Imperial Chemical Industries plc (ICI) v Kenneth Hall Colmer (Her Majesty's Inspector of Taxes).

• Jurisdiction: European Union
• Court: Court of Justice (European Union)
• Writing for the Court: Wathelet
• ECLI: ECLI:EU:C:1998:370
• Docket Number: C-264/96
• Date: 16 July 1998
• Procedure Type: Reference for a preliminary ruling

Avis juridique important

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61996J0264

Judgment of the Court of 16 July 1998. - Imperial Chemical Industries plc (ICI) v Kenneth Hall Colmer (Her Majesty's Inspector of Taxes). - Reference for a preliminary ruling: House of Lords - United Kingdom. - Right of establishment - Corporation tax - Surrender by one company to another company in the same group of tax relief on trading losses - Residence requirement imposed on group companies - Discrimination according to the location of the corporate seat - Obligation of the national court. - Case C-264/96.

European Court reports 1998 Page I-04695

Summary
Parties
Grounds
Decision on costs
Operative part

Keywords

1 Preliminary rulings - Jurisdiction of the Court - Limits - Manifestly irrelevant questions

(EC Treaty, Art. 177)

2 Freedom of movement for persons - Freedom of establishment - Tax legislation - Corporation tax - Tax relief - National legislation making consortium relief available solely to companies which control, wholly or mainly, subsidiaries whose seat is in the national territory - Not permissible

(EC Treaty, Arts 52, 56 and 58)

3 Member States - Obligations - Situation outside the scope of Community law - Obligation on the national courts to interpret domestic law in a way conforming with Community law - No such obligation

(EC Treaty, Art. 5)

Summary

1 In the context of the preliminary ruling procedure under Article 177, it is solely for the national courts before which proceedings are pending, and which must assume responsibility for the judgment to be given, to determine in the light of the particular circumstances of each case both the need for a preliminary ruling to enable them to give judgment and the relevance of the questions which they submit to the Court. A request for a preliminary ruling from a national court may be rejected only if it is manifest that the interpretation of Community law or the examination of the validity of a rule of Community law sought by that court bears no relation to the true facts or the subject-matter of the main proceedings.

2 Article 52 of the Treaty precludes legislation of a Member State which, in the case of companies established in that State belonging to a consortium through which they control a holding company, by means of which they exercise their right to freedom of establishment in order to set up subsidiaries in other Member States, makes a particular form of tax relief subject to the requirement that the holding company's business consist wholly or mainly in the holding of shares in subsidiaries that are established in the Member State concerned.

Such legislation, which makes a tax advantage in the form of consortium relief available solely to companies which control, wholly or mainly, subsidiaries whose seat is in the national territory, applies the test of the subsidiaries' seat to establish differential tax treatment of consortium companies established in that Member State and is not justified in terms of a need to ensure the cohesion of the national tax system arising from the fact that the revenue lost through the granting of tax relief on losses incurred by resident subsidiaries cannot be offset by taxing the profits of non-resident subsidiaries, since there is no direct link between the consortium relief granted for losses incurred by a resident subsidiary and the taxation of profits made by non-resident subsidiaries.

3 When deciding an issue concerning a situation which lies outside the scope of Community law, the national court is not required, under Community law, either to interpret its legislation in a way conforming with Community law or to disapply that legislation. Where a particular provision must be disapplied in a situation covered by Community law, but that same provision could remain applicable to a situation not so covered, it is for the competent body of the State concerned to remove that legal uncertainty in so far as it might affect rights deriving from Community rules.

Parties

In Case C-264/96,

REFERENCE to the Court under Article 177 of the EC Treaty by the House of Lords (United Kingdom) for a preliminary ruling in the proceedings pending before that court between

Imperial Chemical Industries plc (ICI)

and

Kenneth Hall Colmer (Her Majesty's Inspector of Taxes),

on the interpretation of Articles 5 and 52 of the EC Treaty,

THE COURT,

composed of: G.C. Rodríguez Iglesias, President, H. Ragnemalm, M. Wathelet (Rapporteur) and R. Schintgen (Presidents of Chambers), G.F. Mancini, J.C. Moitinho de Almeida, J.L. Murray, D.A.O. Edward, P. Jann, L. Sevón and K.M. Ioannou, Judges,

Advocate General: G. Tesauro,

Registrar: L. Hewlett, Administrator,

after considering the written observations submitted on behalf of:

- Imperial Chemical Industries plc (ICI), by Peter Whiteman QC and Christopher Vajda, Barrister, instructed by Hammond Suddards, Solicitors,

- the United Kingdom Government, by John E. Collins, Assistant Treasury Solicitor, acting as Agent, with Derrick Wyatt QC and Rabinder Singh, Barrister,

- the Commission of the European Communities, by Peter Oliver and Hélène Michard, of its Legal Service, acting as Agents,

having regard to the Report for the Hearing,

after hearing the oral observations of Imperial Chemical Industries plc (ICI), the United Kingdom Government and the Commission at the hearing on 14 October 1997,

after hearing the Opinion of the Advocate General at the sitting on 16 December 1997,

gives the following

Judgment

Grounds

1 By order of 24 July 1996, received at the Court on 29 July 1996, the House of Lords referred to the Court of Justice for a preliminary ruling under Article 177 of the EC Treaty two questions on the interpretation of Articles 5 and 52 of the EC Treaty.

2 Those questions were raised in proceedings between Imperial Chemical Industries plc (hereinafter `ICI') and the United Kingdom tax authorities (hereinafter `the Inland Revenue') concerning the latter's refusal to grant to ICI tax relief in respect of trading losses incurred by a subsidiary of the holding company beneficially owned by ICI through a consortium.

3 ICI and Wellcome Foundation Ltd, both of which are companies resident in the United Kingdom, together form a consortium through which they beneficially own 49% and 51%, respectively, of Coopers Animal Health (Holdings) Ltd (hereinafter `Holdings').

4 The sole business of Holdings is to hold shares in some 23 trading companies which are its subsidiaries and which operate in many countries. Of those 23 subsidiaries, 4 - including Coopers Animal Health Ltd (hereinafter `CAH') - are resident in the United Kingdom, 6 in other Member States and 13 in non-member countries.

5 CAH incurred losses on its United Kingdom trade in the accounting periods ending in 1985, 1986 and 1987. ICI sought, pursuant to sections 258 to 264 of the Income and...