Scott v Russell (HM Inspector of Taxes)
| Jurisdiction | Northern Ireland |
| Judgment Date | 13 May 1948 |
| Date | 13 May 1948 |
| Court | King's Bench Division (Northern Ireland) |
NO. 1414-HIGH COURT OF JUSTICE, NORTHERN IRELAND (KING'S BENCH DIVISION)-
COURT OF APPEAL, NORTHERN IRELAND-
HOUSE OF LORDS-
Income Tax - Receipts from sale of sand by owner of sandpit - Income Tax Act, 1918 (8 & 9 Geo. V, c. 40), Schedule A, No. III; Finance Act, 1926 (16 & 17 Geo. V, c. 22), Section 28 and Third Schedule.
A farm of about 25 acres owned and occupied by S included a field containing a deposit of sand about 1 acre in extent. In 1940 M, a building contractor, obtained S's permission to open up a sandpit in the field in question, M to construct a road into the field and pay S 1s. per ton for all sand taken. After the sandpit was opened up in January, 1941, other contractors also obtained S's permission to take sand, at rates of 6d., 9d. and 1s. per ton according to quality. S did not take the initiative in opening up the pit or disposing of the sand, and purchasers had to make their own arrangements for digging the sand and carrying it away. In May, 1941, S arranged with H, an employee of M, to check the quantities of sand taken by the various contractors, and paid him 1/2d. per ton for his services. H, on behalf of S, supervised the pit generally, and when he left the pit his duties were taken over by his wife. The pit was worked regularly and continuously until 1944, when the sand was practically exhausted.
No assessments under No. I of Schedule A or under Schedule B had been made in respect of the farm because the personal allowances due to S cancelled any liability to tax in respect of the farm, considered apart from the sandpit.
S was assessed to Income Tax under Schedule D in respect of the sums received from the disposal of the sand for the years 1940-41, 1941-42 and 1942-432, and appealed to the Special Commissioners. The Crown contended that the sandpit was a "concern of the like "nature" with those enumerated in Rule 3 of No. III of Schedule A. The Special Commissioners on the rehearing of the appeal decided that the sandpit was a "concern" carried on by S, and that it was a concern "of the like nature", and confirmed the assessments.
Held,
Held, that the sandpit was not a "concern of the like nature" with those enumerated in Rule 3 of No. III of Schedule A.
Mosley v. George Wimpey & Co., Ltd., 27 T.C. 315,overruled.
Stated under Section 149 of the Income Tax Act, 1918, by the Commissioners for the Special Purposes of the Income Tax Acts for the opinion of the King's Bench Division of the High Court of Justice in Northern Ireland.
1. At a meeting of the Commissioners for the Special Purposes of the Income Tax Acts held in Belfast, on 23rd March, 1945, Mr. David Scott (hereinafter called "the Appellant") appealed against assessments made upon him to Income Tax under Schedule D for the years 1940-41, 1941-42 and 1942-43 in estimated sums of £4,000, £10,000 and £10,000, respectively.
These assessments were made in respect of sums received by the Appellant from the disposal (in the manner hereinafter described) of sand, from a sandpit on his lands of Glebe in the County of Londonderry, on the footing that such sandpit fell within the lands, tenements, hereditaments or heritages mentioned in Rules 1, 2 or 3 of No. III of Schedule A, the property in which is now chargeable to tax under Case I of Schedule D by virtue of Section 28 of the Finance Act, 1926.
2. On 20th November, 1942, an appeal by the Appellant against these same assessments had been heard by the Commissioners for the Special Purposes of the Income Tax Acts, who had discharged the assessments. On appeal by way of Case Stated to the King's Bench Division of the High Court of Justice in Northern Ireland, and thence to the Court of Appeal in Northern Ireland, the decision of the Special Commissioners discharging the assessments had been affirmed (on different grounds), but on a further appeal to the House of Lords it was ordered by an Order dated 7th February, 1945, that the assessments be restored and the appeal against them be remitted to the Special Commissioners for them to rehear and, if so requested, to state a fresh Case for the opinion of the High Court in Northern Ireland. A copy of the Order of the High Court in Northern Ireland, setting forth the said Order of the House of Lords and making the same an Order of the High Court, is hereto annexed and forms part of this Case(1).
3. At the rehearing of the appeal on 25th March, 1945, evidence was given by the Appellant, Mr. Stewart Harvey, Mr. William Moore, Mr. James McKinney and the three witnesses mentioned respectively in paragraphs 14, 15 and 16 below.
The facts found by us on the evidence are as hereinafter set forth.
4. The sandpit, which is the subject of the appeal, is situate on a small portion of a farm at Glebe in the County of Londonderry, consisting of 25 acres and 30 perches. The area of the pit (which is now practically worked out) is about one acre and its depth varies from 30 to 40 feet. Eight photographs of the pit (as it now exists) accompany this Case, in a separate bundle, and may be treated as forming part of this Case(1).
5. Some time before the beginning of the year 1939, Mr. Moore, who is a building contractor and was then engaged in building cottages, had, by the permission of the then owner of the farm, got sand from a field on the farm, being the field which was subsequently opened up and excavated as a sandpit as hereinafter described. This field was
rough ground unsuitable for cultivation. At that time there was simply a hole in the field from which Mr. Moore got the sand, the hole subsequently being filled up by him with earth.6. The Appellant is a farmer. He purchased the farm on 8th February, 1939. He lives about a mile from the farm. At the time he bought the farm he did not know that sand existed in any large quantity under the field in question, and he himself did not take the initiative in opening up the sandpit or disposing of sand. Neither before nor after the pit was opened did the Appellant ever publish any advertisement in any newspaper about the pit or ever invite anybody to buy sand from him. Nor did he get any printed billheads or note headings or keep books of account.
7. Towards the latter part of 1940 a demand for sand arose in connection with the construction of aerodromes in Northern Ireland. In December, 1940, Mr. Moore came to see the Appellant and asked for permission to open up a sandpit in the field from which he (Mr. Moore) had previously dug sand, and asked the Appellant what his terms would be. At that time there was no road into the field in question. It was verbally agreed between the Appellant and Mr. Moore that Mr. Moore should have permission to open up a sandpit in the field, on the terms that he should pay the Appellant 1s. per ton for all sand gotten, and should also at his (Mr. Moore's) own expense make a road from the county road to the brae face in the field.
Mr. Moore accordingly made a substantial road to the brae face, laying the road with stones, opened up the sandpit and commenced excavation operations in January, 1941.
8. Later in the same year other contractors began to come to the Appellant and asked for permission to take sand. The sand was of different qualities or grades, in particular, a finer quality, namely, building sand, and a coarser quality, namely, concrete sand. The Appellant granted permission to other contractors to take sand, at rates varying between 6d., 9d. and 1s. per ton, according to the quality of sand gotten. Five of these other contractors were James McKinney, Peter McKinney, John O'Hara, John Morrow and J. McWilliams. In addition to the "regular" contractors there were a number of "casual" ones, who (not having previously made any arrangement with the Appellant) came to the pit to get sand and there arranged terms with Mr. Stewart Harvey (on behalf of the Appellant), as stated in paragraph 12 below.
9. The sandpit was regularly and continuously worked, and sand excavated and taken by the various contractors, from January, 1941, until about October, 1944, by which time the pit was practically worked out. The excavation was done by shovelling. The hours of working at the pit were from 8 a.m. to 6 p.m. daily. Save as stated in paragraph 13 below, each contractor made his own arrangements for providing lorries to convey the sand from the pit to the particular aerodrome at which he delivered it.
The two largest contractors concerned were Mr. Moore and Mr. McKinney. Mr. Moore had from 7 to 12 men working for him at a time, and Mr. McKinney an average of 8 or 9 men. Between January, 1941, and October, 1944, Mr. Moore paid the Appellant (in monthly payments) sums aggregating £3,915, which, at 1s. per ton (the rate at which he was paying) represents an aggregate of 78,300 tons of sand dug and taken by him. Mr. McKinney dug and took an aggregate of 22,220 tons, for which he paid£1,111 (his rate also being 1s. per ton). These two tonnages aggregate 100,520 tons, dug and taken between January, 1941, and October, 1944, in addition to which there were the tonnages dug and taken by the other contractors (regular and casual), the details of which were not in evidence before us. All payments by all contractors were made in full without deduction of Income Tax.
The profits made by the Appellant from the disposal of sand as aforesaid (after deduction of expenses) up to 5th April, 1943 (the end of the last of the three years of assessment before us), as agreed between the parties subsequently to the rehearing, were £5,150, namely, £150 in 1940-41, £1,250 in 1941-42 and £3,750 in 1942-43.
10. Some time after Mr. Moore had begun to dig and take away sand (namely, in January, 1941) he (Mr. Moore), in his own words, "saw the job was going to be fairly large" and offered to buy the field from the Appellant for £700. The Appellant, however, declined to sell it.
Up to May, 1941, the Appellant kept no check on the tonnage excavated and...
To continue reading
Request your trial