Re Glasgow Corporation Waterworks
| Jurisdiction | England & Wales |
| Judgment Date | 26 May 1875 |
| Date | 26 May 1875 |
| Court | Exchequer |
NO. 12.-IN THE EXCHEQUER, SCOTLAND.-FIRST DIVISION.
Income Tax. - Corporation of Glasgow not chargeable for Income Tax as on profits of Waterworks for moneys received from compulsory District Water Rate.
At a Meeting of the Commissioners for General Purposes, under the Property and Income Tax Acts for the City of Glasgow, held at Glasgow on the 22nd day of February 1875.
The Glasgow Corporation Water Commissioners appealed against asupplementary assessment made upon them under Schedule D. of the Income Tax Acts for the year 1872-73, in respect of the sum of 17,032l. 15s., on the ground that they have been already charged in the first assessment for the annuities and interest which they pay, and from which they are entitled to retain the tax, and upon which alone they were previously assessed, and that the sum charged, which is the surplus of the water rates, after payment of all other current expenses necessary for carrying on the undertaking, has been applied as directed by Act of Parliament, viz., towards the formation of a sinking fund in redemption of the annuities and mortgages, and the remainder of the sum carried forward to the following year's account, to be applied, as the Act directs, in reducing the domestic water rate, and not therefore assessable.
The facts are these:-By the Act 18 & 19 Vict. c. 118., the Lord Provost and magistrates of the city of Glasgow were appointed commissioners to obtain a supply of water for the city of Glasgow and its suburbs, and as such commissioners were empowered to acquire, and have acquired, by purchase the "Glasgow Waterworks" and the "Gorbals Gravitation Waterworks," the two joint stock companies by which the city of Glasgow and its neighbourhood were previously supplied with water, with all their properties, privileges, and obligations, together with power to introduce an additional supply of water from Loch Katrine.
For these purposes they were authorised to borrow money by annuities, mortgage, and otherwise, and it is provided that the several sums so borrowed should be applied in defraying the expense of purchasing and acquiring lands and other property and of executing the authorised works.
They are required, by compulsory clauses in the Act, to furnish the city of Glasgow, i.e., within the municipal boundaries, with a supply of water for domestic purposes, and to erect 32 public fountains from which the poorer classes may draw water, and the area within these boundaries is termed "the limits of compulsory supply."
They are also required to introduce a supply to the suburbs within a prescribed area, extending as far as Barrhead, in Renfrewshire, and embracing a very large population.
They are also empowered to sell water for the purposes of trade, manufacture, &c., either by measure or upon such special terms as may be agreed on between them and the consumer.
They are also authorised to let meters on hire to those parties who consume by measure, and make a charge therefor of 10 per cent. per annum.
Householders residing beyond the limits of compulsory supply are not required to take water, but having once done so, must continue to take it for three years, when they may cease doing so, and be no longer liable to pay for it.
To provide for the annual expense connected with carrying on these undertakings, the Water Commissioners are required to meet once a year to make an estimate of the probable expense, and having done so, are empowered to levy (1) a rate, to be called "the domestic water rate," from the occupiers of all dwelling-houses within the municipal boundaries, "limits of compulsory supply," according to their rents; (2) the "public water rate," not exceeding 1d. per pound on the full annual value of all dwelling-houses, shops, warehouses, buildings, &c. within the municipal boundary, and this rate is payable within these limits, whether the water supplied by the corporation be used or not, except where the mains or other pipes are not within 50 feet of the outer wall, fence, or boundary of the premises, in which case no rate can be levied on a proportion greater than one-fourth of the annual value of the premises; and (3) such rates as may be fixed by the Commissioners from all parties residing beyond the limits of compulsory supply who use the water; but these rates are not to exceed the rates previously charged by the old companies.
The rates are not payable beyond the limits of compulsory supply, unless the water be actually taken. The sum to be thus raised, together with the sums received from traders and others supplied under special agreement, and for the use of meters, must be sufficient to cover all the annual expenses, including a sum of not less than one per cent. on the money borrowed, to be set apart as a sinking fund for the redemption of the annuities and mortgages, and such sinking fund, it is declared, shall be from time to time applicable to the redemption of mortgages and annuities, and to no other purpose whatsoever; and the rates to be levied must be so regulated that such rates shall be sufficient to pay the interest on the money borrowed, and the annuities payable under the Act, together with all other charges and expenses and such other sums as shall be set apart for the purpose of the sinking fund. And if in any year the amount received shall be more than sufficient for all these purposes, the Commissioners are required to make a reduction in the domestic water rate of the next year.
The Appellants specially referred to sections 89, 90, 92, 109, 110, and 119 of the Act 18 & 19 Vict. c. 118., "Corporation "Waterworks Act, 1855," and they desire that these be held as part of their case.
It was argued on behalf of the Appellants that the case of the Attorney General v. Black. 17th June 1871, 6 Law Reports, Exchequer, 308, founded on by the Inland Revenue, was not analogous, because-(1.) The question in that case was whether the corporation of Brighton were liable to pay income tax in respect of a coal duty levied by them. By 13 Geo. 3. c. 30. a power was given to improvement commissioners for Brighton to levy a duty of 6d. upon every chaldron of coals landed on the beach or brought into the town, for the purpose of erecting and maintaining groyns against the sea. By subsequent Acts the duty was continued and increased, and by 6 Geo. 4. c. 179. it was, together with rates which the Commissioners were empowered to levy, market tolls, &c., to form a common fund for the general purposes of the Act, which included paving, lighting, and watching, and the maintenance of groyns and other sea works. It was held, affirming the judgment of the Court below, that the corporation who had succeeded to the rights of the commissioners were liable to pay income tax in respect of the coal duty.
(2.) The grounds upon which that decision proceeded do not exist here. In that case the duty was of the nature of a toll, and was levied from whatever persons landed coals, whether inhabitants of Brighton or strangers.
It was thus not a "district rate"-a rate levied from the inhabitants or owners or occupiers of property within a defined area. In its application it was not exclusively or at all appropriated in the same manner as a "district rate," but was applicable to the general purposes of the corporation. While the Court in that case held the coal duty to be taxable, they intimated clear opinions that any revenue which was truly of the nature of a "district rate" would not be taxable.
Thus Mr. Justice Blackburn, in commenting upon a passage from the opinion of Mr. Baron Martin, says "They" (a corporation) "would not be liable, except in respect of something "of the same nature and kind as what had been previously "mentioned, not, for instance, in respect of a burgh-rate or a "highway rate, because these are not within the analogy of the "property or profit previously described."
So Mr. Justice Keating says,-"the argument has been "brought within a narrow compass. Mr. Manisty does not "contend that harbour and port dues and other revenues of "that description are not taxable, and the Attorney General "admits that a "district rate" is not. The question then is "does the rate in question partake more of the nature of the "one or of the other. I am of opinion that it does not partake "of the character of a "district rate" imposed by the inhabitants "of a place upon themselves, and that, on the other hand, it is "very difficult to distinguish it from harbour dues."
The opinions of the other judges are to the same effect.
(3.) The question in the present case thus comes to be whether the moneys dedicated to the creation of the sinking fund and the surpluses truly are, in point of character, profits from carrying on the business of introducing water, or whether they are a "district rate." The Appellants submit that whether regard be had to their origin or application they are a "district rate."
The moneys in question are raised by rates charged upon the persons possessing property within a defined area, so that they have the primary attribute of a "district rate," that they are levied in the form of a rate from persons within a specified district, not from strangers, as were the coal dues in the Brighton case.
As regards appropriation, the moneys in question are stamped with the character of a "district rate."
The sinking fund is created to provide for reduction or repaymentpro tanto of the sums borrowed for the purposes of the Act, these purposes being exclusively confined to the specified area or district.
There is not, as in the Brighton case, any discretion left as to how the funds shall be applied. If, instead of the money required for the purposes of the Act having been borrowed and expended in large sums shortly after the passing of the Act, it had been expended and provided for by an assessment in each individual year, it would have been clear that the...
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