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Scottish Court of Session Decisions
You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> Hill v. Inland Revenue [1912] ScotLR 960 (12 July 1912)
URL: http://www.bailii.org/scot/cases/ScotCS/1912/49SLR0960.html
Cite as: [1912] SLR 960, [1912] ScotLR 960
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SCOTTISH_SLR_Court_of_Session
Page: 960↓
Court of Session Inner House First Division.
(Exchequer Cause).
v.
Facts:
The Finance (1909–10) Act 1910, sec. 66 (2), enacts—“For the purposes of the super tax the total income of any individual from all sources shall be taken to be the total income of that individual from all sources for the previous year, estimated in the same manner as the total income from all sources is estimated for the purposes of exemptions or abatements under the Income Tax Act. …”
The Customs and Inland Revenue Act 1890, sec. 23 (1), enacts—“Where any person shall sustain a loss … in the occupation of lands for the purpose of husbandry only, it shall be lawful for him, upon giving notice in writing to the surveyor of taxes for the district within six months after the year of assessment, to apply to the Commissioners for the General Purposes of the Acts relating to income tax for an adjustment of his liability by reference to the loss and to the aggregate amount of his income for that year, estimated according to the several rules and directions of the said Acts.”
A, an occupier of agricultural land, was called upon in 1910 to furnish a return of his income for assessment to super tax for the year ending 5th April 1910—his income for that year being as directed by sec. 66 (2) of the Finance Act his total income from all sources for 1908–9. In making his return A claimed to deduct the loss which he alleged he had incurred in connection with the occupation of certain farms. In making his ordinary return for income tax for 1908–9, A had not claimed any deduction in respect of these losses, but had paid tax on the full assessment.
Held ( rev. the determination of the Special Commissioners) that A was not thereby barred from claiming deduction in respect of his farming losses—the six months' limitation imposed by section 23 (1) of the Act of 1890 not being applicable to estimation of income for assessment to super tax.
The Finance (1909–10) Act 1910 (10 Edw. VII, cap. 8), section 66, enacts—“ Super Tax on Incomes over £5000.—(1) In addition to the income tax charged at the rate of one shilling and twopence under this Act, there shall be charged, levied, and paid for the year beginning on the sixth day of April Nineteen hundred and nine, in respect of the income of any individual, the total of which from all sources exceeds five thousand pounds, an additional duty of income tax (in this Act referred to as a super tax) at the rate of sixpence for every pound of the amount by which the total income exceeds three thousand pounds.”
“(2) … ( The sub-section is quoted supra in rubric.] …”
The Customs and Inland Revenue Act 1890 (53 and 54 Vict. cap. 8), section 23 (1), which is noted in the margin, “Relief to … Farmers in Case of Losses,” is quoted supra in rubric.
This was an appeal at the instance of R. Wylie Hill, Balthayoch, Perth, against an assessment to super tax in the sum of £5140 for the year ended 5th April 1910 under the provisions of section 66 of the Finance (1909–10) Act 1910.
The Case, which was stated under section 72 (6) of that Act and section 59 (1) of the Taxes Management Act 1880 (43 and 44 Vict. cap. 19), was as follows:—“2. On the 2nd November 1910 the appellant made
Page: 961↓
a return for the year ending 5th April 1910, for the purposes of super tax, in the sum of £7289, 10s., arrived at as follows—
The annual value of properties owned and also in some cases occupied by him assessed under Schedule A (as reduced for the purpose of collection under sec. 35 of the Finance Act 1894) for the year ending 5th April 1909 (including 140 Sauchiehall Street)
£4,763
8
0
The annual value of properties occupied by him assessed under Schedule B for the year ending 5th April 1909 (including the properties in respect of which the alleged farming losses were in-curred)
146
7
0
Income from investments
5,769
18
8
Wife's income
84
15
10
£10,764
9
6
Deductions
3,474
19
6
£7,289
10
0
“3. Included in the sum of £3474, 19s. 6d. for ‘deductions’ were … the following amounts, viz.—£727, 6s. 10d., being the amount of the alleged losses on Mains and Oliverburn Farms, and £124, being the alleged loss of rent on 140 Sauchiehall Street. The Special Commissioners by whom the said assessment of £5140 was made disallowed the said sums of £727, 6s. 10d. and £124 as deductions, the assessment being arrived at as follows:—
Total income returned
£7289
10
0
Add said deductions disallowed
851
6
10
Total
£8140
0
0
Statutory allowance
3000
0
0
Amount of assessment
£5140
0
0
“4. The appellant claimed to deduct from the said sum of £5140—…( b) A sum of £146, 7s., being the amount of the assessment to the income tax, Schedule B, for the year ended 5th April 1909, in respect of certain farms on said Balthayock estate on which the appellant alleges he sustained a loss. The said sum of £146, 7s. is included as one of the appellant's sources of income in arriving at the total aggregate income of £8140 shown in paragraph No. 3 of this case. ( c) A sum of £727, 6s. 10d., representing the extent of the losses alleged to have been incurred by him in farming operations in the year ending 5th April 1909, in respect of certain farms,, viz., Mains and Oliverburn Farms on the said Balthayock estate.…
5. … As regards items ( b) and ( e), the appellant admitted that he had not claimed relief from income tax for the year ended 5th April 1909 in respect of these items under section 23 (1) of the Customs and Inland Revenue Act 1890, within the time therein prescribed, or at all, or any other relief in respect thereof. This being so, we were of opinion that these deductions could not be allowed.”
[With regard to the claim for alleged loss of rent on 140 Sauchiehall Street, Glasgow, referred to in article 3 of the case, counsel for the parties stated that the facts were not fully before the Court, and craved time for further inquiry.]
Argued for appellant— Esto that the appellant did not claim a deduction in respect of items ( b) and ( c) when making his return for income tax for 1908–9, he was not barred thereby from claiming such deduction now. This was a new tax imposed for the first time in 1910, and it might well be that a man might not claim deduction for income tax and yet be desirous of doing so quoad assessment to super tax. There was nothing in the Act of 1910 to suggest that the appellant was foreclosed from claiming these deductions now; all that the Act prescribed was that the deductions should be claimed at the same time as the return was made.
Argued for respondents—The method of estimating income for the purposes of claiming exemption was prescribed by the Income Tax Act 1842 (5 and 6 Vict. c. 35), Schedule G, Rule 17— vide Dowell's Income Tax Laws, 6th ed. p. 317. A claim for deduction of farming losses was first allowed by the Customs and Inland Revenue Act 1890 (52 and 53 Vict. c. 42), sec. 23— vide Dowell, op. cit. p. 591. That Act, however, provided that such a claim must be made within six months of the expiry of the financial year for which the assessment was made, and that it must be accompanied by a certificate of the loss incurred. The appellant had made no such claim when making his return for income tax for 1908–9, and he was therefore barred from doing so now.
At advising—
The appellant was not asked to make a return until long after 5th April 1910, that is, long after the expiry of the year for which the tax was to be paid, and a good deal more than twelve months after the expiry of the year the income of which was to be the basis of assessment. He was thus called on in the later half of 1910 to make a return of his income from all sources for 1908–9. One source of his income for that year was profit from the occupation of land for agricultural purposes, that is, of income under Schedule B. He alleges that he made a loss on the occupation of certain farms. In making his ordinary return for income tax for 1908–9 he had not claimed any deduction in respect of these losses, but had paid tax on the full assessment. But now that he is charged super tax he has claimed such deduction in estimating his income for 1908–9, and the Special Commissioners refuse to entertain his claim because he did not make it, as they think, in due
Page: 962↓
The sub-section then proceeds to say that the total income from all sources is to be “estimated in the same manner as the total income from all sources is estimated for the purpose of exemptions or abatements under the Income Tax Acts.” It says it is to be estimated, not is to be taken as it has been estimated, and accordingly an estimate in “manner” prescribed is required.
“In manner” prescribed throws the individual making the return back immediately on the Customs and Inland Revenue Act 1890, section 23 (1), which provides that where any person shall sustain a loss in the occupation of land for the purposes of husbandry only, it shall be lawful for him, upon giving notice in writing to the surveyor of taxes for the district within six months after the year of assessment, to apply to the General Commissioners under the Income Tax Acts “for an adjustment of his liability by reference to the loss and to the aggregate amount of his income for that year estimated according to the several rules and directions of the said Acts.” It does not appear to me that the six months' limitation applicable to adjustment of liability by reference to the loss and to the aggregate amount of income, in regard to the assessment for ordinary income tax, has anything to do with the “manner” of estimating income, or is a condition of the operation which the individual is called on to perform for the benefit of the Special Commissioners dealing with super tax. The manner of estimating total income is clearly that of the “several rules and directions” of the Income Tax Acts.
That super tax and everything connected with it is something quite apart from income tax is, if it were necessary, clearly shown by the four special rules which are appended to the sub-section (2) which I have just examined.
I therefore think that the Special Commissioners are bound to consider the appellant's demand for deduction in respect of his farming losses.
A subsidiary question is raised in the case. But it became clear at the bar that there had been a misapprehension, which renders it impossible to determine that question on the case as stated, and leaves it very probable that on fuller explanation the matter may be adjusted.
The
The Court reversed the determination of the Special Commissioners in article 5 of the Case allowed deductions under heads ( b) and ( c) of article 4 of the Case of such losses as the appellant might instruct, and remitted to the Special Commissioners to determine the amount of the said losses to be allowed under heads ( b) and ( c).
Counsel for Appellant— Horne, K.C.— Lippe. Agents— Maxwell, Gill, & Pringle, W.S.
Counsel for Respondents— Sol.-Gen. Anderson, K.C.— J. A. T. Robertson. Agent— Sir Philip J. Hamilton Grierson, Solicitor for Inland Revenue.