THE GOVERNORS of The ROTUNDA HOSPITAL, DUBLIN, v COMAN (Surveyor of Taxes)

JurisdictionIreland
CourtHouse of Lords (Ireland)
Judgment Date13 May 1920

NO. 421.-HIGH COURT OF JUSTICE, IRELAND (KING'S BENCH DIVISION).-

COURT OF APPEAL, IRELAND.-

HOUSE OF LORDS.-

(1) THE GOVERNORS OF THE ROTUNDA HOSPITAL
DUBLIN
and
COMAN (Surveyor of Taxes)

Income Tax.-Hospital.-Profits derived from letting rooms belonging to and connected with Hospital.-Income Tax Act, 1842 (5 and 6 Vict. c. 35), Section 61, Schedule A, No. VI, and Section 100, Schedule D, Income Tax Act, 1853 (16 and 17 Vict. c. 34), Section 5.

The Governors of a maternity hospital established for charitable purposes by Royal Charter in 1756, were the owners of a building which comprised rooms adapted for public entertainments, and which was connected with the hospital buildings proper by an internal passage.

The hospital derived a substantial income from letting the rooms for public entertainments, concerts, etc., for periods varying from one night to six months and applied the income to the general maintenance of the hospital.

The rooms were let upon terms which included the provision of seating, heating, and attendance, but an additional charge was made for gas and electricity consumed.

Held, that the profits derived from the letting of the rooms were assessable to Income Tax under Schedule D, either under Case I, as the profits of a trade or business, or under Case VI of that Schedule, and that there was, therefore, no exemption conferred by the Income Tax Acts which was applicable to the profits.

CASE.

Stated under 43 and 44 Vic., Ch. 19, Section 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.

1. At a meeting of the Commissioners for the Special Purposes of the Income Tax Acts, held in Dublin on 22nd October, 1915, for the purpose of hearing Appeals, the Governors of the Rotunda Hospital, Dublin (hereinafter called the Appellants) appealed against the following assessments made upon them under Schedule D. of the Act 16 and 17 Vict., Ch. 34, in respect of the profits derived from the letting of the Rotunda Rooms:-

For the year ended 5th April,

1912

£755

For the year ended 5th April,

1913

768

For the year ended 5th April,

1914

797

For the year ended 5th April,

1915

742

The Appellants were represented by Mr. Gerald FitzGibbon, K.C., Counsel.

2. The following facts were proved or admitted:-

(1) The Rotunda Hospital was established by Royal Charter dated 2nd December, 1756, for the relief of poor lying-in women.

Certain Bye-laws and Ordinances for the more effectual welfare of the Hospital were approved at a Board of the Governors and Guardians on 28th January, 1786, and subsequently received the assent of four of the Chief Judges of His Majesty's Courts of Ireland.

No. XX. of the aforesaid Bye-laws and Ordinances provides:-

  1. XX. That, as the principal support of this Charity is produced from public entertainments in apartments contiguous to the Hospital, it must be of the utmost advantage to contrive every possible accommodation for servants, to prevent noise and disturbance-and therefore that the Board will be pleased to direct (when their funds can admit of it) a large hall, extending from Great Britain Street to the Rotunda, to be erected, of such considerable breadth as to admit of a railed passage for company, and a space with three fireplaces on either side for waiting servants; and such other accommodation as the Governors of this Charity may judge necessary.

Certain Resolutions have been passed from time to time by the Governors and Guardians of the Hospital.

X. Provides for the general management of the Rotunda Rooms.

XIX. Defines the duties of the Keeper of the aforesaid rooms and fixes the scale of remuneration for his services, etc.

In the Appendix Schedule II., the scale of Charges for the use of the Public Rooms is set forth.

A copy of the aforesaid Charter, Bye-laws and Ordinances, Collection of Resolutions and Appendix is attached hereto (marked "A") and forms part of this Case.(1)

3. The Rotunda Rooms-which are connected with the Hospital proper by an internal passage-are let by the Appellants for entertainments, concerts, cinema shows, etc., for periods varying from one night to six months-the letting price including the use of seating and heating. Further charges are made for gas and electric light in accordance with the consumption as shown by the respective meters.

The printed reports of the Hospital for each of the six years ended 31st March, 1909, 1910, 1911, 1912, 1913 and 1914, respectively contain "General Cash Accounts" into which the profit or loss derived from the letting of the Rotunda Rooms is brought. The reports for the years ended 31st March, 1912, and 31st March, 1913, contain also details of income and expenditure on the "Rotunda Rooms Account."

In the report for the year ended 31st March, 1909, the following note appears:-

It will be observed from the appended Cash Account that the Rotunda Rooms show a deficit of £377 10s. 8d. This is due to the expenditure of £1,057 1s. 8d. on the construction of a proscenium and new platform in the Round Room, to the design and under the supervision of Mr. A.E. Murray, F.R.I.B.A., but for which expenditure the rooms account would have shown a profit of £770 It is anticipated, however, that these improvements will result in increased patronage of the Rooms.

Copies of the aforesaid printed Reports are attached hereto (marked respectively "B," "C," "D," "E," and "F") and form part of this Case(1) -with the exception of the Report for the year ended 31st March, 1912-of which no copy is available-the figures relating to the "Rotunda Rooms Account" for that year have, however, been entered in the margin of page 14 of the corresponding Account for the year ended 31st March, 1913 (marked E).

4. The Poor Valuation as regards the Rotunda Hospital and the Vaults below is as under:-

Rateable Valuation.

Rotunda Lying-in Hospital and Gardens

Exempt

Vaults under Rotunda

£65

At the hearing of the Appeal it transpired that in a recent Revaluation List the following item was included for the first time:-

Rateable Valuation.

Rotunda Concert and Ball Rooms-Occupiers, Governors of Rotunda Hospital

£300

and an assessment to Income Tax Schedule A in the sum of

£300

less the statutory deduction of one-sixth for repairs, viz., £50, was subsequently raised for the year ended 5th April, 1917.

The vaults under the Rotunda, which are let to a tenant, have been assessed to Income Tax, Schedule A, for several years past, but the duty charged and paid has been repaid under the provisions of Section 61, Schedule A, No. VI of 5 and 6 Vic., Ch. 35, as being applied to Charitable Purposes.

5. The Appellants contended:-

  1. (a) That all profits derived from the lettings of the Rotunda Rooms are-in accordance with the intention of the original Royal Charter, as shown by No. XX. of the "Bye-laws and Ordinances"" made pursuant to the powers granted by such Charter-(vide paragraph 2 of this Case) applied to the general support of the Hospital.

  2. (b) That the moneys received from the temporary lessees or occupiers of the Rotunda Rooms are rents and profits of tenements belonging to a Hospital within Section 61, No. VI., Schedule A, of the Income Tax Act, 1842, as extended and applied to Ireland by Section 5 of the Income Tax Act, 1853; and that these moneys, so far as they are applied for charitable purposes, are exempt from Income Tax.

  3. (c) That the judgment of Buckley, L.J., in the "Essex Hall" Case(1) (C.A. [1911], 2 K.B., p. 434) must be taken as implying that had Essex Hall been a Hospital, the exemption sought in respect of the casual rents derived from letting portions of the premises would have been granted.

6. The Surveyor of Taxes, who appeared for the Crown, contended:

  1. (2) That no exemption exists under the Section relied on by the Appellants in respect of rents and profits of tenements in the occupation of the owner.

  2. (3) That admitting the rents received from letting the Rotunda Rooms-after payment of expenses incurred in connection with such lettings-to be applied to charitable purposes, the Appellants are carrying on a concern the profits of which are assessable to Income Tax under the First Case, Schedule D, of the Income Tax Act, 1842, and that the exemption granted by Section 105 of the aforesaid Act does not extend to trading profits, even though such profits may be applied to charitable purposes.

In support of the foregoing contentions he relied, as regards No. 1, on the judgment in the Essex Hall Case-and as regards No. 2 on the following Cases:-

  1. St. Andrew's Hospital (Northampton) v. Shearsmith([1887] 19 Q.B.D. 624; 57 L.T. 413; 35 W.R. 811: 2 T.C. 219).

  2. Trustees of Psalms and Hymns v. Whitwell ([1890] 1 T.L.R. 164; 3 T.C. 7).

  3. Grove v. Young Men's Christian Association ([1903] 67 J.P. 279; 88 L.T. 696; 19 T.L.R. 491; 4 T.C. 613).

7. In arriving at the precise quantum of liability, the Surveyor of Taxes was prepared in the circumstances to allow the net annual value, £250, of the Rotunda Rooms (vide paragraph 4 of this Case) as a deduction in arriving at the profits assessable under Schedule D. He also admitted that certain adjustments fell to be made in respect of renewals of flooring, platforms, seating and furniture-also a proportion of the general administrative salaries as applicable to the letting of the Rooms, with the result that the amended liability would be as under:-

£

For the year ended 5th April, 1912

223

For the year ended 5th April, 1913

327

For the year ended 5th April, 1914

405

For the year ended 5th April, 1915

381

The Appellants agreed that, if the profits in question are held to be assessable to Income Tax, Schedule D, the figures as above may be taken as correct.

8. Having considered the facts and contentions herein set forth we were of opinion that the profits derived from letting the Rotunda Rooms were assessable to Income Tax, Schedule D...

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