Inland Revenue Commissioners v Ayrshire Employers Mutual Insurance Association Ltd
[1946] 1 All ER 637(Judgment by: Lord Simonds)
Between: Inland Revenue Commissioners
And: Ayrshire Employers Mutual Insurance Association Ltd
Judges:
Lord Thankerton
Lord MacMillan
Lord Wright
Lord SimondsLord Uthwatt
Subject References:
taxation
Other Taxation
Income Tax
Mutual insurance association
Surplus arising from transactions with members
Whether assessable
Legislative References:
Finance Act, 1933 (c 19) - s 31(1)
Case References:
New York Life Insurance Co v Styles - (1889), 14 App Cas 381; 28 Digest 59, 300; 59 LJQB 291; 61 LT 201; sub nom Styles v New York Life Insurance Co 2 Tax Cas 460
Municipal Mutual Insurance Ltd v Hills - (1932), 147 LT 62; Digest Supp; 16 Tax Cas 430
Judgment date: 29 March 1946
Judgment by:
Lord Simonds
My Lords, I am so fully in accord with the view felicitously expressed by the Lord President (Normand) that I should be content to do no more than state my concurrence but for the argument addressed to the House by counsel for the appellants.
The case is an unusual one. The section under discussion, sect 31 of the Finance Act, 1933, is clearly a remedial section, if that is a proper description of a section intended to bring further subject-matter within the ambit of taxation. It is at least clear what is the gap that is intended to be filled and hardly less clear how it is intended to fill that gap. Yet I can come to no other conclusion than that the language of the section fails to achieve its apparent purpose and I must decline to insert words or phrases which might succeed where the draftsman failed.
I need not restate the facts of the present case or the history or judicial decisions which led to the enactment here in question. The vital words for your Lordships' consideration are:
'... a profit or surplus arising from transactions of the company or society with its members which would be included in profits or gains for the purpose of that provision or rule [i.e., under Case I of Sched. D] "if those transactions were transactions with non-members..'
Counsel for the appellants argued, and there was, I think, some force in his argument, that in the passage I have cited the expression "non-members" means persons who are not contributors to and participators in a mutual insurance scheme and does not mean persons who are in the strict sense not members of a company or society according to its constitution or rules. The badge of membership, he said, for the purpose of this section is contribution and participation in some mutual scheme. I do not think it necessary to decide this question, which may in other connections have far-reaching importance. For, assuming for this purpose that the argument is so far well founded counsel is still faced with a difficulty which appears to me, as it did to the Lord President (Normand) to be insuperable. For the hypothetical profit or surplus with which the section deals is one that is assumed to arise out of "those transactions" with "non-members." What are "those transactions?" They are ex hypothesi transactions in which the element of mutuality is an integral essential and inseparable part. How then can the two factors coalesce? On the one hand a transaction in which mutuality is essential, on the other hand a party to that transaction who by the postulated definition of non-member is excluded from any transaction which involves just that element of mutuality. It follows that upon an initial assumption in favour of counsel the section becomes meaningless and the hypothetical profit or surplus indeterminable. The appeal must, in my opinion, be dismissed.