Re Downing's Estate

• Jurisdiction: Ireland
• Judgment Date: 18 December 1936
• Date: 18 December 1936
• Court: Supreme Court (Irish Free State)

In re Downing's Estate

Estate of TERESA DOWNING

Owner.

Supreme Court.

Revenue - Income tax - Arrears of jointure rentcharge - Schedule A tax paid in respect of lands - Whether exhaustive - Whether annuity "payable wholly out of profits or gains brought into charge to tax" - Sale of lands under Land Purchase Acts - Claim for arrears on allocation of purchase money - Claim allowed by Judicial Commissioner - Whether Judicial Commissioner a person making an "annual payment" - Whether arrears liable to income tax - Income Tax Act, 1918 (8 & 9 Geo. 5, c. 40), sect.187; Schedule A, No. VIII, rule 4; Schedule D, clause 1 (b) and rule1 (a) of Rules applicable to Case III; General Rules applicable to all Schedules, rules 19 and 21.

Upon a sale of lands under the Land Purchase Acts, a claim on the Allocation Schedule of the purchase money by the personal representative of a deceased jointress for six Years' arrears (up to the death of the jointress in 1920) of a jointure rentcharge was allowed. The jointure rentcharge was created by a marriage settlement and secured by a term of years limited to the trustees of the settlement. During the six years in question, Schedule A income tax calculated by reference to the annual value of the lands was paid. The annual value was less than the amount of the jointure rentcharge. The lands had been vested in the Land Commission in 1931, prior to allocation, and income tax had not been paid under Schedule A since the vesting. On a claim by the Accountant-General of Revenue for income tax on the arrears of the jointure rentcharge:

Held, by the Supreme Court, that Wylie J. was correct in disallowing this claim, as, on the construction of Schedule A, No. VIII, rule 4, and General Rules, Rule 19, Income Tax Act, 1918, the jointure was payable out of "profits or gains brought into charge to tax" and the payment of Schedule A income tax in the years in question left no further subject-matter for taxation. Rule 21 of the General Rules did not apply so as to enable the arrears to be treated as being paid, in the year of allocation, out of profits or gains not brought into charge as that Rule dealt with payments of annual sums charged with tax under Schedule D, while, reading the Income Tax Acts as a whole, annual sums charged wholly on land were charged under the Rules relating to Schedule A; and, further, that Rule was not applicable to the satisfaction of a superior interest on allocation.

Allocation Schedule.

The Accountant-General of Revenue claimed at item A on the Allocation Schedule in the Estate of Teresa Downing a sum of £286 for income tax under Schedule D on the arrears of a jointure as set out at item 6 on the said Allocation Schedule.

The facts are set out sufficiently for the purpose of this report in the judgment of Wylie J.

The Revenue Commissioners appealed to the Supreme Court (1) and applied for an order that the whole of the order of Wylie J. be discharged and that in lieu thereof an order might be made allowing the claim of the Accountant-General of Revenue to the sum of £286 for income tax on the arrears of jointure in said order referred to.

Wylie J.:—

The lands sold were settled by indenture of marriage settlement, dated 20th January, 1874, on the marriage of Eugene F. Downing and Teresa Keegan. The lands were settled on the husband for life, with power of appointment among the children of the marriage, and, in default of appointment, to his eldest son in tail male with remainder to his sons successively in tail male, subject to a charge in favour of the wife for jointure of £300 a year payable out of the rents and profits of these lands and out of these lands only. The husband survived the marriage five years, dying in 1879. There were three children of the marriage: Henry, Gerald and Teresa. The rents and profits of the lands were insufficient to pay the jointure in full and it fell heavily into arrear.

By his will made in 1915, Henry Downing, the tenant in tail male in default of appointment, who died in 1916, purported to devise the lands to his mother, Mrs. Teresa Leonard (formerly Downing), for life, and after her death to his sister, Miss Teresa Downing. No disentailing deed had been executed, and the devise of the lands was, therefore, of no effect. Mrs. Teresa Leonard died in the year 1920. By her will she devised and bequeathed everything she possessed, including the arrears of her jointure of £300, to her daughter, the owner herein, Teresa Downing. Doubts having arisen as to the validity of the devise by Henry Downing of the lands, the second son, Gerald, who had become tenant in tail male under the settlement of 1874, executed on 26th November, 1924, a disentailing deed, and by deed of even date therewith conveyed his estate therein to his sister, Teresa Downing, who became entitled to the lands and to the arrears of the jointure, which was solely charged on these lands, for the years 1914 to 1920. The really important facts are that the jointure was charged solely on the rents and profits of these lands, and that Teresa Downing as executrix of her mother's will, or as beneficial owner, was entitled to the rents and profits and to the arrears of jointure. One other vital fact is that it is admitted that Schedule A tax was paid on these lands for the years 1916 to 1920 inclusive.

Arrears of jointure amounting to £1,347 have now been paid out of the capital money payable on the sale of the estate, which is insufficient to discharge the entire of such arrears. The Revenue Commissioners claim that income tax is payable on a certain portion of these arrears of jointure under Schedule D.

To test the Revenue claim, assume that, instead of falling into arrear, the jointure had been paid. Take the year 1918. Assuming that the jointure was paid, and that income tax under Schedule A had been paid on the lands, could the Revenue Commissioners have claimed any further payment? Could they have recovered anything from the lady in respect of the jointure? In my opinion they could not. If the jointure or annuity was paid year by year the tax on it was Schedule A tax and no other tax, and when it was paid all other tax was...