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TMI Blog1946 (3) TMI 18X X X X Extracts X X X X X X X X Extracts X X X X ..... ving fit the balance of profits or gains under Case I of Schedule D. It is sufficient to cite the decision of this House in the sugar-beet case (Lincolnshire Sugar Co. v. Smart [1937] 20 Tax Cas. 643) as an illustration. 3. The second proposition constitutes an exception. If the undertaker is a rating authority and the subsidy is the proceeds of rates imposed by it or comes from a fund belonging to the authority, the identity of the source with the recipient prevents any question of profits arising ; see, for example, Lord Buckmaster's explanation in Forth Conservancy Board v. Inland Revenue Commissioners [1931] 16 Tax Cas. 103, and. compare what Lord Macmillan said in Municipal Mutual Insurance Co. v. Hills [1932] 16 Tax Cas. 430. 4. Lord Thankerton has conclusively demonstrated that Lord President Inglis' decision in the first Glasgow Water case (Glasgow Water Commissioners v. Inland Revenue Commissioners [1875] 1 Tax Cas. 28) falls within this second proposition; so interpreted, it was rightly decided, but it does not help the appellants. The precept? which the appellants issued called for lump sums to be contributed by the two urban district councils which they might pay eit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... receipts and should enter into computation. Hence this appeal by the appellant board. 8. Counsel for the appellant board referred to reasons Nos. 6 and 7 of the appellant's case as embodying his main contentions. These are : (6) where a local authority carries on a commercial undertaking at a loss, and is permitted to make good that loss by a compulsory rate levied on the ratepayers, the amount of the rate so raised is not a receipt of the local authority's said trade, and (7) the board's position in respect of the sum raised by precept to meet its trading losses is similar to that of a local authority, its "ratepayers" being either the two councils, the Rhondda Urban District Council and the Pontypridd Urban District Council as its constituent authorities, or the individual ratepayers of those two districts. 9. The appellant board was established as a corporate body by a local Act, the Pontypridd and Rhondda Water Act, 1910, the board being constituted as follows: (a) The chairman for the time being of the Rhondda Urban District Council; (b) the chairman for the time being of the Pontypridd Urban District Council; (c) six members to be appointed by the Rhondda Urban District ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deficiency whether for satisfying past or future liabilities shall be apportioned between and borne by the constituent authorities in the proportion which the assessable value of the Pontypridd district bears to the assessable value of that part of the Rhondda district which is within the limits of supply. (3) The board shall issue precepts to the constituent authorities for the amounts apportioned in pursuance of this section and the constituent authorities respectively shall within three months from the receipt of such precepts pay to the board the amount so apportioned to them respectively. (4) Such amounts respectively shall be paid by the constituent authorities out of their respective district funds and general district rates which funds and rates are hereby charged with the payment of the same accordingly and the constituent authorities respectively are hereby authorised and required to make and levy any rate that may be necessary for the purposes of this section." 12. Sub-section (5) of Section 91 provides that in default of payment by a constituent authority of the amount so apportioned to it, the board may sue the defaulting authority, or itself cause a rate to be lev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 Tax Cas. 28 in Attorney-General v. Black [1871] 1 Tax Cas. 52, in which it was admitted by the Crown that a tax imposed by the community on themselves did not involve liability to income-tax, and, in the Exchequer Chamber, Keating, J., said: "Mr. Manisty does not contend that harbour and port dues, and other revenues of that description, are not taxable; and the Attorney General admits that a district rate is not. The question then is, does the rate in question partake more of the nature of the one or of the other? I am of opinion that it does not partake of the character of a district rate imposed by the inhabitants of a place upon themselves ; and that, on the other hand, it is very difficult to distinguish it from harbour dues." It will be found that this same principle was applied in the First Glasgow case [1875] 1 Tax Cas. 28, which was decided four years later and to which I will now return. 15. The Glasgow Water Commissioners were created as a statutory incorporation, according to the law of Scotland, by the local Act 18 & 19 Vict, cap. cxviii, by Section 6 of which it was provided : "The magistrates and council of the City of Glasgow and their successors in offic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have undertaken, through this water corporation as their representatives, to assess themselves for a very important public purpose-a purpose very conducive to their own comfort and well-being-to obtain a good supply of water for the city. In so assessing themselves they had not in view certainly to make profit by the undertaking. On the contrary, what they have distinctly in view is to pay money in order to obtain this particular benefit. They are not, therefore, trading in any commodity, nor are they entering into any undertaking for the use of property that is to be attended by a resulting profit, or a beneficial interest accruing to any individuals, or to any corporation. The object of the assessment is to pay for bringing in the water, and when that is done the assessment and the authority to levy it come to an end." The Lord President then distinguishes the case from the case of Attorney General v. Black [1871] 1 Tax Cas. 52, and Attorney-General v. Scott [1874] 1 Tax Cas. 55. "The case is entirely different from those that have been cited, which have been decided in the Court of Exchequer in England, because in those cases the statute which gave the right to levy the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the water commissioners were expressly appointed "as representing and for and on behalf of" the community of the City of Glasgow, which formed the area of compulsory supply; (2) the commissioners had the power of levying the domestic and public rates direct on the ratepayers within the compulsory area, and, quoad these rates, the ratepayers were ratepayers of the commissioners and not of the municipal corporation; (3) these rates were payable whether the particular ratepayer chose to use the water or not; (4) no price was paid by any domestic consumer for his particular supply and he did not enter into any trading transaction with the commissioners; (5) the rates thus levied were applied to the expenses incurred on behalf of the inhabitants, and any surplus rightly belonged to the ratepayers and was carried forward and applied in reduction of the domestic rate in the next year, thus answering Lord Buckmaster's definition of the principle. On the other hand, the present case is very different. The appellant board- (1) are not directly representative of the inhabitants of the Rhondda and Pontypridd Urban District Councils; (2) their limits of supply do not include the whole of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the First Glasgow case not only fails, in my opinion, but in stating the various points of contrast between the provisions of the Glasgow Water Act and the provisions of the appellant board's Water Act, the various matters I have indicated in respect of the latter Act go far to show that the amount of the precepts are not in the position claimed under head (b) of his second contention, namely, that they were in exactly the same category as a local rate raised by a public body for the assistance of an undertaking carried on by that body, which is entitled to have such assistance. But I will deal first with head (a) of his second contention, by which he contended on general grounds that the sums in question were not trade receipts. In regard to this contention he cited two cases, the first of which was Seaham Harbour Dock Go. v. Crook [1931] 16 Tax Cas. 333, which was decided by this House in 1931. The Harbour Dock Co. had applied for and obtained grants from the Unemployment Grant Committee from funds appropriated by Parliament; these grants were paid as the work progressed and were equivalent to half the interest on approved expenditure met out of loans. The payments were made sev ..... X X X X Extracts X X X X X X X X Extracts X X X X
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