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Scottish Court of Session Decisions
You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> M'Dougall (Surveyor of Taxes) v. Sutherland [1894] ScotLR 31_630 (20 March 1894)
URL: http://www.bailii.org/scot/cases/ScotCS/1894/31SLR0630.html
Cite as: [1894] ScotLR 31_630, [1894] SLR 31_630
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SCOTTISH_SLR_Court_of_Session
Page: 630↓
Court of Session Inner House First Division.
[Court of Exchequer.
v.
Facts:
The minister of a Free Church of Scotland who had an income of £364, 10s., occupied rent free a manse, the annual value of which was £50. He was entered in the valuation roll as proprietor of the manse, although in point of fact the manse was vested in trustees for behoof of the congregation. If the annual value of the manse was added to his income it exceeded £400, but if otherwise, it was only £364, 10s., on which income (less £15 for life insurance) he was assessed under Schedule E. He appealed against this assessment. He maintained that the annual value of the manse was not part of his “income” in the sense of the Income-Tax Acts, that his income was therefore less than £400, and therefore that he was entitled to the abatement on £120 allowed by these Acts on incomes under £400.
Held that the annual value of the manse did not fall to be included in reckoning his income, that therefore it did not exceed £400, and that he was entitled to the abatement.
Tennant v. Smith, March 14, 1892, 19 R. (H. of L.) 1, followed.
The Customs and Inland Revenue Act 1876 (39 and 40 Vict. cap. 16), sec. 8, provides—“The following relief or abatement shall be given or made to a person whose income is less than four hundred pounds—that is to say, any person who shall be assessed or charged to any of the duties of income-tax granted by this Act, or who shall have paid the same, either by deduction or otherwise, and who shall claim and prove in the
Page: 631↓
manner prescribed by the Acts relating to income-tax that his total income from all sources, although amounting to one hundred and fifty pounds or upwards is less than four hundred pounds, shall be entitled to be relieved from so much of the said duties assessed or paid by him as an assessment or charge of the said duties upon one hundred and twenty pounds would amount unto.” At a meeting of the General Commissioners of Income-Tax held at Rothesay on 30th October 1893, the Rev. Andrew Neil Sutherland, minister of the Free Church, Rothesay, appealed against an assessment made on him under Schedule E of the Income-Tax Acts for the year 1893–94 on £349, 10s., on the ground that he was entitled to an abatement from his income of £120 allowed on incomes under £400.
After hearing parties, the Commissioners sustained the appeal and allowed the abatement of £120.
The Surveyor took a case for the opinion of the Court of Exchequer in accordance with the Taxes Management Act 1880 (43 and 44 Vict. cap. 19), sec. 59.
The first rule under Schedule E of the Income-Tax Act 1842, under which the assessment was imposed, provides that “The duties shall be annually charged on the persons respectively having, using, or exercising the offices or employments of profit mentioned in the said Schedule E, or to whom the annuities, pensions, or stipends mentioned in the same schedule shall be payable, for all salaries, fees, wages, perquisites, or profits whatsoever accruing by reason of such offices, employments, or pensions.”
The employments of profit mentioned in Schedule E include “any office or employment of profit held under any ecclesiastical body.”
The fourth rule under Schedule E provides that “The perquisites to be assessed under this Act shall be deemed to be such profits of offices and employments as arise from fees or other emoluments, and payable either by the Crown or the subject in the course of executing such offices or employments.”
The duties to be paid under Schedule A are in respect of “all lands,” &c., “in respect of the property thereof,” and under Schedule B “all lands,” &c., “in respect of the occupation thereof.”
Section 167 of the same statute enacts “That the annual value of lands, hereditaments, or heritages belonging to or in the occupation of any person claiming the said exemption, shall be estimated for the purpose of ascertaining his title to such exemption according to the rules and directions contained in the said several Schedules (A) and (B) respectively.” …
The facts stated in the case were:—“1. The appellant is minister of the Free Church at Rothesay, and his whole income is derived from that office, and, exclusive of the annual value of the manse, amounts to £374, 10s., or after deducting £10 allowed for expenses, £364, 10s.
“2. He is entered in the valuation roll for the burgh of Rothesay as owner and occupier of the Free Church Manse of Rothesay, the annual value of which is £50, and is assessed under Schedule A of the Income Tax Acts for the said manse thus:—
No.
Occupier.
Property.
Name or Situation.
Description.
Proprietor.
Rent or Annual Value in Valuation Roll.
Gross Rent or Annual Value assessed.
Deductions. Rates and Land Tax.
Net Annual Value assessed.
Duty.
1944
Proprietor.
Serpentine Road.
House.
Rev. A. N. Sutherland.
£50
£50
£3 s.10
£46 s.10
£1 s.7 d.1
3. He is also assessed to Inhabited House Duty as occupier of the said house on the sum of £50.
4. The manse, in terms of a disposition dated 17th June 1859, and which disposition, and the model trust-deed referred to in it, it is agreed may be referred to as part of this case, is vested in trustees for behoof of the Free Church congregation of Rothesay, and it is thereby declared that the manse is to be ‘for the use of the minister for the time being of the said congregation during his life, and so long, but so long only, as he shall remain minister thereof, and shall not be debarred from the use, occupation, and enjoyment of the same by or in virtue of a sentence judicially pronounced’ by a competent Judicatory of the Church.
5. The whole manse is in the possession of the appellant, and is used by him as his residence as minister of the congregation.
6. The appellant stated that no use is made by him of the house except in direct connection with the duties of his office, and that he is bound to remove from the said manse in the following circumstances:—1. If he were transferred by the Church Courts from the ministry of the said congregation to the ministry of another congregation of the Free Church; and 2. If, on the appointment of a colleague minister in the said congregation, the manse were made a residence for the colleague minister.”
Mr Sutherland's contention against the annual value of the manse being reckoned as part of his income, was thus stated in the case:—“That the advantage of free residence which he derived from the discharge of his duty of residing in the manse for the purposes of the said congregation, was not a subject of assessment in any of the schedules of the Income Tax Act, and therefore was not to be taken into account in calculating his total income under section 8 of the Income Tax Act 1876.”
Although the respondent paid the property tax assessment, it was not disputed by the appellant at the bar that it had always been repaid to him by the Deacon's Court.
Page: 632↓
It was argued for the Commissioners—The annual value of the manse formed part of the respondent's income under Schedule E. This case differed from Tennant v. Smith, January 21, 1891, 18 R. 428— rev. March 14, 1892, 19 R. (H. of L.) 1, in respect—(1) The bank there was assessed as proprietor of the premises, whereas here the occupier was entered as proprietor. (2) The respondent was a liferent proprietor, and was entered in the valuation roll and assessed as proprietor. Ministers in similar positions to the respondent have been found entitled to vote as owners or proprietors in liferent of their manses— Rutherford v. Young, December 2, 1863, 2 Macph. 180; Robbie v. Meiklejohn, December 19, 1868, 7 Macph. 296. He was therefore liable to assessment under Schedule A. The 167th section of the Income-Tax Act of 1842 showed how income arising from lands is to be estimated with reference to claims of exemption.
Argued for the respondent—The annual value of the manse ought not to be included in estimating his income. The mere fact that his name appeared as proprietor in the valuation roll was nothing to the purpose in reference to the present question if in point of fact he was not proprietor. The trustees were vested in the manse, and not the respondent. Tennant v. Smith was exactly in point, and the same principle should be applied here. The respondent was not proprietor, nor was he in the enjoyment of what might yield him £50 annually.
At advising—
It is stated in the case that his whole income is derived from his office of minister of the Free Church, and amounts, after deducting £10 allowed for expenses, to £364, 10s.
The appellant, however, proposes to add to that sum the value of the manse which the respondent occupies, which he estimates at £46, 10s.—thus making the total income amount to £411.
The question therefore is, whether the value of the manse ought to be added to the respondent's income from other sources in considering whether he is entitled to the abatement claimed or not?
In this case the respondent is assessed under Schedule E of the Income-Tax Act 1842 (5 and 6 Vict. cap. 35) as holding an office or employment of profit under an ecclesiastical body, viz., the Free Church of Scotland.
It was held in the case of Tennant v. Smith in the House of Lords, 19 R. (H. of L.) 1, that the duties chargeable under Schedule E on persons holding such offices or employments, for “all salaries, fees, wages, perquisites, or profits whatsoever accruing by reason of such offices and employments,” did not include the annual value of a house occupied rent free by the agent of a bank, and forming part of the bank premises, and that such value ought not to be taken into consideration in estimating the amount of his income. In that case the bank agent was bound to occupy the house personally, and could not let it, so that he could not convert his right to occupy it into money; and it was said by Lord Hannen that different considerations would apply to the case of an agent who as part of his remuneration has a house provided for him which he might let. That, he says, which could be converted into money might reasonably be regarded as money.
That leads to the consideration of the terms on which the respondent occupies his manse.
It is stated in the case that the manse is vested in trustees for behoof of the Free Church congregation in terms of a disposition dated 17th June 1859 and the model trust-deed therein referred to, which are held to be parts of the case, but I do not find any statement of the terms on which the respondent holds the manse under them, but I presume the terms are the same as those under which the trustees are vested in the building.
Now, I find that there is appended to the model deed the form of a simple disposition for a manse which seems to be appropriate to this case. From this form it appears that the subjects conveyed to the trustees are held by them in trust, that the manse shall in all time coming be used, occupied, and enjoyed as and for a manse in connection with the Free Church of Scotland, and that by and for the use of the minister for the time being of the congregation during his life, and so long, but so long only, as he shall remain minister thereof, but always under the conditions, provisions, and declarations contained from tertio to duodecimo, both inclusive, in the model trust-deed there referred to.
That model trust-deed is very lengthy, and seems adapted to the case of a church rather than to that of a manse. The only provision I can find in it which seems to have a bearing on the present question is contained in article 3, which declares that the building shall be under the immediate charge and management of the elders and deacons, or elders acting as deacons for the time being, of the congregation in the use, occupation, and enjoyment at the time of such building.
It appears, accordingly, that this dwelling-house is provided to the respondent as the minister of the congregation, and is in all time coming to be used, occupied, and enjoyed by him as and for a manse in connection with the Free Church. It does not appear to me that the right to occupy a dwelling-house on these terms is one which was intended to be convertible into money. I think, therefore, that the principle of the case of Tennant v. Smith applies
Page: 633↓
But the appellant further maintained, as I understood his argument, that in estimating a person's “total income from all sources” there fell to be included the annual value of all property for which he was chargeable under Schedule A, and that the 167th section of the Act of 1842 contained directions for estimating these values for the purpose of ascertaining the title to abatement when abatement was claimed. That would appear to be so, but the question remains whether the respondent is chargeable under Schedule A.
Section 167 provides that the annual value of lands, tenements, &c., belonging to or in the occupation of any person claiming exemption shall be estimated for the purpose of ascertaining his title to such exemption, according to the rules and directions contained in the said several Schedules (A) and (B) respectively. It was said that the respondent was chargeable as occupier of the manse, that he was proprietor of the manse in the sense of the Act, that he was ultimately chargeable as such proprietor, and had in fact been assessed as occupier and had paid such assessment.
It appears to me that the respondent is in no sense proprietor of the manse. The trustees are proprietors, and are the persons who are ultimately chargeable as owners in respect of it.
It is true that the respondent is entered in the valuation roll as proprietor, but that will not make him proprietor or liable as proprietor. It is also true that he has been in use to pay the property tax assessment, but he was bound to do so as occupier of the manse, and it was stated, and not disputed, that it has always been repaid to him by the Deacon's Court of the Church.
The decisions which were quoted to us to the effect that ministers in the position of the respondent had been found entitled to vote as owners or otherwise of their manses, have no bearing on the present question.
I am therefore of opinion that the determination of the Commissioners was right, and that the appeal should be refused.
But then another criterion applicable to claims of this description is proposed in the opinion of the Lord Chancellor, and I think assented to by all their Lordships, viz., that in construing the statutory provision as to abatement, and in particular the expression “total income from all sources,” nothing is to be treated as income unless it is capable of being turned into money. I think the circumstance that the bank agent was not entitled to let his residence, but was under obligation to live in it, was the decisive element in that case, although other elements were referred to; for example, that the occupation of the bank agent was that of a servant or manager under a contract of service as distinguished from that of a tenant. In the present case the manse is vested in trustees, and it is not said that the minister is a tenant. He is a beneficiary under the trust, and it is to my mind perfectly clear that under the conditions of the trust the minister has a residence provided for him to enable him to discharge the duties of his office, and that he would not be able to let this residence to a yearly tenant without committing a breach of contract. His equitable estate is therefore not a right capable of being turned into money, and I attach no importance to the consideration that with the consent of the trustees the minister might let the manse furnished for a few weeks in summer when absent from his charge, or when his duties did not require that he should personally occupy the manse. It is no doubt true that the use of the manse is part of the consideration which the minister receives under his contract with the congregation or their ecclesiastical superiors, but if I rightly follow the decision in Tennant's case it is not “income,” and is not to be taken into account in estimating his right to an abatement of tax on the ground that his total income from all sources is under £400.
I do not of course mean to imply that the manse is to escape taxation under Schedule A. How it is to be assessed is a question not before us. In the present case we are only concerned with the question whether a value is to be put on the occupation for the purposes of the claim of exemption.
The Court affirmed the determination
Page: 634↓
Counsel for the Surveyor of Taxes—Dean of Faculty ( Sir Charles Pearson, Q.C.)— A. J. Young. Agent—The Solicitor to the Board of Inland Revenue.
Counsel for Mr Sutherland— Jameson— Guthrie. Agents— Cowan & Dalmahoy, W.S.