Double tax relief depends on distributable accounting profits, not foreign tax assessment profits, under the relevant statutory formula.

For double tax relief under paragraph 9 of Schedule 16 to the Income Tax Act 1952, the expression "the relevant profits" is construed as the company's distributable profits shown in its accounts, not the profits computed for foreign tax assessment. The provision links relief to the profits of the period out of which the dividend is paid and to profits available for distribution, while the proviso confirms that earlier periods are considered only to the extent needed to cover any excess dividend. The alternative approach based on foreign tax profit computations, and the argument that a payment may be treated as coming out of the more favourable fund, were rejected.

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Issues: Whether, for the purpose of double taxation relief under paragraph 9 of Schedule 16 to the Income Tax Act, 1952, the expression "the relevant profits" means the profits shown in the company's accounts or the profits computed for foreign tax purposes.

Analysis: The governing provision requires the foreign tax borne by the dividend-paying body corporate to be attributed to the proportion of the relevant profits represented by the dividend. Read as a whole, the provision points to distributable profits shown in the accounts, because the paragraph speaks of profits of a period, profits out of which the dividend is paid, and profits available for distribution. The proviso reinforces that construction by expressly referring to profits available for distribution and bringing in preceding periods only to the extent necessary to cover any excess dividend. The Court rejected the contention that the calculation should instead follow the profits as assessed for foreign tax purposes, and also rejected reliance on the principle that a payment may be treated as coming out of the more favourable fund.

Conclusion: "The relevant profits" means the profits shown in the company's accounts and available for distribution, not the profits computed for foreign tax assessment; the appeals fail.

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