Patrick J. O'Connell, Inspector of Taxes (appellant) v Fyffes Banana Processing Ltd (respondent).

Revenue - Corporation tax - Manufacturing relief - Scope of relief - Finance Act 1980, sections 39 and 41 - Finance Act 1990, section 41.

Statutory Interpretation - Principles governing interpretation in case of taxing statutes.

The Supreme Court (the Chief Justice Mr Justice Keane, Mr Justice Murray and Mr Justice Hardiman); judgment delivered 24 July 2000.

A company engaged in the artificial ripening of bananas will not qualify for manufacturing relief; a fortiori, a company which is engaged in an activity of artificially ripening bananas belonging to another person will not qualify for such relief.

The Supreme Court so held in upholding the appellant's appeal.

Anthony Aston SC and Grainne Clohessy BL for the appellant; Thomas McCann SC for the respondent.

The Chief Justice, Mr Justice Keane, delivering judgment on behalf of the court, stated that the appellant was appealing from a judgment of the High Court. Mr Justice Geoghegan in the High Court on a case stated from the Appeal Commissioners, had concluded that the Commissioners were correct allowing the respondent's claim to manufacturing relief in respect of an assessment to corporation tax.

The respondent, a wholly owned subsidiary of Fyffes plc, was incorporated in the State on 22 January 1991, its business being the provision of banana ripening services to other companies within the Fyffes group. It had been held by the Supreme Court in Charles McCann Ltd v S. O'Cualachain, Inspector of Taxes [1998] IR 196 that the process of artificially ripening bananas was a manufacturing process to which manufacturing tax relief applied. Subsequently, section 39(5) Finance Act 1980, was amended by section 41(1)(c) Finance Act 1990 to provide, inter alia, that goods would not be regarded as manufactured goods, if they resulted from a process which consisted primarily of, inter alia, methods of preservation, pasteurisation or maturation or other similar treatment to any foodstuffs or any combination of such processes. Following the enactment of this provision it was clear that if a company was engaged in the artificial ripening of bananas, which were its own property, it would not qualify for manufacturing tax relief.

The respondent argued however that its eligibility to manufacturing tax relief was governed solely by section 39(2) which provided that such relief was available where a company carried on a trade which consisted of, or included, the rendering to another person of services, by way of subjecting commodities or materials belonging to that person, to any process of manufacturing. The respondent submitted that the effect of this provision was to entitle it to manufacturing tax relief and that section 39(5), which treated the artificial ripening of bananas as not being the manufacture of goods, was of no relevance to the construction to section 39(2), which was a self-contained provision and had to be applied as such.

The Chief Justice observed that if the case were to be decided on the basis of what was most probably the intention of the Oireachtas, however inaptly expressed, the appellant would be entitled to succeed. However, such an approach was not permissible in the present case. In the case of a taxing statute it was the duty of the court to give effect to the intention of the legislature, as that intention was to be gathered from the language employed, having regard to the context in connection with which it was employed, (per Lord Russell LCJ in Attorney General v Carlton Bank [1899] 2 QB 158).

There were, the Chief Justice stated, special considerations affecting the construction of a taxing statute, which had been explained by (the former) Chief Justice Kennedy in The Revenue Commissioners v Doorley [1933] IR 750. In that case the former Chief Justice had stated, citing the speech of Lord Cairns in Pryce v Monmouthshire Canal Company 4 App Cas 197, at 202, that there was no a priori liability on a subject to pay any particular tax, nor any antecedent relationship between the tax payer and the taxing authority, and, therefore, no reasoning founded upon any supposed relationship of the taxpayer and the taxing authority could be brought to bear upon the construction of the Act. Chief Justice Kennedy, having stated that no person or property was to be subjected to taxation unless brought within the letter of the taxing statute, went on to state that exemption from tax was governed by the same considerations, the exemption from tax must be brought within the letter of the taxing act as interpreted by the established canons of construction.

In dealing with the present case, Mr Justice Keane stated that what the court was concerned with was whether the respondent was entitled to relief; such relief had to be given expressly and in clear and unambiguous terms. Section 41(2) of the Finance Act 1980 afforded manufacturing relief to a company, which carried on a trade, which consisted of, or included, the manufacture of goods. The term, goods, was defined, for the purposes of manufacturing relief, in section 39(1) of the Act. Section 39(5) went on to provide that, without prejudice to the generality of subsection (1), goods were not, for the purposes of the definition of goods in subsection (1), to be regarded as manufactured, if they were goods which resulted from a process which consisted primarily of . . . "applying methods of . . . maturation or other similar treatment to other foodstuffs . . . ". Thus, Mr Justice Keane observed, far from any relief from taxation being afforded expressly or unambiguously under these provisions, it seemed that the opposite was the case. The Oireachtas had said in plain and unambiguous language that goods, such as bananas, which were subjected to an artificial ripening process, were not to be regarded as goods manufactured in the State for the purposes of section 41(2).

That conclusion, Mr Justice Keane stated, was wholly unaffected by the provisions of section 39(2), the intention of which was to treat a company, which was subjecting commodities or materials belonging to another person to any process of manufacturing, as a company engaged in the manufacturing of goods within the State. That provision, of itself, afforded no relief from corporation tax, the relief was conferred solely by section 41(2). That relief was confined to a company carrying on a trade which included "the manufacture of goods" and, by virtue of section 39(1) and (5), a company engaged in the artificial ripening of bananas was not engaged in the manufacture of goods and, accordingly, not entitled to the relief. A fortiori, a company which was engaged in an activity of artificially ripening bananas belonging to another person was clearly not intended to be treated as a company engaged in the "manufacture of goods" within the meaning of section 41(2).

Mr Justice Keane went on to state that a company, which produced goods by subjecting other people's materials to a manufacturing process, was not to be deprived of relief where the process would otherwise be regarded as the manufacturing of goods for the purposes of such relief. If one had regard solely to the language used in the subsection, that was its only effect; it certainly could not be said to confer in express and unambiguous relief from corporation tax in respect of the manufacturing of goods in a case such as the present.

Accordingly, the Chief Justice allowed the appeal and substituted for the order of the High Court an order answering the question posed in the case stated in the negative.

Solicitors: The Revenue Solicitor for the appellant; Arthur Cox (Dublin) for the respondent.