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TMI Blog1956 (2) TMI 72X X X X Extracts X X X X X X X X Extracts X X X X ..... erms of that schedule because, in my judgment, Mr. Borneman correctly reminded us that the cases of individual persons sought to be charged under Schedule E of the Act, where the charge is "in respect of every employment of profit," do not form a safe guide to cases under Schedule D, at least as a general proposition. We must consider the correctness or otherwise of the assessment here made in the light of the language which I have read of Schedule D. The question, so interpreted, as it is before us can be thus expressed: Does this sum of £ 16,000 odd represent profits or gains of the Anglo- French Exploration Company Ltd. arising from its trade? In other words, was it a sum received by the appellant company in the ordinary course or stream of its trading operations? The facts of the case are not in dispute, and since they are fully recited in the case stated, it is unnecessary for me to repeat the whole of the narrative. The essential facts, however, are as follows. The Anglo- French Exploration Company Ltd.-I will henceforth call it "AngloFrench"--was formed as an English company at the end of last century: its business being that of a mining and finan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cent.--"with transfer forms as aforesaid attached thereto, your company will tender its resignation as agents and secretaries to the Kleinfontein Company, acceptance of which we undertake to procure forthwith upon its being tendered, and upon the tender of such resignation we shall pay to your company in cash the sum of £ 20,000." Those offers, the offer to buy the shares at 35s. od. each, and the offer in respect of resignation by Anglo-French, were accepted by Anglo-French. In due course, and in accordance with the terms of the arrangement, the £ 20,000 having been received, part of it was paid over by Anglo-French to the Farrar trustees, the figure of £ 16,138 4s. 2d. representing the balance of the £ 20,000 retained by Anglo-French. I observe two things: (1) the £ 20,000 was not part of the purchase price of the shares, as was indeed conceded in the courts below, and as has been here conceded on the part of the Crown. Had it been otherwise, had it been part of the purchase price, then either Anglo-French would have got more than the other shareholders for their shares (which is inconsistent with the Philip Hill Company's offer) or, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the present time of income prospects. But the question remains, not whether that sum in some senses or in some contexts might sensibly be called a "capital" payment, but whether within the terms of Schedule D it is a profit or gain arising from the trade of the recipient. And the matter is not in any case res integra. The line of cases to which we have had our attention directed, starting from the well-known trilogy : Inland Revenue Commissioners v. Newcastle Breweries Ltd. [1927] 42 T.L.R. 185; 12 T.C. 925., Short Brothers v. Inland Revenue Commissioners 12 T.C. 988 and Inland Revenue Commissioners v. Northfleet Coal & Ballast Co. Ltd. 12 T.C. 1102 seem to me to emphasise that sums received for the cancellation of an agency or of other similar agreements which have been entered into by the recipient in the ordinary course of its trade will themselves, prima facie, be regarded as received in the ordinary course of trade unless the transaction involves a parting by the recipient with a substantial part of its business undertaking. The case of Barr Crombie & Co. Ltd. v. Inland Revenue Commissioners [1945] 26 T.C. 406 was a case of that exceptional character. On the other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yment. I have already given reasons for thinking that the structure of the business carried on by the appellants was in fact, as the nature of the business required, so designed as to absorb such shocks as the cancellation of a single, albeit an important, agency contract." I will next make a reference to the leading judgment of Lord President Cooper in Fleming's case 33 T.C. 57, 62. That was a case in which a contract had been cancelled and a restrictive covenant had also been entered into. The Lord President said: "It is conceded by the Inland Revenue that the £ 590 and the £ 800" (being the values paid in respect of the restrictive covenants) "are not revenue payments and I imagine that this concession would equally have been made even if the proportions allocated to those parts of the agreement had been far larger. It is against the £ 5,320 alone that the challenge is directed, and taking the agreement at its face value the Inland Revenue maintain that clause 1 specifically records simply the loss by a selling agency of one agency (out of eight which they held in 1948) and that such a loss is or must be treated as a normal trading risk ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... time with little variation. Nevertheless, the making of such contracts was part of the business of Anglo-French, and the cancellation of this one contract in no sense affected the "profit-making apparatus" of the company which retained its offices and staff, etc., in Johannesburg exactly as before. In my judgment, Mr. Monroe's first alternative proposition is really inconsistent with the cases. The taxpayers in the Kelsall Parsons case 21 T.C. 608 and the Fleming case 33 T.C. 62 were not dealers in agency contracts. Mr. Monroe's second alternative answer is a question of fact and degree. As I have said, at the beginning of this judgment, I think that the Commissioners were fully entitled to find the conclusion of fact which they did. I should add that the fact that the £ 20,000 was paid, not by the Kleinfontein company, but by a stranger to the agency contract, namely, the Philip Hill company, in my judgment, is immaterial. It has been clearly established that a question of this sort must be determined by having regard to the nature of the payment in the recipient's hands. I, therefore, think that Harman J. arrived at an entirely correct conclusion in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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