United Kingdom House of Lords Decisions

You are here: BAILII >> Databases >> United Kingdom House of Lords Decisions >> Malcolm v. Lockhart [1919] UKHL 224 (28 January 1919)
URL: http://www.bailii.org/uk/cases/UKHL/1919/56SLR0224.html
Cite as: [1919] UKHL 224, 56 ScotLR 224

[New search] [Printable PDF version] [Help]

SCOTTISH_SLR_House_of_Lords

Page: 224↓

House of Lords.

Tuesday, January 28. 1919.

(Before Lord Buckmaster, Lord Finlay, Lord Dunedin, and Lord Atkinson.)

56 SLR 224

Malcolm

v.

Lockhart.

(In the Court of Session, November 16, 1917, 55 S.L.R. 98.)

Subject_Revenue — Income Tax — Stallion's Fees — Mode of Assessment — Income Tax Act 1842 (5 and 6 Vict. cap. 35), sec. 63, Schedule B, and sec. 100, Schedule D, First Case, Rule First, and Sixth Case — Income Tax Act 1853 (16 and 17 Vict. cap. 34), sec. 2, Schedules B and D.
Facts:

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, and marked respectively A, B, C, D, and E, and to be charged under such respective schedules—that is to say,” Schedule B, “for and in respect of the occupation of all such lands, tenements, hereditaments, and heritages as aforesaid, and to be charged for every twenty shillings of the annual value thereof.” Schedule D—“For and in respect of the annual profits or gains arising or accruing to any person residing in the United Kingdom from any kind of property whatever … and for and in respect of the annual profits or gains arising or accruing to any person residing in the United Kingdom from any profession, trade, employment, or vocation, whether the same shall be respectively carried on in the United Kingdom or elsewhere, and to be charged for every twenty shillings of the annual amount of such profits and gains.”

The above schedules replace Schedules B and D of the Income Tax Act 1842, but the cases and rules applicable to the Schedules B and D of that Act are still operative, and of these the following are the first and sixth cases under Schedule D:—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.” 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 of the other schedules contained in this Act.”

The tenant and occupier of a mixed farm of 400 acres at a rent of £580 kept a stallion which he used to serve his own mares on the farm, and also to serve mares belonging to others. The mares were either served at the farm or at other places where the stallion attended under the care of the owner's servants. The owner was assessed under Schedule B of the Act of 1853 upon the rental of his farm as tenant thereof, and in the year of assessment his gross earnings from the stallion amounted to £290. The Commissioners for the General Purposes of the Income Tax decided to assess the owner of the stallion upon the profits derived from its ownership under Schedule D of the Act of 1853, in respect that the use made by the owner of the stallion was a use that provided a profit that did not arise in respect of the occupation of his lands. Held that the question of the use made of the stallion was a question of fact, and that the Commissioners, decision was final.

Headnote:

The case is reported ante ut supra.

William Taylor Malcolm, the appellant, appealed to the House of Lords.

Page: 225↓

Judgment:

Lord Buckmaster—The appellant in this case is a farmer who has a farm at Dunmore. Upon this farm he has a considerable quantity of stock and horses. Among his animals he possesses a stallion known by the name of “Prince Ossian.” This stallion he has been in the habit of using for the service both of his own mares, six in number, upon the farm, and also for the service of the mares of adjacent farmers who desire to get the benefits of the horse. It is not the only stallion which serves his farm; he has another which he also keeps upon the premises. The service of the stallion “Prince Ossian,” apart from its use in connection with the farm, is so much sought for and is of such value that the appellant received in the income tax year 1915 the gross sum of £290 in respect of its use. The Income Tax Commissioners sought to assess the appellant to income tax upon £250, part of this sum of £290, and he thereupon required them to state a Special Case raising the question as to whether or no the use of this stallion in the manner that I have described did or did not render him liable for the tax. That Special Case, which was stated on the 21st June 1917, was referred to the Court of Session for decision, and the Judges of the First Division have unanimously decided that the assessment was correct.

The question which arises for determination is one which not infrequently occurs in connection with the Income Tax Acts, and which in the result always becomes the determination of a simple question of fact. It is well known that by Schedule B of theb lncome Tax Act of 1853 provision is made for taxation in respect of the occupation of lands in the United Kingdom, and there then follow provisions in Schedule D, which secure that further duties under that schedule are to be exacted in respect either of any trade, adventure, or concern in the nature of a trade not contained in any other schedule, or in the case of duties to be charged in respect of annual profits or gains not falling under any foregoing rule. There can be no question therefore that these profits are liable to taxation unless it can be properly asserted that they arise for and in respect of the occupation of the lands which the appellant holds as his farm.

It is quite possible that an entire horse may be used by a farmer in connection with his farm in such a manner that its use outside will in relation to its use for his own purposes be so trivial and unimportant that there would be no tax exigible in respect of profits received for its services. Or on the other hand it may be that the real use and purpose of the animal and its real advantage to its possessor lie in the moneys which can be obtained by the use of its services outside. This question is essentially a question of fact. The Commissioners in this case have decided that the use by the appellant of this stallion is a use that provides a profit which does not arise in respect of the occupation of his lands. There seems to me no reason whatever why that finding of fact should be investigated more closely. Had it been found in terms it would have been outside the competence of a court to discuss it further. It is not found in exact language, but it is found inferentially, and the facts to which I have referred, namely, the number of mares on the appellant's farm, the number of entire horses that he possesses, and the extent of the profits which this horse has earned, are in my opinion abundant to justify the conclusion which has been reached.

For these reasons in my opinion this appeal fails and should be dismissed with costs.

Lord Finlay—I am of the same opinion. Every case of this kind really depends upon questions of fact, and very largely in most cases it resolves itself into a question of degree. I see no reason whatever which would justify us in overruling the conclusion at which the Commissioners have arrived, and it seems to me that the appeal must be dismissed.

Lord Dunedin—I concur.

Lord Atkinson—I concur.

Their Lordships dismissed the appeal with costs.

Counsel:

Counsel for the Appellant— Condie Sandeman, K.C.—Watson. Agents— Guild & Guild, W.S., Edinburgh— Thorne, Priest, & Company, London.

Counsel for the Respondent—Lord Advocate ( Clyde, K.C.)— R. C. Henderson. Agents— Sir Philip J. Hamilton Grierson, Solicitor of Inland Revenue for Scotland— H. Bertram Cox, Solicitor of Inland Revenue for England.
1919