Anglo Persian Oil Co., Ltd. V. Commisioner Of Income Tax

1935 Present : Akbar S.P.J. and Koch J.

ANGLO-PERSIAN OIL CO., LTD. v. COMMISSIONER
OF INCOME TAX.

162-(Inty.) Income Tax Special

Income tax-Contract for sale of fuel oil made in London by company registered in V. K.-Delivery to shops at Colombo by company's agent-Payment in London-Profits not arising in or derived from Ceylon-Agent not instrumental in selling or disposing of property in Ceylon-Ordinance No. 2 of 1932, ss. 5 and 34.

A contract was entered into in London by the appellant company, which was registered in the United Kingdom, for the sale of fuel oil
(which was not a product of Ceylon) to shipowners, whose ships call at Colombo. Delivery of the oil was to be made at Colombo by the agent of the company who stored his own oil as well as the oil of the company, payment being made in London on receipt of telegraphic advice of the quantity delivered each time. The shipowners were bound to purchase all their requirements from the company, the latter undertaking to have ready at Colombo sufficient oil to satisfy all their requirements.

Held, that the profits of the company from the contract were not liable to income tax under either section 5 or section 34 of the Income Tax Ordinance.

The profits of the company arise from contracts made in London and it cannot be said from the mere act of delivery of the oil in Ceylon that the profits " arise in or are derived from Ceylon " within the meaning of section 5 of the Ordinance.

Section 34 is intended to include contracts which have been entered into as a result of efforts of agents in Ceylon of a foreign principal even when such contracts have been finally concluded outside Ceylon.

THIS was a case stated for the opinion of the Supreme Court under section 74 of the Income Tax Ordinance. The facts are stated by Akbar J. as follows : -

The appellant is the Anglo-Persian Oil Company, Ltd., registered in the United Kingdom, and its agent in Ceylon is the Anglo-Persian Oil Company (Ceylon), Ltd., also registered in the United Kingdom. The appellant company enter into contracts in London with shipowners whose ships call at various ports including Colombo. In Colombo the appellant company, although it has no place of business, stores its fuel oil with its agent, the Ceylon company, which has its place of business in Colombo where it trades in fuel oil as part of its business. A specimen form of the contract is attached and under it the appellant company undertakes to supply fuel oil for the requirements of the shipping company's vessels at certain named ports including Colombo and at a stated price per ton. The shipping company on its part binds itself to buy from the appellant company all the oil requirements of its vessels at the named ports and the total estimated tons of oil for all the ports are also stated. The minimum quantity which the shipping company undertakes to buy and the maximum quantity which it may require the appellant to deliver during the period (which is also fixed) are also stated. Clause 3 provides that the prices include delivery f.o.b. where there are direct pipe lines, but where delivery is by barge (as in Colombo) the shipping company pays an extra sum also paid per ton. The appellant company's weights and measurements are to be accepted as conclusive but the shipping company may also be represented at the measuring to verify the correctness of the measurements. By clause 5 payment is to be made in London by cash nett on receipt of the appellant's agent's telegraphic advice of the quantity delivered. By clause 7 the shipping company had to give the appellant's agents at the named ports forty-eight hours notice of each delivery required. Clause 9 states that each delivery shall constitute a separate contract. The appellant has the right to suspend or cancel the contract in the event of the shipping company failing to make the payments prov

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