MALCOLM v LOCKHART (Surveyor of Taxes)
| Jurisdiction | England & Wales |
| Judgment Date | 28 January 1919 |
| Date | 28 January 1919 |
| Court | Exchequer |
No. 384.-COURT OF SESSION (SCOTLAND), FIRST DIVISION.
HOUSE OF LORDS.-
Income Tax (Schedule D). - Liability of a farmer to assessment in respect of stallion fees. A farmer, who was assessed to Income Tax (Schedule B) in respect of his farm, owned a stallion that was used for breeding purposes. In addition to serving the farmer's own stock the stallion served the mares of other farmers for which service fees were received. The farmer claimed that the fees which he received in respect of the stallion's services should be deemed to be part of the profits of his farm, the Income Tax liability in respect of which was covered by the Income Tax Schedule B Assessment.
Held, that the farmer was chargeable to Income Tax Schedule D in respect of the service fees.
At a meeting of the Commissioners for the general purposes of the Income Tax Acts, and for executing the Acts relating to the Inhabited House Duties for the District of Falkirk, in the County of Stirling, held at Falkirk on 15th February, 1917.
WILLIAM TAYLOR MALCOLM, Dunmore Home Farm, Airth (hereinafter referred to as the "Appellant"), appealed against an assessment made upon him for the year 1915-16 of £250 in respect of profits of the stallion "Prince Ossian."
The assessment was made under the Act 5 & 6 Vict. cap. 35, S. 100, Schedule D, Case 6, and 16 & 17 Vict. cap. 34, S. 2, Sched. D. The assessment was made as follows:-
W. T. Malcolm-Profits of "Prince Ossian," £250.
I. The following facts were admitted:-
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(2) The Appellant is the owner of an entire horse called "Prince Ossian" which is used for breeding purposes, and in addition to serving Appellant's own stock earns fees for serving mares of other owners.
(3) When a foal the said horse "Prince Ossian" was purchased by the Appellant. He was reared and fed by him on Dunmore Home Farm, as part of the stock of the farm on the produce of the farm. After reaching three years old he became suitable for breeding purposes. The animal is still fed and attended to by the ordinary farm servants in the employment of the Appellant.
(4) The Appellant has used said horse since three years old during the breeding season for the service of agricultural mares in his own possession, and in addition he sells the services of the horse as a breeding animal to owners of agricultural mares who desire to mate their stock with him, at varying rates. Many mares are sent to Dunmore to be served by "Prince Ossian" there, while in other cases the horse is sent under the care of Appellant's servant to the stables of the owners of mares, and service effected there.
(5) The breeding season extends from the month of April to the beginning of August, and during that period the horse is part of the time away from the farm, always under the charge and care of Appellant's farm servant. The Appellant pays for his keep during the period he is off the farm, as well as the wages of the farm servant attending upon him, and all charges for shoeing and veterinary attendance.
(6) For the season of 1915 "Prince Ossian" was selected by the Stirlingshire Horse Society to serve mares belonging to the members of that Society, but in addition he also served farm mares belonging to the Appellant. The Appellant received £2 and £4 as stud fees from the Stirlingshire Horse Society for each mare served and proved to be in foal, and in addition an initial payment of £60 from the Society. He admitted that his gross earnings from the horse amounted to £290.
(7) The Appellant is tenant and occupier of the Home Farm of Dunmore on the estate of Claude Archibald Mackenzie Bruce Hamilton, Esquire of Dunmore, at a rent of £580, where he breeds and maintains a stud of Clydesdale horses, and also a herd of pedigree shorthorn cattle. He is assessed under Schedule B, as tenant of the farm, at £580, and by his return he has other sources of income amounting to £80 in dividends and £11 as a director's fee-total, £671.
(8) The farm is a mixed one of 400 acres, and the Appellant also rents grass parks to the extent of 100 acres. On the farm there are generally 30 horses, including 16 work horses, 8 entire colts and horses, and 6 breeding mares; 400 sheep, 30 bullocks, 8 bulls, 2 three-year-old bulls, 7 heifers, 8 cows, and 4 calves, and 20 yearling bulls. One other stallion besides "Prince Ossian" is used for stud purposes, but it is not dealt with in this case.
II. The Commissioners reserved judgment.
III. At a meeting of Commissioners held of this date, 3rd April, 1917, the following judgment was delivered:-
The Commissioners are of opinion that the Appellant, Mr. Malcolm, must be assessed upon the profits made by him out of the employment of his stallion in serving mares away from his own farm.
The Commissioners think that such profits fall under either the First Case of Schedule D, or the Sixth Case of the same Schedule, 5 & 6 Vict. c. 35, S. 100. The profits in question may very fairly be considered to fall under the First Case, but if not, the Commissioners are firmly of opinion that they fall under the Sixth Case.
It does not appear to the Commissioners that the employment of a stallion in the manner disclosed in this case can be said to fall within the terms of Schedule B. The employment of a stallion for stud purposes for hire outside of his own farm is no part of the business of a farmer. The Commissioners see no reason for holding that before a party in the occupation of land chargeable under Schedule B can be charged under Schedule D it is necessary for the Crown to shew that he is carrying on a separate business. There is no substance in the contention that businesses are to be charged separately (except in so far as the provisions of Section 101 of the Income Tax Act, 1842, are applicable). The Income Tax Act is to be taken as a whole. The opinion of Lord Macnaghten in London County Council v.Attorney-General, 1901, A.C. 26, 36, 37,(1) is referred to. There it is made...
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...Court were clearly confined to this issue, and offer no assistance here. 8The case most nearly approaching the present is the case of Malcolm v. Lockhart, 1919, Appeal Cases, at p. 463, and it is a case that requires careful and critical examination since, if it establishes the principle fo......
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