Marina Nominees Ltd. V. Federal Board Of Inland Revenue (1986)

LawGlobal-Hub Lead Judgment Report

KAZEEM, J.S.C. 

The point for consideration in this appeal falls within a narrow compass; and it is whether or not the appellant, a limited liability company incorporated under the Companies Act, 1968, and which earned fees (income) within the period under review, was liable to pay corporate tax under the Companies Income Tax Act, 1961. The facts on which the whole matter revolved may be stated thus:-

A firm of Accountants named Peat Marwick Casseleton Elliott & Co. (here-in-after called “Peat Marwick”) was acting as Secretaries to a number of limited liability companies; and according to the provisions of the Companies Act, 1968, whenever there is a change of Secretary of a limited liability company, the Company concerned is obliged to file returns with the Registrar of Companies of such change. Peat Marwick while acting as Secretaries to their clients, was making use of members of their staff as such Secretaries.

But whenever those employees left the services of Peat Marwick, it became necessary to file returns with the Registrar of Companies to satisfy the requirement of the Companies Act. In order therefore to take advantage of perpetual succession and to prevent frequent filing of returns of change of Secretaries, Peat Marwick formed the Appellant company in March, 1964, among other things, to act as Secretaries to limited liability companies on their behalf.

The subscribers of the Appellant company are two senior partners of Peat Marwick; but there is nothing in the Memorandum and Articles of Association of the Appellant Company (Exh. C) to show any connection with Peat Marwick. Mr. Ogunde, a partner of Peat Marwick who testified for the Appellant said the Secretariat work was done by Peat Marwick in the name of the Appellant and that all bills for services rendered by the Appellant were raised in favour of Peat Marwick; and the latter retained all the income and accounted for them in their books. He maintained that since the Appellant did not actually run the services, it had no right to the income.

Consequently, the Appellant neither filed any Income tax returns nor paid any Corporate tax since its inception.

That situation had continued since 1964 when the appellant company was incorporated until 1973 when the Respondent challenged the contentions of Peat Marwick not to allow the Appellant to file any returns or to pay corporate tax on the ground that the Appellant had no income of its own. The Respondent thereafter raised for the first time assessment of corporate tax payable by the Appellant from the year 1964/65 to 1972/73.

When all efforts by Peat Marwick to persuade the Respondent to change is mind with respect to the assessment failed, the Appellant which was the company directly concerned appealed to the Body of Appeal Commissioners in accordance with Section 56 of the Companies Income Tax Act, 1961. After hearing the appeal, the Body of Appeal Commissioners dismissed it and said: “We uphold the contention of the respondent that the income belonged to Marina Nominees Limited and that Marina Nominees should be liable to tax under Section 17.”

Subsequent appeal to both the Federal High Court and the Court of Appeal by the Appellant also failed. In both courts the Appellant contended that it acted as agents of Peat Marwick and that the income earned by it belonged to Peat Marwick which had already paid tax on such income. The decisions in three cases of Commissioner of Inland Revenue v Samson 8 Tax Cases 20; Smith Stones & Knight v Birmingham Corporation (1939) 4 All E.R. 116; and In Re F.G. Film Ltd. (1953) 1 WLR. 483 were cited and relied upon. But that contention was rejected.

The Appellant has again appealed to this court and with leave filed and argued the following grounds:-

“(1) The Federal Court of Appeal erred in law in failing to observe that the substantial question for determination in this appeal is as follows:

“whether (as the Appellants contend) Peat Marwick Casselton Elliot & Co (PMCE) are merely using the name of Marina Nominees for the purpose of the business of their Secretarial Department or whether (as the Respondents contend) Marina Nominees are the persons actually performing the secretarial jobs in their own right and through their own servants and agents.

(2) The Federal Court of Appeal erred in law and on the facts in failing to observe that the appeal before them raised no question as to whether the profits derived from the secretariat jobs concerned are chargeable to tax and that the only question in issue is whether, they are chargeable as part of the profits of PMCE (as the Appellants contend) or as part of the profits of Marina Nominees (as the Respondents contend).

(3) The Federal Court of Appeal erred in law in holding (per Ademola JCA) as follows: