VALLAMBROSA RUBBER Company, Ltd, v FARMER (Surveyor of Taxes)
| Jurisdiction | Scotland |
| Judgment Date | 16 March 1910 |
| Date | 16 March 1910 |
| Court | Court of Session |
NO. 311.-COURT OF SESSION (SCOTLAND).-LORD CULLEN.-
COURT OF SESSION (SCOTLAND). FIRST DIVISION. 1st and
Income Tax, Schedule D., First and Second Cases, Rule 1. Deduction for expenses.-A Rubber Company have an estate, of which in the year under review one-seventh only produces rubber, the other six-sevenths being in process of cultivation for the production of rubber. (Rubber trees do not yield rubber until they are about six years old.) Expenditure for superintendence, weeding, &c., is incurred by the Company in respect of the whole estate.
Held, that in arriving at their assessable profits the Company are entitled to deduct the expenditure for superintendence, weeding, &c., on the whole estate and not one-seventh of such expenditure only.
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 County of Edinburgh, held at Edinburgh on the 5th day of March, 1908, the Vallambrosa Rubber Company, Limited (hereinafter referred to as "the Company") appealed against an assessment for the year ending 5th April, 1907, on the sum of £2,683 made upon it in respect of profits arising from the production and sale of rubber.
The assessment was made under 5 & 6 Vic., c. 35, s. 100, Schedule D. First Case: 16 & 17 Vic., c. 34, s. 2, Schedule D, and 6 Ed. 7, c. 8, s. 6.
I. The following facts were admitted or proved:-
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(a) The Company was incorporated on 22nd April, 1904, under the Companies Acts as a Company limited by shares. Its registered office is situate at No. 123, George Street, Edinburgh. The capital of the Company is £60,000, divided into 60,000 shares of £1 each.
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(b) The objects of the Company, as set forth in the third Article of its Memorandum of Association are, inter alia, as follows:-
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1. To acquire by purchase, grant, concession, feu, lease, exchange or otherwise, any rubber or other plantations, lands, buildings, or other heritages, and any interest or option in, or rights over, such plantations, lands, buildings, or other heritages in the Straits Settlements or elsewhere; to erect buildings, machinery and other works thereon for the purposes of the Company; and to cultivate and develop the resources of and turn to account the plantations, lands, buildings and other heritages and rights for the time being of the Company, in such manner as the Company may think fit, and in particular by clearing, cutting timber, draining, irrigating, fencing, planting, building, improving, farming and grazing…
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4. To sell, improve, manage, develop, lease, mortgage, or otherwise dispose of any portion of the assets, estate and effects of the Company…
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5. To carry on the business of manufacturers, exporters, and importers of and dealers in all such goods and articles as the Company from time to time determine upon.
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6. To acquire by purchase, grant, concession, lease or otherwise, forest rights, timber and wood of all kinds, whether standing or otherwise, and lumbering and cutting rights and privileges over lands situated in the Straits Settlements or elsewhere and to cut, mill, prepare for market, sell and deal in timber of all kinds, and the product of any such forest rights, timber and woods…
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19. To sell the undertaking of the Company or any part thereof for such consideration as the Company may think fit.
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(c) The Company makes up its accounts annually on 31st March.
(d) The operations carried on by the Company up to 31st March, 1906, consisted of the production and sale of rubber, seeds and stumps, and coffee and cocoanuts, clearing land, planting of rubber trees, draining, making roads and drying stores, and similar work.
(e) The rubber plantations owned and worked by the Company are situated in the Federated Malay States.
(f) Rubber trees do not yield rubber until they are about six years old. Up to 31st March, 1904, no rubber was produced. The estate was acquired by the Company as at 1st April, 1904. No accounts are available showing the expenditure on the estate by the Company's predecessors before 1st April, 1904.
(g) In the year ending 31st March, 1906, the Company paid £99 of annual interest on loans, and deducted thereout £4 19s. in respect of Income Tax, which, on demand of the Commissioners of Inland Revenue, the Company accounted for and paid over to the latter (51 & 52 Vic. c. 8, s. 24 [3]). No assessment was made on the Company for the year ending 5th April, 1906, in respect of profits, as its trading in its first year ended 31st March, 1905, resulted in a loss, as shown in paragraph (i.) of I.
(h) Included in the sum of £3,261 shown as estate expenditure in the Company's accounts for the year to 31st March, 1905, was a sum of £2,632, consisting of the following items, viz.:-
| £ | £ | ||
| (1.) | Superintendence | 724 | |
| Allowances | 45 | ||
| Contingencies | 135 | ||
| Stores | 19 | ||
| Medical | 18 | ||
| Bank commission, stationery, and | |||
| postages | 17 | ||
| Nurseries and seeds | 5 | ||
| Lining and cutting pegs, &c. | 10 | ||
| Weeding | 540 | ||
| Cattle-keepers | 28 | ||
| Pests | 271 | ||
| Weeding watchmen | 29 | ||
| Home expenses | 181 | ||
| 2022 | |||
| (2.) | Cutting out rubber | 35 | |
| Tapping | 83 | ||
| 118 | |||
| (3.) | Clearing and draining | 330 | |
| Making roads and drains | 162 | ||
| 492 | |||
| £2,632 |
(i) In arriving at the amount of profit or loss for the year ending 31st March, 1905, one-seventh, or £290, of the said sum of £2,022, and the whole of the said sum of £118 were allowed by the Commissioners as deductions; and the balance, or...
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