TaxTMI 
TaxTMI 
1943 (7) TMI 6
X X X X Extracts X X X X
X X X X Extracts X X X X
.... deducted in calculating the annual net profits of the defendant company for the purpose of the calculation of the managing agents' commission." A similar question came before this Court recently in the case of James Finlay & Co., Ltd. v. The Finlay Mills Ltd [1942] OCJ Suit No. 411 of 1942., and we held in that case that inasmuch as the agreement provided that in ascertaining the profits on which commission was based no deduction should be made for income-tax, super-tax or any other tax on income, the parties had in effect agreed that there should be no deduction in respect of excess profits tax, which, we held was a tax on income. However, the agreement in this case is in a different form. The question turns on the construction of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....mpany or for carrying on and conducting the business of the said company and all expenses incurred by the managing agents in connection with the business of the said company, which expenses and charges shall be borne and paid by the said company." So that, the commission is to be based on annual net profits, to be ascertained without making the deductions specified. Under sub-clause (a) the deductions to be made are those which would normally be made in ascertaining profits for payment pf dividends, calculated on rather a generous scale. In law a company is not bound generally to make allowance for depreciation before declaring a dividend, though in practice prudent companies generally do so. It may be that under (b) there are allowances wh....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tion, Section 4, provides: "Subject to the provisions of this Act, there shall, in respect of any business to which this Act applies, be charged, levied and paid on the amount by which the profits during any chargeable accounting period exceed the standard profits a tax (in this Act referred to as 'excess profits tax') which shall, in respect of any chargeable accounting period ending on or before the 31st day of March, 1941, be equal to fifty per cent. of that excess and shall, in respect of any chargeable accounting period beginning after that date, be equal to such percentage of that excess as may be fixed by the annual Finance Act." The percentage has since been increased No doubt, the tax has some of the features of....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... large fortune out of what is a national danger. I think that in effect, though not in form, the tax is partly of a prohibitive character; it prohibits the owner of a business from retaining more than a certain proportion of profits which may be deemed to have arisen on account of the war. If one considers the tax in that light, it seems to me plain that the parties cannot have intened to divide between employer and employee a sum which the employer himself is not allowed to retain; nor do I see in principle any very good reason why an employee should be allowed to benefit from the national emergency to a greater extent than an employer. No doubt the managing agents may say that their remuneration is based on the pro fits made as a result o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e that the parties intended to divide something which neither of them was going to get the benefit of. No doubt, he does rely on one distinction between income-tax and excess profits tax, which has since been held not to be valid. He refers to income-tax paid by a company, as being paid not by the company direct, but on behalf of the share-holders. That view did prevail at one time, but the decision of the House of Lords in Cull v. Inland Revenue Commissioners [1940] AC 51; 8 ITR Suppl. 1 shows that that view has now been negatived. But I do not think that that distinction formed the real basis of the Court's judgment. A similar question then came before the other branch of the English Court of Appeal in Vulcan Motor & Engineering Co....