Tennant v Smith
| Jurisdiction | England & Wales |
| Judgment Date | 14 March 1892 |
| Date | 14 March 1892 |
| Docket Number | No. 1. |
| Court | House of Lords |
Ld. Chancellor (Halsbury), Lord Watson, Lord Macnaghten, Lord Morris, Lord Field, Lord Hannen.
Revenue—Income-tax—Abatement—Bank-agent residing in bank premises—Income-Tax Act, 1842 (5 and 6 Vict. c. 35), Schedules D and E—Income-Tax Act, 1853 (16 and 17 Vict. c. 34), sec. 51—Customs and Inland Revenue Act, 1876 (39 and 40 Vict. c. 16), sec. 8.—
The Customs and Inland Revenue Act, 1876, sec. 8, provides for an abatement of income-tax in the case of any person whose ‘total income from all sources’ is less than £400.
A bank-agent, who had an income of £374 and occupied rent free a house forming part of the bank premises, which was of the annual value of £50, was disallowed the abatement by the Assessor of Income-Tax, on the ground that the value of the house fell to be reckoned as part of his income, and that his income was thus not under £400. The bank-agent objected, on the ground that it was part of his duty as bank-agent to occupy the house for the protection of the bank, and that he could not sublet the house or vacate it even temporarily without consent of the directors and without another bank official being appointed to occupy it in his absence, and that he was liable to be removed at any time. The house was suitable for the bank-agent, and if it had not been provided he would have required another of the same annual value.
Held (rev. judgment of the Second Division and three consulted Judges) (1) that in ascertaining total income from all sources with a view to the exemption enacted by sec. 8 of the Inland Revenue Act, 1878, no income arising in this country can be taken into account which is not chargeable under one or other of the income-tax schedules;
(2) That the advantage of free residence which the appellant derived from the discharge of his duty of residing in the bank premises for the purposes of the bank was not a subject of assessment in any of the schedules of the Income-Tax Act, and therefore was not to be taken into account in calculating his total income under sec. 8 of the Income-Tax Act, 1876.
Observations on the construction of the Income-Tax Acts.
(In the Court of Session, Jan. 21, 1891, 18 R. 428.)
At a meeting of the General Commissioners of Income-Tax for the district of Brechin Alexander Tennant, agent at Montrose for the Bank of Scotland, appealed against an assessment made on him under schedules D and E of the Income-Tax Act, for the year ending 5th April 1890, on £317 of income, less £22 of insurance premiums, on the ground that he was entitled to a further abatement from his income of £120 allowed on incomes under £400.*
The appellant stated that his whole income was £374, but that the assessor had improperly taken his income as above £400 by adding £50 as the value of a house in the bank occupied by him.
The Commissioners of Income-Tax sustained the appeal, and allowed the abatement.
The Surveyor of Taxes took a case for appeal.
The facts as stated in the case were as follows:—
Mr Tennant had a stated income from the bank of £300 per annum, from commissions, &c., £17, making together £317, besides an income from invested capital, from which tax had been deducted, £57. These three sums amounted to £374.
With respect to the house the case bore:—‘1. The appellant is bound, as part of his duty, to occupy the bank house as custodier of the whole premises belonging to the bank, and also for the transaction of any special bank business after bank hours. He is not allowed to vacate the house even for a temporary period unless with the special consent of the directors, who, in that case, sanction the occupation of the house by another official of the bank during the absence of the agent. It is imperative that in the absence of the agent some responsible person should occupy the house and attend to the carrying on of the bank's business, so far as that may be necessary, after bank hours, and to the due locking up of the premises, and specially to the security of the cash and books in the bank's safe, communicating with which there is a night bolt from the agent's bedroom. The annual value of the house so occupied is £50. 2. The appellant is not entitled to sublet the bank house or any part thereof, and is not entitled to use it for other than the bank's business, but the appellant, with the tacit consent of the bank, carries on insurance business in the bank's premises. 3. By bond of fidelity granted by the appellant on his appointment as agent at Montrose, dated 17th February 1888, he agreed that he should be liable to removal at any time, and in case of his removal from office, that he should be obliged forthwith to flit and remove from the whole premises occupied by him 4. If the appellant were to desire not to occupy the bank house, the sanction of the directors would be necessary for any arrangement which he might propose. In other cases where a bank-agent has desired not to occupy the bank house, the directors have agreed to his not doing so, and have made arrangements for its occupation by a subordinate official at the branch. In such cases the bank-agent's salary has not been affected by the change, and the subordinate officer of the bank who was appointed to occupy the house did not pay the agent any rent for the bank house, and the said officer's own salary was not affected by the change. In some special cases the bank have increased the salary to the official required to occupy the house on account of their requiring him to do so. In such cases the bank house was unsuitable for his use. 5. The general rule of the bank is that the bank-agent must occupy the bank house, and no case has ever occurred in which they have asked the agent to give up his house, and they have accordingly never had to consider whether any increase of salary would
be given to the agent if such a case ever arose. 6. The bank house is suitable in respect of size and accommodation for the appellant. If a dwelling-house were not provided by the bank, he would require to provide a house for himself of similar size to the bank house. …’
Mr Tennant's contentions against the annual value of the house being reckoned as part of his income were thus stated in the case:—‘(1) That the occupancy of the house is imposed upon him as part of his duty. (2) That the premises are not a dwelling-house in the sense of the Act, but are truly bank premises occupied by him specially in connection with the bank's business. (3) That his occupancy of the premises does not fall under schedule E and the rules applicable thereto. (4) That the premises come under the exemption of section 51* of 16 and 17 Victoria cap. 34, as being a necessary expense incurred in the performance of the duties of his office.’
On 4th June 1890 the Second Division, in respect of the difficulty and importance of the question submitted for decision, appointed the cause to be argued before them and three Judges of the First Division.
The case was advised on 21st January 1891, when a majority of the Judges (the Lord President Inglis, the Lord Justice-Clerk, Lord Rutherfurd Clark, and Lord M'Laren, diss. Lord Young, Lord Adam, and Lord Trayner), held that the assessment should be sustained.
Mr Tennant appealed.
Lord Chancellor.—To put this case very simply, the question depends upon what is Mr Tennant's income. This is an Income-Tax Act, and what is intended to be taxed is income. And when I say ‘what is intended to be taxed,’ I mean what is the intention of the Act as expressed in its provisions, because in a taxing Act it is impossible, I believe, to assume any intention, any governing purpose in the Act, to do more than take such tax as the statute imposes. In various cases the principle of construction of a taxing Act has been referred to in various forms, but I believe they may be all reduced to this, that inasmuch as you have no right to assume that there is any governing object which a taxing Act is intended to attain other than that which it has expressed by making such and such objects the intended subject for taxation, you must see whether a tax is expressly imposed.
Cases, therefore, under the Taxing Acts always resolve themselves into a question whether or not the words of the Act have reached the alleged subject of taxation. Lord Wensleydale said, in In reMicklethwait,1‘It is a well-established rule that the subject is not to be taxed without clear words for that purpose, and also that every Act of Parliament must be read according to the natural construction of its words.’
Now, it is certainly true that the occupation of a house rent free is not income.
Of course the possession of a house which may be used for purposes of profit is property, and taxable as such. But the bald dry proposition that the mere fact of occupying a house, which house as property is already taxed, is not income in any sense, could, I think, hardly be disputed. For my own part I doubt very much whether a house could ever properly be described as part of a man's income, though, doubtless, the rent for it when received would be income in the hands of the person receiving it.
Another observation that occurs to me is, that in dealing with real property the whole framework of the statute seems to point to a peculiar kind of assessment while treating the things themselves as the subjects of assessment; and the provisions which give effect to that peculiarity of assessment are entirely distinct from the provisions as to income.
Now, Mr Tennant occupies this house without paying any rent for it. It may be conceded that if he did not occupy it under his contract with the bank rent free he would be obliged to hire a house elsewhere, pay rent for it, and pro tanto diminish his income. And if any words could be found in the statute which provided that besides paying income-tax on income, people should pay for advantages or emoluments in its widest sense (such as I think...
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