Coll 28/16 ‘Persia; Imperial Bank of Persia; relations with the Persian Government.’ [‎36r] (71/247)

3
Bank's Arguments.
(2) Over a great number of years the Persian Government has accepted that
royalty should be calculated on net profits after deduction of British income tax,
and the High Commissioner who represented the Persian Government was no
doubt aware of the method of calculation of royalty, and never objected. This
is proof that the Persian Government has heretofore accepted the bank’s interpre
tation regarding deduction of British income tax from net profits.
Refutation of above Arguments.
1 he concession foresees the presence at the general meeting of shareholders
and meetings of the directors in Tehran of the Government’s special envoy. Apart
from this the Imperial Bank of Persia did not in the past send detailed statements
of accounts so as to ascertain that British income was being deducted from net
profits, and as no documents or positive proofs of any kind were presented, the
Persian Government had been unable to agree to the amount of royalties it has
received. Such payments have, on the contrary, been treated as part payments
made on account and the Persian Government has not waived its rights. There
fore, the implied consent of the Persian Government which, it is alleged, existed
does not apply. On the contrary, the payment of £87,304 in 1928 indicates that
the Imperial Bank of Persia itself impliedly agreed to the indefinite nature of the
Peisian Government annual royalties accounts. Moreover, by virtue of the
concession, the Persian Government is entitled to 6 per cent, of the net profits of
the bank. By net profits is meant profits less expenditure, and by expenditure
is meant moneys spent in the course of deriving income. For this reason income
tax payable in Fngland cannot be looked upon as expenditure, and for the same
reason the Government’s royalty must be paid before the deduction of the said
tax, especially since the Imperial Bank of Persia, in spite of having had the sole
right of issue of notes, has been exempt from all taxes, including income tax,
whereas in England, where it has no such monopolistic concession, it pays income
tax. In the circumstances, how can it be said that the payment of British income
tax has precedence over the Persian Government’s 6 per cent, royalty which must
compensate the Government’s Exchequer loss for the non-collection of the usual
taxes ?
The Persian Government naturally sees no objection to the Imperial Bank
of Persia paying any amount it likes out of its profits to any person or authority
it chooses, but this prerogative cannot cause a diminution of'the undoubted rights
of the Persian Government.
Bank's Arguments.
(3) The fact that royalty payable to the Persian Government has been debited
to the profit and loss account before providing for British income tax, cannot be
taken as evidence of the bank’s interpretation of the meaning of “ net profits ”
mentioned in the concession.
The said procedure was adopted by arrangement with the British income tax
authorities. Besides, the practice of another company which also holds a
concession in Persia cannot affect the subject in dispute.
Refutation of above Arguments.
Admittedly, the said facts were cited only as secondary evidence, and it is
true that by themselves they are not sufficient to prove the Persian Government’s
contention. The other questions, however, are amply sufficient to prove the justice
of the Pei sian Exchequer s claim, in favour of which the followm 0, argument mav
also be added :— J
It is entirely contrary to logic that taxes payable in Persia should be subject
to an increase or decrease in taxation in another country, for in this manner it will
be sufficient for the latter country to raise its taxation two or three times in order
that as a result the Persian Government’s dues may sustain a very considerable