(1.) LORD EVERSHED M.R. - stated the facts and continued : Apart from legislation passed in 1955 the Irish company would either certainly or in all probability have been able to recover from the English Revenue not, as we were informed, the actual tax which had been paid in respect of the accumulated profits, but a sum of income -tax (which might even have been larger) claculated by grossing up this vast dividend; but the right so to recover such a sum must - and I put this early in my judgment and in the forefront of it - depend upon some statutory right to be found in English legislation.
(2.) A series of agreements had been made between representatives of the Governments, on the one side, of the United Kingdom, and on the other side of what was formerly the Irish Free State and later became the Irish Republic. Those agreements were confirmed in both countries by appropriate legislation. So far as this case is concerned, it will only be necessary to pay regard, except in passing, to the English legislation contained in the consolidating Income -tax Act, 1952, and section 349 of that Act in particular, and in section 4 of the Finance Act, 1955, to which I have earlier alluded. But in order to make more clear the history and, I hope, the arguments, it is necessary to have in mind that the first of the agreements which I have mentioned was made in the year 1926 between the representatives of the two Governments I have named. It is now to be found in Schedule 18 of the Income -tax Act, 1952. The effect of it, so far as relevant, was that a person who should prove to the satisfaction of the Inland Revenue Commissioners in England that he was a resident in the Irish Free State and not a resident in Great Britain or Northern Ireland should be entitled to exemption from British income -tax for the year in question and in respect of properties situated in and profits and gains arising in our from Great Britain and Northern Ireland, and also to exemption from British super -tax for the same year. There was a corresponding arrangement for the benefit of English residents as respects property in the Irish Free State. That was the purpose of the agreement, and it was executed by Ministers on both sides.
Article 8 provided as follows : 'This agreement shall be subject to confirmation by the British Parliament and by' - the Irish Free State Parliament - 'and shall have effect only if and so long as legislation confirming the agreement is in force in both countries.' That, it is hardly necessary to say, was necessary in order that individual citizens of the two countries should, in fact, enjoy the rights which the agreement intended to confer or provide.
That is the agreement, the intended benefit of which the Irish company in this case asserts. The agreement was later modified twice during the relevant period. The first modification came about in the year 1928 and was rendered desirable or necessary because there was in this country substituted for what was called super -tax a new designation, surtax, so that the provision to which I referred above, if and so far as implemented by appropriate United Kingdom legislation, would be inapposite since it referred to super -tax and not surtax. In the same way in 1947 another agreement was made between representatives of the two countries in order to deal with this sort of case : an English company might not in truth have paid a smaller rate, called 'net United Kingdom rate'; and the agreement signed in July, 1947, was intended to make applicable to Irish residents comprehended by the original agreement the net United Kingdom rate of tax instead of the standards British income -tax rate, where applicable.
I have mentioned these later agreements in order that the history may be understood. But, as I said earlier, the claim here rests upon the effect (as implemented in legislation) of the agreement of 1926, and we are not in this case concerned with the later modifications save to the extent that part of Mr. Fosters forcible argument for the Irish company turned in some measure upon what happened in 1945, 1947 and 1948 in connection with this so -called 'net United Kingdom rate,' and to that argument I shall presently return.
The agreement of 1926 was, in acordance with the contemplation of article 8, implemented by English legislation shortly afterwards. That lefgislation was later reproduced in section 349 of the consolidating Act, the Income -tax Act, 1952. [His Lordship read the relevant parts of the section and continued :
Part III of Schedule 18 is headed : 'Provisions forgiving effect to agreements set out in Part I of this Schedule,' including, of course, the agreement of 1926, and it is true to say that it is substantially what one would call a series of mechanical provisions to make appropriate for the cases contemplated the relevant parts of the fiscal legislation in England, which is notoriously complex, in particular to make applicable the terms of Schedule D for the purposes of taxation computations, and so forth. We have not examined closely the precise effect of these provisions, and I am not suggesting that they in any real way quality the prima facie right which would be given to an Irish resident by section 349(2), standing alone, that is to say, by the statement that the agreement and the rights intended to be injoyed by Irish residents should have effect in England. I only observed that by the terms of subsection (3) for the purpose of giving effect to the agreements, the Act should for any year have effect subject to certain modifications. It is sufficient to say that in so far as there was any modification of the rights intended to be conferred, it could obviously not go to the root of the matter, but would be a modification based rather on procedural considerations. Still, I mention it for reasons which may later become more apparent.
(3.) IT is plain enough so far that what the English Parliament did in 1952 was to say that the terms of the agreement of 1926, as stated in Part 1 of Schedule 18, should be incorporated in the English law as part of the Income Tax Act, 1952, and so should take effect and be effective in English law. It is clear and must not be forgotten (and, indeed, I have already stated it) that if an Irish citizen desires to take advantage of the benefit which the agreement of 1926 intended that he should enjoy, he must be able to invoke for that purpose some provision of the English law, more particularly in this sort of case, some provision of an English statute, and his right in England to enjoy the benefit, to be able to have this exemption (which means to be able to recover income -tax) depends upon and depends exclusively upon the section which I have read.
In the course of opening the case Mr. Foster referred a good deal to matters of international law and international comity, and some references were made to cases. Gracefully, Mr. Foster did not cite all the cases which were cited to Vaisey J. but it must be quite clear, first of all, that it is competent to the legislature of the United Kingdom to impose income -tax in respect of profits or gains which arise in the jurisdiction, and that competence is in no way qualified because the profits and gains may be enjoyed by someone who is himself not so resident. If, therefore, Parliament decides that tax at a certain rate should be levied in respect of that class of property, or, alternatively, decides that in certain cases persons who might otherwise suffer the tax should be entitled to exemption, it cannot be said that Parliament is trying to exert a jurisdiction over foreigners in the sense that it is trying to legislate outside the proper jurisdiction of the English Parliament. I venture to emphasise that the fact that a person who has a statutory right to an exemption in respect of income tax, a statutory right to recover, may be a foreigner, is of itself quite irrelevant, and does not appear to me to involve any question of comity or international law.
So, as I think, the effect of section 349 is on the face of it to say this, by enacting as part of the munilcipal law of England the agreement of 1926, that Irish residents may have certain rights to recover tax which is exigible in respect of property in England or profits and gains arising in England. In so far as Parliament chose in 1952 to confer that statutory right, prima facie it must be equally clear that Parliament by some later statutory provision can modify or wholly revoke or repeal it. Putting it quite briefly, what is said here on behalf of the Crown and was the view formed by Vaisey J., is that in the Act of 1955 Parliament in the exercise of its undoubted sovereign power did so qualilfy the statutory right which section 349 had conferred. [His Lordship read section 4(2) of the Finance (No. 2) Act, 1955, and continued :] That subsection was intended to strike at this so -called 'dividend -stripping' practice. There is no doubt that the shares in Carpet and Textiles (Wholesale) Ltd. were shares of the class covered by the subsection.;