TMI Blog1941 (12) TMI 26X X X X Extracts X X X X X X X X Extracts X X X X ..... t of a series of transactions extending over a number of years certain valuable assets belonging to Lord Howard de Walden and consisting of shares in and debts owing by an English company became vested in four Canadian companies. It is not disputed that these transactions were of the kind described in the preamble to Section 18, and it is admitted that their main, and indeed their sole, purpose was to avoid liability to taxation. The only interests which, during the relevant periods, were held by Lord Howard de Walden in respect of the consideration payable under these transactions, consisted of (1) a life interest in certain notes issued to him by the Canadian Companies; (2) part of certain sums of cash on deposit with the Canadian compani ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... companies. We have come without any hesitation to the conclusion that the latter is the true view. The income of a person resident or domiciled out of the United Kingdom which under sub-section (1) is deemed to be income of the taxpayer is described as that income , a phrase which refers back to the income mentioned in the earlier part of the sub-section in the following phrase where such an individual has...acquired any rights by virtue of which he has... power to enjoy... any income of a person resident or domiciled out of the United Kingdom . Power to enjoy income includes the cases mentioned in sub-section (3) and in particular the cases where (b) the receipt or accrual of the income operates to increase the value of the individua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erred. We are unable, therefore, to accept the argument that the income which is caught by sub-section (1) is limited to the income which the taxpayer is, in fact, entitled or able to receive. Counsel for the appellant argued that sub-section (3) does not deal with the quantum, but only with the character of the income which the taxpayer is to be deemed to have power to enjoy. But the real question depends upon the meaning of the words any income in sub- section(1), words which, in our opinion, are, in the context of the sub- section, when read together with sub-section (3), incapable of being construed as limited to income which the taxpayer is entitled or able to enjoy in fact. Our conclusion on this matter can be tested by writing ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the transferor is that part of the income which is traceable to the assets transferred. No doubt, in the majority of cases which, in practice, come within the scope of the section, the transferee will have been constituted, either individually as a trustee or as a corporation, for the sole purpose of carrying out the transactions and will have no other income. But cases might arise where the transferee selected was, for example, an existing corporation with very large assets and income of its own and the income attributable to the assets transferred might be a very small proportion of its total income. It cannot be supported, argues counsel for the appellant, that the Legislature can have intended to produce such an extreme result as mi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure has often been worsted by the skill, determination and resourcefulness of its opponents, of whom the present appellant has not been the least successful. It would not shock us in the least to find that the Legislature has determined to put an end to the struggle by imposing the severest of penalties. It scarcely lies in the mouth of the taxpayer who plays with fire to complain of burnt fingers. It is not, however, necessary for us to choose between the second and third constructions. We would rather defer that choice until a case which raises the issue can be considered on its own facts. In the present case it is sufficient to say that the appellant is in our opinion chargeable in respect of the entire income of the Canadian companies, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that we disagree with it entirely. By the Finance Act, 1938, Section 28, certain amendments were made in Section 18 of the Act of 1936. In particular, the provision was made by a new section to meet devices by which a transferor took care to give him- self no power to enjoy any income of a nonresident transferee company within the meaning of Section 18, but obtained the money he required, for example, by borrowing from the company, all the shares being vested (for example) in his children. In this new section the phrase power to enjoy did not, and obviously could not, appear, as the best and the natural method of taxing the transferor was by taxing him on the amounts he in fact obtained out of the company's coffers. This new section, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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