Cloghran Stud Farm Company v Birch

• Jurisdiction: Ireland
• Judgment Date: 08 July 1936
• Date: 08 July 1936
• Court: Supreme Court (Irish Free State)

Cloghran Stud Farm Co. v. Birch.

THE CLOGHRAN STUD FARM COMPANY

and

A. G. BIRCH, Inspector of Taxes (1)

High Court.

Supreme Court.

Revenue - Income tax - Stud farm - Stallion fees - Profits in respect of the occupation of land - Income Tax Act, 1918 (8 & 9 Geo. 5, c. 40),Schedule B; Schedule D, sects. 1 and 2; Case VI.

The C. Stud Farm, which was owned by a Company, comprised 772 acres, divided up as follows:—stud paddocks, 400 acres, agricultural pasture land, 322 acres, arable land, 40 acres, the remainder being woodland belts and waste land. The Poor Law Valuation was £981. There were 31 paddocks and 97 horse boxes. The paddocks were used for horse grazing. To prevent the paddocks from becoming stale bullocks were allowed to graze upon them and these bullocks when finished off and in proper condition were sold. The produce grown on the arable land was consumed on the farm, but as it was insufficient to meet the requirements of the farm considerable quantities of feeding stuffs had to be purchased each year. There were two stallions on the farm—a horse and a pony—the former was owned by the Company and, being a well-known stallion, the Company received large fees for its service. This stallion never left the farm but was visited by, and served, mares of other owners, and for these mares the Company provided accommodation and was paid therefor. The Company had no mares of its own. The Company were paid £3 10s. 0d. a week for keeping the pony stallion together with a percentage on all its stud fees. The number of horses not owned by the Company but which wore kept on the farm averaged from 50 to 60 per year, and the number of cattle (other than horses) averaged from 240 to 290.

Held by the Supreme Court, affirming the High Court, that the profits derived from the stud fees of the stallion owned by the Company were not profits arising in respect of the occupation of land but wore profits of trade assessable to income tax under Schedule D of the Income Tax Act, 1918.

Judgment of the King's Bench Division in McLaughlin v. Bailey, [1920] 2 I. R. 310, approved.

Lord Glanely v. Wightman, [1933] A. C. 618, not followed.

Case Stated under sect. 149 of the Income Tax Act, 1918, by the Commissioners for the Special Purposes of the Income Tax Acts. The case was as follows:—

1. At a meeting of the Commissioners for the Special Purposes of the Income Tax Acts held on the 19th October, 1933, at Dublin for the purpose of hearing appeals, the Cloghran Stud Farm Company (hereinafter referred to as"the Company") appealed against an estimated assessment to income tax under Schedule D of the Income Tax Act, 1918, made upon the Company for the year of assessment 1933-34 in the sum of £15,000 in respect of profits derived from stallion fees.

The following facts were admitted or proved:—

The Company was incorporated under the Companies Acts, 1908 to 1917, on the 3rd March, 1931, as a private unlimited Company, having a share capital.

Article 3 of the Memorandum of Association of the Company sets out the objects for which the Company was established. The objects are numerous and comprehensive, extending to 31 sub-clauses. The first sub-clause is as follows:—

(a) To acquire by purchase, lease, exchange or otherwise and take over as a going concern and carry on the business of Blood Stock Farming, Stud Breeding and Farming generally now carried on by Richard Cecil Dawson at Cloghran, County Dublin, under the style or firm of "The Cloghran Stud Farm" together with all or any of the real and personal property and assets of the proprietor of that business used in connection therewith or belonging thereto, and to acquire by purchase, lease, exchange or otherwise, and to hold lands, buildings, hereditaments of any tenure or description with the appurtenances for any estate or interest or any sporting or other rights over or in connection therewith or over or in connection with any adjoining or other lands and to develop the same and to turn the same to account as may seem expedient and in particular by erecting buildings, installing electric or other necessary plant, and maintaining, altering, enlarging or replacing any buildings, electric or other plant, offices, roads, fences, banks, dams or watercourses and planting, improving, farming, gardening, or market gardening, grazing, quarrying and mining, and to let on lease or otherwise, or to sell or dispose of the same or any part thereof or any timber as and when deemed convenient. [A copy of the Memorandum and Articles of Association of the Company was annexed thereto and formed part of the Case.]

3. The Cloghran Stud Farm (hereinafter referred to as"the Farm") was in existence for many years prior to the formation of the Company. The Farm is situated at Cloghran, Co. Dublin. Its total area of 772 acres statute measure is approximately divided up as follows:—

Stud Paddocks	400 acres
Agricultural pasture land	322 ,,
Arable land	40 ,,
Woodland belts and waste land	10 ,,

The Poor Law Valuation of the Farm is £981 15s.

There are 31 paddocks on the Farm and 97 horse boxes. Water is laid on to the paddocks. The horse boxes are well-constructed and up-to-date buildings. The paddocks are used for horse-grazing. To prevent the paddocks from becoming stale or horse-sick bullocks are allowed to graze upon them from time to time. The bullocks when finished off and in proper condition are sold.

The produce grown on the arable land is altogether consumed on the Farm. The main crops are hay, oats, turnips and mangolds. As these crops are insufficient to meet the requirements of the Farm considerable quantities of feeding stuffs have to be purchased each year.

4. The number of horses which were owned by the Company and which were on the Farm on the 31st March, 1932, and on the 31st March, 1933 (the date upon which the Company's accounting period ends), was as follows:—

	31st March, 1932.	31st March, 1933.
Stallions	1	1
Stallion Pony	1	1
	—	—
	2	2

The number of horses which were not owned by the Company but which were on the Farm on the 31st March, 1932, and on the 31st March, 1933, was as follows:—

	31st March, 1932.	31st March, 1933.
Stallions	1	1
Mares	27	31
Foals	8	14
Yearlings	14	11
	—	—
	50	57

The number of animals other than horses belonging to the Company which were on the Farm on the 31st March, 1932, and on the 31st March, 1933, was as follows:—

31st March, 1932. 31st...