Scottish Court of Session Decisions

The Income Tax Act 1853 enacts—Section 2—“For the purpose of classifying and distinguishing the several properties, profits, and gains for and in respect of which the said duties are by this Act granted, and for the purposes of the provisions for assessing, raising, levying, and collecting such duties respectively, the said duties shall be deemed to be granted and made payable yearly for and in respect of the several properties, profits, and gains respectively described or comprised in the several schedules contained in this Act—that is to say”—Schedule B—“For or in respect of the occupation of such lands, tenements, hereditaments, and heritages as aforesaid, and to be charged for every twenty shillings of the annual value thereof.” Schedule D—“For or in respect of the annual profits or gains arising or accruing … from any kind of property whatever, and for and in respect of the annual profits or gains arising or accruing to any person … from any profession, trade, employment, or vocation … to be charged for every twenty shillings of the annual amount of such profit or gain.”

The first, third, and sixth cases under Schedule D of the Income Tax Act 1842 which were applicable to the above schedules are as follows:— First case—“Duties to be charged in respect of any trade, manufacture, adventure, or concern in the nature of trade not contained in any other schedule of this Act.” Third case—“The duty to be charged in respect of profits of an uncertain annual value not charged in Schedule A.” Sixth case—“The duty to be charged in respect of any annual profits or gains not falling under any of the foregoing rules and not charged by virtue of any other of the schedules contained in this Act.”

William Donald, farmer, Parkieston, Newmilns, appellant, being dissatisfied with the decision of the Commissioners for the General Purposes of the Income Tax Acts at Ayr sustaining assessments in the sums of £56 and £32, appealed by way of Stated Case in which A. Thomson, Surveyor of Taxes, Ayr, was respondent.

The assessments were made under Schedule D of the Income Tax Acts for the years 1917–18 and 1918–19 respectively, and were charged as profits arising from his tenancy of grass parks, of which he was lessee from May to November in the years 1916 and 1917.

The Case set forth—“The following facts were found proved or admitted:—1. The appellant is tenant of Parkieston Farm at an annual rent of £211. 2. From May to November in each of the years 1916 and 1917 he took in addition certain grass parks at the season rents of £56 and £16 respectively. He used these fields for the grazing of young dairy stock brought from his own farm of Parkieston, which at the end of the season were taken back into stock on his own farm to replace older stock sold during the season. 3. The assessment under Schedule B in respect of the occupation of these grass parks was made each year on the landlord as occupier in terms of Rule 3, No. iv, Schedule A, sec. 60, of the Income Tax Act 1842 (5 and 6 Vict. cap. 35), but relief was given to him under section 27 of the Finance Act 1896 (59 and 60 Vict. cap. 28). 4. Assessment under Schedule B was made on the appellant each year in respect of his occupation of the farm of Parkieston, and no appeal is made against that assessment under Schedule B, but only against the further assessments under Schedule D made in respect of the estimated profits derived from his tenancy of the said grass parks. 5. The appellant stated that he was unable to give particulars to enable the actual profits (if any) to be ascertained. The Additional Commissioners had estimated the

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profits in the absence of a return according to the rental or double rental of the grass parks for the year preceding the year of assessment.…

“We, the Commissioners, after consideration of the facts and arguments submitted to us, were of opinion that the subjects were liable to assessment under Schedule D, and that the sums of £56 and £32 represented reasonable profits for the income tax years 1917–18 and 1918–19 from the lands of which the appellant had beneficial occupation. We therefore dismissed the appeal and sustained the assessments.”

The question of law for the opinion of the Court was—“Whether the appellant is assessable to income tax under Schedule D in respect of the profits derived from the occupation of the fields taken by him for grazing purposes in addition to the assessment upon him under Schedule B in respect of the occupation of his own farm.”

Argued for the appellant—The appellant could not be assessed in respect of the grass parks under Schedule D. Case 3 was inapplicable, because he was not a cattle dealer or dairy keeper, but occupied the parks merely as an incident of the farm, the rents being part of the expense of carrying it on. To make cases 1 or 6 applicable there must be something of the nature of a trade or business in the grazing, as in the case of Malcolm v. Lockhart, 1919 S.C. 33, 56 S.L.R. 224. That was not the situation here. There was no distinction in principle between using the parks as the appellant did and buying grown grass or artificial feeding, or bringing manure on to the farm to increase its production. The profits from the parks could not be estimated apart from those of the farm and were covered by the assessment under Schedule B, while the assessment for occupancy of the parks fell to be made on the owner. The necessity of providing for the assessment of cattle dealers and dairy keepers (case 3) showed that it was not intended that farmers should be assessed separately for grazings which were merely incidental to the farm.

Counsel for the respondent was not called upon.