Baird's Trustees v Lord Advocate
| Jurisdiction | Scotland |
| Judgment Date | 01 June 1888 |
| Docket Number | No. 125. |
| Date | 01 June 1888 |
| Court | Court of Session |
Lord Fraser. M., Lord President, Lord Shand, Lord Adam
Revenue—Income-Tax—Income-Tax Act, 1842 (5 and 6 Vict. cap. 35), sec. 105, and sec. 88, Schedule C, Rule Third—Exemption—‘Charitable purposes only.’—
The words ‘charitable purposes,’ as used in the exempting clauses of the Income-Tax Act, 1842, are to be interpreted in their ordinary and popular signification as meaning the relief of poverty, and do not cover purposes of general benevolence and of public utility.
By trust-deed a truster provided a fund of £500,000 for the promotion of religion and the mitigation of the ‘spiritual destitution’ which prevailed ‘among the poor and working population of Scotland.’ The income of the fund was principally applied towards the building and endowment of churches. Held that it was not exempt from the payment of income-tax as a ‘trust established for charitable purposes only,’ in the sense of the 105th section and sec. 88, schedule C, of the Income-Tax Act, 1842.
Under a trust-deed executed by the late James Baird of Auchmedden, on 24th July 1873, the truster made over to the trustees a sum of £500,000 in the following terms, and for the following purposes, inter alia, —‘I, James Baird of Auchmedden, … feeling deeply impressed with the extent to which spiritual destitution prevails among the poor and working population of Scotland, and being satisfied that this proceeds in a great measure from the want of properly organised and endowed territorial work; and considering also that there appears to be a tendency to a departure from the truth, and to an exclusion of religion in the teaching of the young, and that the means available by law are insufficient to provide for the faithful preaching and teaching of the word of God, and for the exposure and refutation of error, and for the support of church, and educational and other purposes of a religious character; and being satisfied that under existing circumstances the evils foresaid cannot properly be met, nor the objects before mentioned attained, without the aid of private benevolence, and additional organisations, and fresh influences, I have resolved … to provide a fund of £500,000 sterling, &c., … Declaring, as I hereby declare and direct, that the said funds shall be expended for the support of objects and purposes in connection with the Established Church of Scotland, all of a religious character, as after described, and for the aid of institutions having the promotion of such purposes in view, my grand object being to assist in providing the means of meeting, or at least as far as possible promoting the mitigation of, spiritual destitution among the population of Scotland, through efforts for securing the godly upbringing of the young, the establishing of parochial pastoral work, and the stimulating of ministers and all agencies of the said Church of Scotland, to sustained devotedness in the work of carrying the gospel to the homes and hearts of all. And as such spiritual destitution exists to the greatest extent in populous places it is my wish that the operation of this trust be directed in the first instance chiefly to such populous places,’ &c.
The funds in the possession of the trustees were all lent out or invested in various ways in the United Kingdom, partly on heritable security and partly in stocks, annuities, and debentures of various railway and other public companies. Upon the whole of the annual returns of these investments, income-tax was deducted by the debtors before paying over the annual proceeds of the investments to the trustees.
The expenditure of the trust from the yearly income of the trust-funds for the year from 1st January to 31st December 1886 was as follows:—Grants, viz.,—1. Towards church building, £14,350. 2. Towards church endowing, £3292. 3. Towards augmentation of stipend, £690. 4. Miscellaneous, £200. Baird lectures—Rev. Professor Milligan, £200. Allowance to Baird Trustees, £500. Amounting in all to £19,232. The income of the trust was only slightly larger.
The income-tax paid upon the investments of the trust for 1886-87 was £691, 5s. 4d. Of that sum £46, 6s. 8d. represented the tax upon the above-named three items, viz. £690 granted in augmentation of stipend, £200 for the Baird lectures, which were both paid free of income-tax, and £500 allowed to the trustees, in which case the tax was deducted before payment.
Of the remaining sum of £644, 18s. 8d., the trustees claimed repayment from the Lord Advocate as representing the Inland Revenue in this action. They founded upon the 105th section and schedule C, therein referred to, of the Income-Tax Act, 1842,* maintaining that the payment in question
fell within the terms of the exempting clauses. They stated that the claim for exemption had been allowed every year from the commencement of the trust up to 1886.
The Lord Advocate stated in answer that the funds in question had not been proved to have been applied to ‘charitable purposes only,’ and further founded upon the terms of exemption contained in Rule 6, schedule A, section 61 of the Income-Tax Act, 1842.*
The pursuers pleaded;—Upon a sound construction of the provisions of the Income-Tax Acts, the pursuers are entitled to the exemptions claimed, and decree ought to he pronounced in terms of the conclusions of the summons, with expenses.
The defender pleaded;—On a sound construction of the said trust-deed, and of the provisions of the Income-Tax Acts, the pursuers are not entitled to repayment as claimed.
The Lord Ordinary (Fraser), on 14th March 1888, assoilzied the defender.†
The pursuers reclaimed, and argued;—In order to succeed in their argument, it was not necessary for them to shew that the words ‘charitable
purposes’ were synonymous with the words in the English Statute of Charitable Uses. The words ‘charitable purposes’ had been used in other statutes, for instance in the Educational Endowments (Scotland) Act, 1882, sec. 10, and in the Customs and Inland Revenue Act, 1885, sec. 11, subsec. 3.1 The ‘maintenance and promotion of religious ordinances and education’ had been held to be a ‘charitable purpose’ under the first of these Acts.2 The words had also been used by the Lord President (Inglis) as applicable to a fund devoted to religious and other purposes in a recent case.3 In that case his Lordship had used ordinary colloquial language in speaking as he had done. There being no interpretation clause in the Income-Tax Acts, the same meaning ought to be put upon the words when found there. It was matter of every-day practice in Scotland to construe the word charity as applicable to a case like the present. If the Lord Ordinary's view was sound, it would lead to a breaking up for income-tax assessment of the different purposes which a hospital served into assessable and non-assessable purposes. For instance, the funds devoted to education would not be held to be charitable, those devoted to housing, feeding, or clothing, would be charitable. Funds belonging to the poor of a parish were not necessarily applied to physical destitution.4 The mere fact that funds applied to the repairs of a church were specially exempted in schedule C did not affect the question.
Argued for the Lord Advocate;—‘Charitable purposes’ in the sense of the Income-Tax Acts meant eleemosynary uses; the element of giving to those who had not must be present. The view of the reclaimers was that a much wider interpretation must be given; indeed they would make it equivalent to public uses. They had indeed avoided using any argument based on the Chancery use of the word arising out of the...
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