2.

However I do not believe that this interpretation would accord with the intention of the Community legislature. Liabilities assumed and expenses borne by the company within the meaning of the directive can only be liabilities and expenses which are certain and definitive and which were incurred by the natural and legal person making the contribution at the latest at the time of his so doing or which in any case are established both as to the basis and the amount thereof. In this connexion the liabilities and expenses in question are those which have been transferred to the newly-formed company. They also include the costs as well as the other sums payable by the newly-formed company relating to the assets contributed. But, as the Commission rightly points out, such debts must always be ascertained and payable at the time of, or as a result of the contribution. The directive introduces a set of rules which favours a founder member of a new company by exempting his income connected with its formation from being taxed. They are fiscal rules which reduce or abolish most of the taxes usually payable on the winding up of a company in order to encourage arrangements and reconstructions of companies and the accompanying surrender of capital or assets in one company in exchange for the right to be given a proportion of the assets and profits of the other company. The contributor of assets can have the stock and the goods on order under a binding contract entered in the balance sheet at cost and create a reserve for losses on the sale of goods or for periods when sales are slack and similar occurrences. Under these circumstances he can be certain that the amount by which the values were written down when he transferred his assets will be immediately deducted. Such a procedure moreover seems preferable because third parties can readily see what has been done; it appears that it can be adopted under Danish law as well as under the laws of the other Member States. However the contributor of assets can also reduce the valuation of his stock and write down the goods he has ordered under binding contracts, but, if he does, he must then abide by this election. It is not permissible to carry forward the written down value of stocks allowed in the context of taxation of industrial and commercial profits to the assessment of the harmonized capital duty which must focus on the position of an undertaking at the time at which the circumstances giving rise to a charge to tax materialized, that is to say at the time at which the assets were contributed. In the context of capital duty a merely contingent change to corporation tax or a tax on commercial revenue cannot be established. When the newly-formed company takes over the increase in value, the taxation of which had been deferred in the case of the company taken over it must step into that company's shoes. Otherwise a debt, which has not been ascertained and which can only arise and be quantified through the commercial conduct of another legal person, would be treated as a debt which had been ascertained. The Danish Government points out with good reason that the reduced valuation of taxable income is not affected if the level of the new company's stock remains constant and that company only makes a similar reduction at the end of each of its financial years; by means of repeatedly carrying forward the relative item this may lead to the ‘potential’ tax never being assessed. If the undertaking continues to adopt its writing down policy and the level of stocks remains the same, the reductions made never lead to any increase in taxable profits. If the undertaking, during the five years subsequent to the year in which the effect of a loss was in fact that there was no charge to tax in respect of any writing down of stocks after their inclusion in its income, continues to make a loss, the potential tax liability will be regarded as having been finally extinguished. Furthermore the provisions relating to writing down permit goods bought pursuant to certain contracts but not yet delivered to be added to the stock. If the company resorts to a greater extent to taking deduction from the value of its stock it can offset in inclusion in its income of the amount resulting from the deduction from the value of goods on order. Since the maximum deduction from the value of the goods on order is less than the maximum deduction from the value of stock, the company may even arrive at a negative income. In that case the tax liability can only arise after the date on which the capital was contributed and the company was formed. What we are therefore concerned with is an option, which was available to the old company as constituted at that time but which cannot simply be transferred so as to be exercisable in relation to capital duty for which the new company, into which the assets and liabilities were brought, is liable. Fortuitous circumstances of the kind described cannot be taken into account in the case of a tax which is levied once only at one specific point of time for payment on the value of the assets brought in. In the case of the formation of a capital company the only exception provided by Article 5 (1) (a) of Directive 69/335/EEC is that ‘Member States may postpone the charging of capital duty until the contributions have been effected’. The construction of the disputed provision seems to me to be clear. The meaning of the words ‘… after the deduction of liabilities assumed and of expenses borne by the company as a result of each contribution’ must on no account depend on the commercial policy of the newly-formed company in relation to the contributions to it.