1892 (3) TMI 1 - HC - Income Tax

Summary

Issues Involved:
1. Whether the occupation of a house rent-free by Mr. Tennant constitutes "income" under the Income Tax Act.
2. Whether the value of the rent-free house should be assessed under Schedule E or Schedule D of the Income Tax Act.
3. Whether the occupation of the house rent-free should be considered a "perquisite," "profit," or "emolument" under the Income Tax Act.

Detailed Analysis:

1. Whether the occupation of a house rent-free by Mr. Tennant constitutes "income" under the Income Tax Act:

Lord Halsbury L.C.:
The primary issue is to determine what constitutes Mr. Tennant's income under the Income Tax Act. The Act intends to tax income, and it is essential to ascertain whether the occupation of a house rent-free falls under this category. The principle of construction of a taxing Act is that no subject is to be taxed without clear words for that purpose. The mere fact of occupying a house rent-free does not constitute income. The possession of a house used for profit is taxable, but mere occupation is not income.

Lord Watson:
Income arising in this country must be chargeable under one of the income tax schedules. The appellant's residence is not income within the meaning of the statutes and should not be assessed for income tax. The appellant resides in the bank premises as a servant, similar to a caretaker, and this does not constitute income.

Lord Macnaghten:
The appellant's occupation of the bank house is not chargeable under Schedule A or B. The Crown has already received the duty on the house's full annual value. The benefit derived from the occupation is not income nor required to be taken into account for income tax purposes.

Lord Morris, Lord Field, Lord Hannen:
Concurred that the occupation of the house rent-free is not income. It does not fall within "salaries, fees, wages, perquisites, profits, or emoluments" as defined by the Act. The occupation saves the appellant from expenditure but does not constitute income.

2. Whether the value of the rent-free house should be assessed under Schedule E or Schedule D of the Income Tax Act:

Lord Halsbury L.C.:
The assessment must be under Schedule E. The words "perquisites," "profits," or "emoluments" do not apply to mere occupation. The Act refers to money payments made to the recipient, not advantages like rent-free occupation.

Lord Watson:
The appellant's income from employment as a bank agent is assessable under Schedule E. The benefit from residing in the bank premises is neither salary, fee, nor wages, and does not constitute a perquisite or profit. It is not reasonable to assess a public office or employment under Schedule D when it is assessable under Schedule E.

Lord Macnaghten:
The occupation of the bank house rent-free is not chargeable under Schedule E. The Crown's claim under Schedule D is also invalid as the benefit is not income. The tax under Schedules D and E is on actual receipts, not on what saves the appellant's pocket.

Lord Morris, Lord Field, Lord Hannen:
Concurred that the occupation of the house does not fall under Schedule E or D. The benefit is not income and does not fit within the definitions provided in the schedules.

3. Whether the occupation of the house rent-free should be considered a "perquisite," "profit," or "emolument" under the Income Tax Act:

Lord Halsbury L.C.:
The words "perquisites," "profits," or "emoluments" do not apply to the mere occupation of a house. The Act focuses on money payments, and the rent-free occupation does not fit this criterion.

Lord Watson:
The benefit from residing in the bank premises is not a perquisite or profit. The word "profit" denotes something that can be turned to pecuniary account, which is not the case here. The rules of Schedule D do not apply to offices and employments under Schedule E.

Lord Macnaghten:
The benefit derived from the rent-free occupation is not a profit or gain within the meaning of the Income Tax Code. It is not income and should not be assessed under any schedule.

Lord Morris, Lord Field, Lord Hannen:
Concurred that the occupation of the house rent-free is not a perquisite, profit, or emolument. It does not fit within the statutory definitions and should not be assessed for income tax.

Conclusion:
The judgment concluded that the occupation of a house rent-free by Mr. Tennant does not constitute "income" under the Income Tax Act. The value of the rent-free house should not be assessed under Schedule E or Schedule D. The occupation does not qualify as a "perquisite," "profit," or "emolument" as defined by the Act. The appeal was allowed, and the decision of the commissioners was restored.