. BENNETT. BRICE v. Australasian Mortgage and Agency Co. (1) The test is whether the investment has been used for carrying on any part of the trade: City of London Contract Corporation v. Styles (2); LIVERPOOL Strong & Co. v. Woodifield (3); Sulley v. Attorney-General (4); Nobel Dynamite Trust Co. v. Wyatt (5): Lovell & Christmas V. AND GLOBE Commissioner of Taxes (6); Dillon v. Corporation of Haverfordwest. (7) Classes A and B are investments made in fulfilment of a condition precedent; class C are simply the invested property of the shareholders. Scottish Union and National Insurance Co. v. NORTHERN Smiles (8), Northern Assurance Co. v. Russell (9), and Norwich ASSURANCE Union Fire Insurance Co. v. Magee (10) are relied on by the Crown, but they turned on the doctrine of constructive remittance, which has been exploded. The appellants did in fact make ACCIDENT permanent investments in America. The reason for these GUARANTEE investments and the manner in which they appear in the accounts of the company are immaterial. These investments are not within case 1: Edinburgh Life Assurance Co. v. Lord Advocate (11); Kodak, Ld. v. Clark (12); Gramophone and Typewriter, Ld. v. Stanley. (13) Sir John Simon, S.-G., and Finlay, for the Crown. The question is whether in the circumstances of this case the Crown is entitled to apply the first rule of case 1 of Sched. D to these dividends. It is not necessary to decide whether a trading company can hold investments which do not form part of the profits of its business. Cases 1 and 4 overlap each other and the same property may fall under both. The Crown has the right to proceed under either or both of these cases at its option. In order to get a decision on this point some questions of fact were waived at the hearing before the Commissioners in order to obtain a decision, but it is necessary, to go into the details. still open to the Crown, if (8) (1889) 16 R. 624; 2 Tax Cases, 551. (9) (1889) 2 Tax Cases, 571. (10) (1896) 73 L. T. 733. (11) [1910] A. C. 143. (12) [1903] 1 K. B. 505. (13) [1906] 2 K. B. 856; [1908] 2 K. B. 89. 2 COMPANY. BRICE v. OCEAN AND CORPORA TION. C. A. 1912 profits or gains of the company's trade within case 1 and are assessable to income tax, and it is not necessary to shew that they have been received in this country, as it would be if the Crown had proceeded under case 4. The whole trade of the company must AND GLOBE be treated as one business and the dividends taken into account INSURANCE COMPANY in ascertaining the balance of profit: Last v. London Assurance LIVERPOOL AND LONDON BENNETT. NORTHERN COMPANY. v. OCEAN AND Corporation. (1) In Smiles v. Australasian Mortgage and Agency Co. (2) it is expressly laid down that such dividends as these fall within case 1: Scottish Union and National Insurance Co. v. ASSURANCE Smiles (3); Clerical, Medical and General Life Assurance Society BRICE v. Carter (4); Northern Assurance Co. v. Russell (5); Norwich Union Fire Insurance Co. v. Magee. (6) Assessments are not made under the cases or rules, but under the schedule, and the cases GUARANTEE and rules help us to apply the schedule. There is an implied provision that the schedule shall not be used twice. There is no question here of constructive remittance or of the application of Gresham Life Assurance Society v. Bishop. (7) The Crown may elect between the two cases: Scottish Mortgage Co. of New Mexico v. McKelvie (8); Revell v. Edinburgh Life Insurance Co. (9) There is no difference for the present purpose between the three classes of investment, A, B, and C. A company cannot act as an individual and hold property apart from its trade. CORPORA TION. Danckwerts, K.C., in reply, referred to New York Life Insurance Co. v. Styles (10), Life Assurance Companies Act, 1870, s. 4, and Buckley on Companies, 8th ed., p. 811. Cur, adv. vult. Danckwerts, K.C., and Bremner, for the respondents in Brice v. Northern Assurance Company ; Danckwerts, K.C., and Kerly, for the respondents in Brice v. The Ocean Accident and Guarantee Corporation; and Sir John Simon, S.-G., and Finlay, for the appellant in both (1) (1884) 12 Q. B. D. 389, 401; (2) 15 R. 872; 2 Tax Cases, 367. (5) 2 Tax Cases, 571. (6) 73 L. T. 733. (7) [1902] A. C. 287. (8) (1886) 2 Tax Cases, 165. (9) (1906) 5 Tax Cases, 221. (10) (1889) 14 App. Cas. 381, 391. |