McLaughlin v Bailey

• Jurisdiction: Ireland
• Judgment Date: 27 April 1920
• Date: 27 April 1920
• Court: Court of Appeal (Ireland)

K. B. Div. (Revenue.)

Appeal.

M'Laughlin v. Bailey.

J. F. M'LAUGHLIN (Surveyor of Taxes)

Appellant

BAILEY, Respondent (1)

Revenue - Income Tax - Stud farm - Stallion fees - Mode of assessment - Income Tax Act, 1842 (5 & 6 Vict. c. 35), sect. 63, Schedule B; sect. 100,Schedule D, First Case, Sixth Case - Income Tax Act, 1853 (16 & 17Vict. c. 34), sect. 2, Schedules B and D.

Case Stated under the Taxes Management Act, 1880, sect. 59, 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 Ireland.

The Commissioners set out the facts as follows:—

1. At a meeting of the Commissioners for the special purposes of the Income Tax Acts held on 12th October, 1917, for the purpose of hearing appeals, Mrs. Blanche Bailey, hereinafter called the respondent, appealed against an assessment to income tax in the sum of £605 for the year ending 5th April, 1918, made upon her under the provisions of the Income Tax Acts, in respect of profits from stallion fees.

2. The respondent is owner and occupier of a farm of 194 statute acres, of the annual value according to the Poor Law Valuation of £326 1s., at Rathbane, County Limerick, and she has been duly assessed to income tax under Schedule B in respect of the occupation of the land. Cattle are kept on the farm, but only to the extent necessary for keeping the ground in good condition, and the principal purpose for which the farm is used is the

breeding of racehorses and hunters for sale. A varying number of mares are kept for this purpose (the highest number hitherto kept at any one time being forty), and two stallions.

3. One of the stallions, "Bachelor's Double," was formerly a successful racehorse. He was acquired in November, 1911, at the conclusion of his racing career, and he has obtained a high reputation as a sire. In addition to serving the respondent's own mares, "Bachelor's Double" is used for the service of mares belonging to other owners, which arrive at Rathbane about a month before foaling, and remain for about three months on the farm. "Bachelor's Double" never leaves the farm. For the service of these mares a fee is charged, usually amounting in the year 1917, to £49 per mare, the fee having been reduced in that year on account of the war. No information was available as to the relative extent to which the horse is used for serving the respondent's own mares and those of other owners respectively. The fees received for the service of visiting mares amounted to £755 in the fourteen months ending 31st December, 1912; £1,114 in the year 1913; £1,346 in 1914; £1,390 19s. in 1915; and £1,180 6s. 5d. in 1916.

4. A second stallion, "Rhosmarket," was purchased in February, 1912, and some small amounts were received in the years 1912, 1913, and 1914 for his service of mares belonging to persons other than the respondent; but these fees were less than the expenses incurred for his keep, &c. A half-bred stallion was substituted in 1915, which has been used solely for the service of the respondent's own mares.

5. For the year ending 31st December, 1916, accounts were furnished showing a loss on the farm of £2,292 after eliminating the profits arising from stallion fees. No accounts were available showing the general results of the farm for the years 1914 and 1915; but accounts were furnished from which it appeared that the profits made from the fees received for the service of mares belonging to persons other than the respondent, after allowance of the expenses incurred for the maintenance and management of the stallions, amounted to £730 in 1914; £652 in 1915; and £434 in 1916. The assessment of £605 under appeal was made under Schedule D of the Income Tax Acts upon the average amount of these profits from stallion fees in the three years 1914, 1915, and 1916.

6. It was contended on behalf of the respondent that the profits from stallion fees were profits arising in respect of the occupation of the land, find were included in the assessment upon the respondent under Schedule B.

7. It was contended by the Surveyor of Taxes that the profits from stallion fees were not profits arising in respect of the occupation of land, but were profits of a trade or concern in the nature of trade, and were assessable under Schedule D.

8. We, the Commissioners who heard the appeal, were of opinion that the contentions of the Surveyor of Taxes were correct; but in deference to a previous decision of the County Court Judge, in a case which could not be distinguished, that such profits were included in the assessment under Schedule B, we discharged the assessment under Schedule D.

9. The Surveyor of Taxes, immediately upon the determination of the appeal, declared to us his dissatisfaction therewith as being erroneous in point of law, and in due course required us to state a case for the opinion of the High Court pursuant to the Taxes Management Act, 1880, sect. 59, which case we have stated, and do sign accordingly.

The respondent appealed to the Court of Appeal (1).

The owner and occupier of a farm used it principally for the breeding of racehorses and hunters for sale. She kept upon the lands a number of mares and two stallions. In addition to serving the farmer's own mares, one of the stallions was used for the service of mares belonging to other owners, which mares arrived at the farm about a month before foaling, and remained there for about three months. For the service of these mares fees were received by the owner of the stallion.

Held (affirming the King's Bench Division), that the stallion fees so received from outsiders were liable to assessment under Schedule D of the Income Tax Acts.

Molony C.J. delivered the judgment of the Court:—

This is a case stated to determine the question whether profits made by the respondent by means of letting out the services of a stallion called "Bachelor's Double" were or were not profits, which were already included in an assessment under Schedule B, and consequently were incapable of separate assessment under Schedule D of the Income Tax Acts.

It appears that the respondent, Mrs. Blanche Bailey, is the owner of a farm of 194 acres at Rathbane, County Limerick, and that she uses that farm principally for...