1941 (5) TMI 13 - HC - Income Tax

Summary

Issues Involved:

1. Whether it is legally permissible to split a single holding into two parts for tax assessment purposes.
2. Whether the facts justify the classification of certain arable lands as "gardens" under Rule 8 of Schedule B.
3. Whether the nature and intensity of cultivation can determine the classification of land as "gardens" under Rule 8.
4. Whether the Commissioners' conclusions were supported by the facts.

Issue-wise Detailed Analysis:

1. Whether it is legally permissible to split a single holding into two parts for tax assessment purposes:

The first question that arises is whether it is in point of law competent to "split" a single holding into two parts with a view to applying Rule 8 to one portion of it, while leaving the other portion to be assessed under the ordinary provisions of Schedule B. The possibility of this was affirmed by the Court of Session in Lowe & Sons, Ltd. v. Inland Revenue Commissioners [1938] 21 Tax Cas. 597, and was recognized by Finlay, J., in Dennis v. Hick (19 Tax Cas., at p. 228). I accept the possibility of such a division of a unit of occupation, provided that the distinction between the portion which is "occupied as garden for the sale of produce" and the separate portion which is not so occupied is really made out.

2. Whether the facts justify the classification of certain arable lands as "gardens" under Rule 8 of Schedule B:

The Commissioners set out in a series of lettered paragraphs running from (A) to (R) the facts which were proved or admitted before them. The Commissioners concluded that the farming operations on the arable land (apart from that used for the growth of hops) are ancillary to the market garden operations and that the whole of the arable land (apart from that occupied for the growth of hops) is occupied as gardens for the sale of produce. However, the facts found in paragraphs (A) to (R) do not, in my opinion, justify such splitting. There is nothing in the findings of the Commissioners to indicate that the fields, which they added together and pronounced to be occupied as "gardens," were not scattered over the whole holding, so as to be interspersed with mowing grass or pasture fields.

3. Whether the nature and intensity of cultivation can determine the classification of land as "gardens" under Rule 8:

The main test, in my opinion, is that the defined area should be subject to that nature and intensity of treatment which is characteristic of horticulture. The decision on this issue in Lowe & Sons, Ltd. v. Inland Revenue Commissioners*, which influenced Lawrence, J., in rejecting the appeal, appears from the judgments to have largely turned on an admission as counsel for the taxpayer. However, in the present case, the Commissioners have decided that the arable land is "garden" merely because of the nature of the produce. They could not have attached any importance to the cost of labor without some further finding as to the usual cost of labor on a highly mechanized farm using very up-to-date appliances and growing vegetable crops and fruit.

4. Whether the Commissioners' conclusions were supported by the facts:

The Commissioners' conclusions, in paragraph 5 of the case, were that the farming operations on the arable land are ancillary to the market garden operations and that the whole of the arable land is occupied as gardens for the sale of produce. However, the first conclusion seems to me entirely unsupported by the facts found. The facts found go to show that the area which the Commissioners deduce to be ancillary to the so-called garden is in fact ancillary to the other part of the farm, which they admit is not garden at all. The remaining conclusion of the Commissioners raises the question of whether the facts proved or admitted can justify the view that the remainder of the arable land was "garden." Reading the findings as a whole, and applying the test above indicated that a "garden" implied, amongst other things, the use of special and intense methods of cultivation, I cannot discover how the facts could sustain the Commissioners' conclusion.

In conclusion, the appeal should be allowed, and the Commissioners' decision to split the holding and classify certain arable lands as "gardens" under Rule 8 is not justified by the facts found.