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Issues: (i) Whether the lump sum of 100,000 received under the agreement was assessable as a trading receipt of the company's existing trade or was a capital receipt. (ii) Whether the sum could be apportioned between capital and income components when the case had been argued and stated on an all-or-nothing basis.
Issue (i): Whether the lump sum of 100,000 received under the agreement was assessable as a trading receipt of the company's existing trade or was a capital receipt.
Analysis: The agreement had to be read as a whole, but the 100,000 was paid for the company's undertaking under Part I to supply drawings, designs, plans, technical data, know-how, and confidential manufacturing information. The decisive question was whether the company was trading in know-how or realizing a capital asset. The opinions accepted that know-how may be supplied as part of trade, but the actual outcome turned on the absence of any finding that the sum was received in the course of a new taxable trade and on the way the claim had been formulated. The receipt could not be brought into the assessment for the existing trade unless it was shown to arise from that trade.
Conclusion: The sum was not finally established as a taxable receipt of the company's existing trade, and the assessment could not stand.
Issue (ii): Whether the sum could be apportioned between capital and income components when the case had been argued and stated on an all-or-nothing basis.
Analysis: The proceedings before the commissioners and the courts proceeded on the footing that the whole sum was either taxable or not taxable. No specific case was made for apportionment at the outset, and no findings had been directed to splitting the consideration between different elements of Part I. In those circumstances, the apportionment order made by the Court of Appeal introduced a new point that was not properly raised by the stated case.
Conclusion: The apportionment and remittal could not be sustained.
Final Conclusion: The appeal was dismissed and the company's cross-appeal succeeded, with the result that the original decision in its favour was restored and the lump sum was not brought into the challenged assessment.
Ratio Decidendi: A stated case on a single lump-sum receipt cannot be converted on appeal into a split assessment between capital and income where that issue was not raised and found below, and a receipt cannot be included in an existing trade assessment unless it is shown to arise from that trade.
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