Knockhall Piggeries v Kerrane
| Jurisdiction | Ireland |
| Judge | Mr. Justice Barrington |
| Judgment Date | 02 May 1985 |
| Neutral Citation | 1985 WJSC-HC 1326 |
| Date | 02 May 1985 |
| Court | High Court |
| Docket Number | No. 171 R/1983 |
BETWEEN:
AND
1985 WJSC-HC 1326
THE HIGH COURT
Synopsis:
REVENUE
Income tax
Assessment - Method - Farming - Husbandry - Smallholder - Rearing and fattening of pigs - Whether taxpayer farming a farm - Held in affirmative - Accommodation for 6000 pigs on 9 acres - Annual output 24,000 pigs - Finance Act, 1969, s. 18 - Finance Act, 1974, s. 13 - (1983 No. 171R - Barrington J. - 2/5/85).
Knockhall Piggeries v. Kerrane
WORDS & PHRASES
"Farming"
Smallholder - Rearing and fattening of pigs - Whether taxpayer farming a farm - Held in affirmative - Accommodation for 6000 pigs on 9 acres - Annual output 24,000 pigs - Finance Act, 1969, s. 18 - Finance Act, 1974, s. 13 - (1983 No. 171R - Barrington J. - 2/5/85).
Knockhall Piggeries v. Kerrane
WORDS & PHRASES
"Husbandry"
Smallholder - Rearing and fattening of pigs - Whether taxpayer farming a farm - Held in affirmative - Accommodation for 6000 pigs on 9 acres - Annual output 24,000 pigs - Finance Act, 1969, s. 18 - Finance Act, 1974, s. 13 - (1983 No. 171R - Barrington J. - 2/5/85).
Knockhall Piggeries v. Kerrane
Citations:
CAVAN CO-OP SOCIETY, IN RE 1917 2 IR 597 12 TC 1
EEC REG 2793/1977
FINANCE (NO 2) ACT 1915 S39
FINANCE ACT 1967 S18
FINANCE ACT 1969 S18
FINANCE ACT 1969 S18(1)
FINANCE ACT 1969 S19
FINANCE ACT 1969 S19(2)
FINANCE ACT 1974 S13
FINANCE ACT 1974 S13(1)
FINANCE ACT 1974 S13(3)
FINANCE ACT 1974 S13(7)(2)
FINANCE ACT 1974 S17
FINANCE ACT 1974 S17(5)
FINANCE ACT 1974 S17(6)
FINANCE ACT 1974 S17(7)
INCOME TAX ACT 1967 S428
INCOME TAX ACT 1967 S54
INCOME TAX ACT 1967 SCH B
INCOME TAX ACT 1967 SCH D
INSPECTOR OF TAXES V KIERNAN 1981 IR 117 1982 ILRM 13
INTERPRETATION ACT 1937
JONES V NUTTALL 10 TC 346
KEIR V GILLESPIE 7 TC 478 1926 SC 15
LEAN & DICKSON V BALL 10 TC 345
NIXON V COMMISSIONER OF VALUATION 1980 IR 340
PHILLIPS V BOURNE 27 TC 498
REVENUE COMMISSIONERS V N 1965 101 ILTR 197
JUDGMENT of Mr. Justice Barrington delivered the 2nd day of May 1985 .
This Case Stated pursuant to the provisions of Section 428 of the Income Tax Act, 1967raises a difficult point on the correct interpretation of Section 13 of the Finance Act 1974.
The Case Stated clearly sets out the facts of the matter and the different contentions of the parties and is as follows:-
"1. At appeal hearings held in Athlone, on the 13th of February, 1981, and in Dublin on the 16th of March, 1981, the Appellants appealed against the following determination of partnership profits -"
Year ended 5th April, 1975
£6,000
Year ended 5th April, 1976
£9,000
and against assessments under Case I Schedule D on the individual partners as follows:-
Patrick Hanley
1975/76 pig rearing £2,000
1976/77 pig rearing £3,000
Peter Hanley
1975/76 pig rearing £2,000
1976/77 pig rearing £3,000
James Hanley
1975/76 pig rearing £2,000
1976/77 pig rearing £3,000
2. The question for decision by us was whether the partnership carried on the business of farming as defined by Section 13, Finance Act, 1974.
3. At the hearings of the appeal the following facts were proved or admitted.
(a) The partnership called Knockhall Piggeries (hereinafter referred to as the partnership), was formed in 1968. There is no written Partnership Agreement.
Capital was subscribed as follows:-
| Patrick J. Kiernan | £1,000 |
| Patrick Hanley | £1,000 |
| Peter Hanley | £500 |
| James Hanley | £500 |
| Total Capital | £3,000 |
Mr. Kiernan is an extensive farmer and is a major supplier of pigs in his own rights to the bacon factory of James Hanley & Sons Ltd. Patrick Hanley is an extensive farmer and he is also a director and shareholder in James Hanley & Sons Ltd. Peter and James Hanley have no farming interests but are directors and shareholders in James Hanley & Sons Ltd. Together the three Hanleys hold 87% of the issued shares in James Hanley & Sons Ltd.
Profits of the partnership are shared in the same ratio as capital subscribed.
(b) Shortly after it was formed the partnership purchased nine acres of land with a retable valuation of £4.50 from Patrick Hanley and between the years 1968 and 1973 it erected sixteen pig houses on this land. These houses covered a total area of about three acres and the remainder of the land was occupied by a lagoon for slurry, later replaced by slurry tanks, and between four and five acres were used to provide spaces between the pig houses and as open areas. No other land was occupied by the partnership.
(c) From completion the piggeries were able to accommodate 6,000 pigs at any one time and the annual output was approximately 24,000 pigs. Pigs were purchased when they were ten to twelve weeks old and sold when they were twenty to twenty-five weeks old. The entire output was sold to the bacon factory of James Hanley & Sons Ltd.
(d) Healthy pigs were not allowed outside the pig houses at all, but in summer months sick pigs (2% to 3% of the total on hands at any time) were put out into pens, set up in the spaces between pig houses. Fresh air was the main curative for these animals, but they were also allowed to root and eat any herbage in the pens.
(e) All feed was purchased from outside suppliers and no bedding was normally used except in the case of sick pigs which were bedded in straw. For this latter purpose about 1,500 bales of straw were purchased annually.
(f) Slurry was spread on the farms of Patrick Hanley and 32 other local farmers who made their lands available for this purpose through the good offices of the Department of Agriculture.
(g) All the records of the partnership were kept in the factory administration offices of James Hanley & Sons Ltd., Which were under the control and supervision of the secretary and financial controller of the company. Management accounts were drawn up every few weeks and full internal accounts were prepared every year, but these were never audited and copies were never submitted to the Inspector of Taxes.
Lending institutions were happy to accept the unaudited accounts.
There were occasional distributions of partnership profits to the partners in the same ratio as the initial capital was contributed.
(h) Policy on matters of major importance was determined at occasional meetings of all four partners, but most decisions were made at meetings between Patrick Hanley and Patrick J. Kiernan about once a mouth. The day to day operation of the piggery was left in the hands of an expert manager.
4. For the appellant it was contended that the business carried on by the partnership was farming as defined in sub-section (i) of section 13, Finance Act, 1974, as follows:
"Farming means farming farm land, that is, land in the State wholly or mainly occupied for the purpose of hushandry, other than market garden within he meaning of Section 54, Income Tax Act, 1967."
(a) Although the word "land", only, is used in Subsection (i) of Section 13 of the Finance Act, 1974, it was contended that having regard to the Interpretation Act, 1937, which states that the word "land"include buildings, the word "buildings" can be substituted for land in the above definition.
(b) The words farming and husbandry have not been defined in legislation. The Oxford Dictionary has defined husbandry as farming while farming is defined as cultivating the soil, which in now taken to include the rearing of livestock which is today one of the most important types of farming. It was submitted that the piggeries came within this category.
(c) The piggery at Knockhall was regarded as a farming operation by a number of different departments and authorities according to their respective requirements in that:-
(i) it qualified for grants from the Department of Agriculture under a farm buildings scheme;
(ii) loans were received from the Agricultural Credit Corporation under a scheme for financing farm buildings including piggeries;
(iii) the piggery ranked as a farm under the farm apprenticeship scheme and has trained several apprentices there since 1973;
(iv) skim milk was supplied to the piggery under an E.E.C. scheme which provided subsidies to farms registered with the Department of Agriculture as specialised farms (E.E.C. Regulation 2793 of 1977);
(v) the employees of the partnership were paid at the agricultural rate of remuneration and over the years the partnership and employees paid social insurance contributions at the agricultural rate.
(vi) electricity charges to the partnership were at the domestic rate rather than the lower industrial rate.
(d) Farming of all kinds but particularly stock farming has changed radically in recent years. There is now far greater dependence on machinery, and industrial techniques are being used to boost production. Although the methods of production have changed, stock farming including pig farming was still essentially a farming enterprise. The partnership piggeries were on land which was used as a farm and continued to be so used. The raw material - pigs - were supplied by local farmers. The main proprietors of the partnership were themselves extensive farmers and slurry from the piggeries was used to fertilise local farms.
Nowhere in legislation relating to the taxation of farm profits is it suggested that profits earned from the use of farm buildings should not be regarded as farm profits. In the circumstances the occupation of farm buildings for the purpose of fattening pigs would fall within the definition of "farming farm land" as required by subsection (i) of Section 13, Finance Act, 1974. The profits of the enterprise should therefore be assessed as farming profits.
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