B1.432 Disposal of business for an income
Ceasing active trading functions in exchange for annuity
There are instances where a company disposes of the whole of its undertaking, ceases to perform active trading functions and merely receives and disposes of an income in the form of an annuity or otherwise. These cases arose, however, mainly in relation to the former excess profits duty and corporation profits tax, and the stress has been on the word 'business', not 'trade'. Lawrence J pointed this out in Morning Post Ltd v George1 and expressed the opinion that these cases could not therefore afford much assistance in construing the words of the Income Tax Acts. It may nevertheless be of assistance to have notes of these cases.
In South Behar Rail Co Ltd v IRC2, a company had owned a railway which was worked by another company, which paid over a share of the profits to the owner company. The owner company relinquished possession of the railway to the Secretary of State for India, who had an option to purchase, and it was arranged that until the option was exercised the owner company should receive a fixed sum in lieu of the share of profits. Thereafter, the company did no more than receive and distribute the annuity and a small amount of other income. It was held that the company was carrying on a business or similar undertaking.
In receipt of royalties
In IRC v Korean Syndicate Ltd3, a company was formed for acquiring and working
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