## Facts

- Delhi Electric Supply & Traction Co. Ltd., an English company, operated an electricity and tramway undertaking in Delhi under municipal license until 1947.
- In 1947, the company sold its entire Indian undertaking to the Government of India for Rs. 82,11,580; most proceeds were paid in India and remitted to England, with the balance paid in 1948 and also remitted.
- In April 1947, Indian legislation introduced capital gains taxation applicable to qualifying asset transfers occurring after March 31, 1946.
- The company entered voluntary liquidation in England in May 1949; its former directors acted as liquidators.
- Indian tax authorities assessed income tax (including capital gains tax) on the surplus from the 1947 sale; the company accepted liability in India and paid part from assets remaining there.
- The Government of India sought to prove in the English liquidation for the unpaid balance as a debt of the company; the liquidators rejected the proof as an inadmissible foreign revenue claim.

## Issues

1. Whether a foreign sovereign may prove in an English company’s liquidation for taxes assessed under the foreign sovereign’s revenue laws.
2. Whether membership in the British Commonwealth warranted different treatment of India’s revenue claim from other foreign states’ tax claims.
3. Whether a foreign tax claim can be admitted in liquidation by characterizing it as an ordinary “liability” or provable debt, rather than enforcement of a foreign tax.

## Decision

- The House of Lords unanimously dismissed the appeal and upheld rejection of the proof in the liquidation.
- The court held the claim was, in substance, an attempt to enforce foreign revenue law in England and was therefore not provable.
- The court refused to create any special exception based on India’s Commonwealth status.
- The court rejected recharacterization of the tax demand as a general provable “liability,” holding that admitting it would amount to indirect enforcement of foreign tax law through insolvency distribution machinery.

## Legal Principles

- English courts will not enforce, directly or indirectly, the revenue laws (and similarly penal laws) of a foreign state.
- The non-enforcement rule bars not only direct suits to recover foreign taxes, but also indirect attempts to obtain recognition or payment of foreign tax claims through domestic insolvency proceedings.
- A court determines the substance of the claim: an obligation arising solely from foreign tax legislation remains a public-law revenue claim even if framed as a private-law debt.
- Commonwealth membership does not alter the rule; any exception for foreign tax enforcement must come from legislation or binding agreement, not judicial action.

## Conclusion

The House of Lords held that foreign tax assessments cannot be admitted as provable debts in an English liquidation, and that neither Commonwealth ties nor formal relabeling of the claim can avoid the common-law bar on enforcing foreign revenue laws.


Gov’t of India, Ministry of Fin. (Revenue Div.) v. Taylor, [1955] A.C. 491 (H.L. 1955)