- (1.) who allowed an appeal by the tax-payer company, Ensign Tankers (Leasing) Ltd., against a decision of the special commissioners. The commissioners held that the taxpayer company was not entitled to claim initial allowances under section 41(1) of the Finance Act 1971 in respect of two transactions related to two films (Escape to Victory and Outland). Section 41(1) provides;
(2.) Subject to the provisions of this chapter, where - (a) a person carrying on a trade incurs capital expenditure on the provision of machinery or plant for the purposes of the trade, and (b) in consequence of his incurring the expenditure, the machinery or plant belongs to him at some time during the chargeable period related to the incurring of the expenditure, there shall be made to him for that period an allowance (in this chapter referred to as a first-year allowance which shall be of an amount determined in accordance with section 42 below,..... At the material time, the master negative of a film constituted plant for the purpose of this section. The first year allowance was 100 per cent.
(3.) The transactions in question were carried out by two limited partnerships-one for each film-in each of which the taxpayer company as a partner. It is common ground that, for the purposes of section 41, the person referred to in that section is the partnership. The questions which arise are (a) was the partnership a person carrying on a trade, (b) did the film belong to the partnership and (c) did the partnership incur expenditure in the purchase of the film ? If the partnerships qualified for first-year allowances under the partnership is to be treated for tax purposes as though it were a limited company, but in computing its tax liability no deduction is to be allowed for capital allowances. Instead, under section 155(2), each partner is entitled in computing his or its profit to take into account its share of the partnership capital allowances. Hence, although the claim to the first-year allowances in this case is rightly made by the taxpayer company (both on its own account and in relation to group relief for other companies in the same group) it is of fundamental importance to appreciate that the relevant questions all depend not on the actions and intentions of the taxpayer company alone but on the actions and intentions of the partnership as a body.;