Law:

Section:

Income-tax-Residence-Company-Test of residence¬" Superior or directing authority "-Finance Act, 1953 (1 & 2 Eliz. 2, c. 34), S. 20 (9). Three companies, which were wholly owned subsidiaries of Alfred Booth & Co. Ltd., a company resident in the United Kingdom, were at all material times registered and resident in East Africa. The boards of the three subsidiaries were entirely distinct from the board of the parent company but the board of the parent exercised control in matters of policy and in effect told the boards of the African subsidiaries what to do and those boards always accepted the instructions and acted accordingly. The respondent company, also a wholly owned subsidiary of Alfred Booth & Co. Ltd., made certain payments to the African subsidiaries which it claimed to deduct in computing its profits for the purposes of its assessments to income-tax under case I of Schedule D. It was admitted that if the African subsidiaries were resident in the United Kingdom within the meaning of section 20 (9) of the Finance Act, 1953, then the payments in question were subvention payments which the respondent was entitled to deduct; [Finance Act, 1953, section 20 (9) : " For the purposes of this section " company " includes any body corporate, but references to a company shall be taken to apply only to a company resident in the United Kingdom and carrying on a trade wholly or partly in the United Kingdom . . . . .] Held, (1) that a company was resident where the superior or directing authority was ; that authority being properly exercise¬able only within the framework of the constitution of the company concerned. Dicta of Evershed M. R. in Union Corporation Ltd. v. Inland Revenue Commissioners (1952) 34 T C 207; 271 and Koitaki Parra Rubber Estates Ltd. v. Federal Commissioners of Taxation (1940) 64 C L R 15, 241 applied. (2) That the board of the parent company did not fall within the phrase " superior or directing authority ", because it had no authority over the boards of the African subsidiaries, and because the boards of the African subsidiaries were not bound, under their respective constitutions, to accept the instructions of the board of the parent…

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