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TMI Blog1941 (5) TMI 13X X X X Extracts X X X X X X X X Extracts X X X X ..... he had felt free to give effect to his own opinion, would have decided in favour of the taxpayer on the view that the facts before the Commissioners did not justify the separate assessment. The learned Judge, however, considered that he was constrained by the decision of the Court of Session in Lowe & Sons, Ltd. v. Inland Revenue Commissioners [1938] 21 Tax Cas. 507, to decide in favour of the Crown, but he struck out of the area classed as "garden" some twenty-six acres of arable carrying wheat, parsnips, mangolds and lucerne, on the ground (with which I thoroughly agree) that there was no justification for holding that this land was "ancillary" to the garden. In the Court of Appeal there was a difference of opinion. Clauson, L.J., and Goddard, L.J., took the view that the General Commissioners were justified in deciding against the taxpayer, while Scott, L.J., in an elaborate judgment, involving both historical research and a full examination of the earlier cases which might bear on the matter, was of a contrary opinion. The taxpayer now appeals to this House. Rule 8 of Schedule B runs as follows: "8. The profits arising from lands occupied as nurserie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as long as it is a distinct and separate unity devoted to gardening. On the other hand, as I have already said, a field, or fields, of farming land should not be called a "garden" merely because they grow products which used to be characterestic products of gardens, or even products which are still mainly or largely found in gardens. 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 Commissioners set out in a series of lettered paragraphs running from (A) to (R) the facts which were proved or admitted before them, and in order that my judgment may be complete and self-contained I must reproduce these paragraphs in extenso: "For the year in question the appellant was the occupier of 550 acres. (i) Part of the land at Spring- hill and the land at Fingerpost Ground and Lower Moor was arable (ex- cluding land utilised for the cultivation of hops) upon which the following crops were growing during 1936: 16 acres wheat. 7 acres potatoes. 3 acres mangolds. ½ acre lucerne. 26½ acres peas. 18½ acres beans. 44½ acres brussels sprouts. 4 ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nures amounted to £ 1,471 8s. 6d. only and had been progressively reduced year by year as the manure produced by the pigs increased. (M) The purchase of feeding stuffs amounted to £ 10,939 4s. 2d. (N) There are no glasshouses on the land occupied by the appellant and no nursery work was done upon any part of the land. (O) The methods of cultivation were the ordinary accepted agricultural methods. (P) The appellant styles himself a farmer and fruit and vegetable grower on his notepaper and bill-heads. (Q) Some of the produce of the land used for growing fruit and vegetables was sold in various towns through an agent in the usual manner in the district. (R) In order to obtain continuity of supplies not always possible from appellant's own land produce is sometimes obtained from other growers and sold by appellant under commission." After setting out the rival contentions the Commissioners then express their conclusion, in paragraph 5 of the case, in the following terms: "We, the Commissioners, have come to the conclusion that the land occupied by the appellant can be divided for purposes of assessment under Schedule (B) and accordingly find as a fact: (1) T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e profits of the preceding year, and was formerly by reference to the average of three preceding years. If a field is subject to rotation of crops, so that last year it was part of the ordinary farm but this year is pronounced by the Commissioners to be a "garden", merely because it is this year producing what they regard as a garden crop, there would be no past profits of the "garden" upon which the assessment under rule 8 could be fixed. In short, a "garden" with the meaning of rule 8, whatever else the word implies, must have some degree of fixity and local continuance, and cannot come and go over different portions of the area according to the system of rotation employed. I wish now to make an observation on the way in which the case is stated. It is important for Commissioners, in drawing, up a case for the High Court, always to bear in mind that under Section 149 the case is required in order to challenge the determination of the Commissioners "as being erroneous in point of law". By sub-section (1)(d) of Section 149 the case is required to "set forth the facts and the determination of the Commissioners", and the "determ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re with this conclusion of fact, and the learned Judge further held that there was evidence to support the conclusion that the use of the remaining land was ancillary to, that is, subservient to, and intended to assist, the market gardening business. In the present case there appears to me to be no such supporting evidence at all, for the wheat was grown partly to obtain the subsidy under the Wheat Act and partly to provide straw litter for the pigs, while the mangolds, parsnips and lucerne were grown to provide feed for the stock and horses. Thus 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 whether the facts provedor 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 method of cultivation, I cannot discover how the facts could sustain the Commissioners' concl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xty acres "because it is necessary, for change of soil and other reasons, that they should use no more". I find no difficulty in distinguishing Monro and Cobley's Case [1933] 17 Tax Cas. 607; 1 I.T.R. 269, from the present, and I accordingly move your Lordships that the present appeal should be allowed with costs here and below. VISCOUNT MAUGHAM.- In this case there has been some judicial difference of opinion. The trial Judge, Lawrence, J., was in favour of the taxpayer, the present appellant, but thought he was bound by authority to decide in favour of the Crown. In the Court of Appeal Clauson, L.J., and Goddard, L.J., took the view that the General Commissioners were justified in deciding against the appellant: but Scott, L.J., in a very careful and elaborate judgment, was for deciding in the appellant's favour. The appeal seems to me to raise a question of considerable importance to a large number of farmers in this country, and I should like to say that counsel on both sides, by their able arguments, have rendered great assistance to the House. The matter comes before your Lordships on a case stated under Section 149 of the Income Tax Act, 1918, by the Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... grown to provide feed for the stock, and it may be added were therefore not within rule 8. I should mention here that I propose for the sake of brevity to use the word "farm" as a synonym for lands "occupied for the purposes of husbandry", which is the old fashioned phrase still used in the Income-Tax Acts. "Husbandry", in fact, means the business of a farmer. I shall make some remarks later as to the words "lands occupied as nurseries or gardens for the sale of the produce" in rule 8 ; but I wish to observe here that that rule is obligatory. It seems to me clear that the nurseries of gardens for the sale of the produce must have boundaries capable of being definitely ascertained. Moreover, it is plain from rule 5 of Schedule B that a farm cultivated according to the usual custom and methods of farmers for the purpose of growing crops and other produce in the open as food for human beings and beasts cannot be a garden within rule 8. That follows from the fact that a man occupying lands for the purposes of husbandry only--that is, an ordinary farmer--has an option under rule 5 to be assessed and charged under Schedule D instead of under rule ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acres for growing small fruit. I will take the vegetable area first. There are here found to be 16 acres of wheat, 7 acres of potatoes, 3 acres of mangolds, ½ acre of lucerne, 26½ acres of peas, 18½ acres of beans, 44½ acres of brussels sprouts, 3½ acres of leeks, 4 acres of carrots and 6 acres of parsnips. These, it will be remembered, are grown in the open, by ordinary accepted agricultural methods, by ordinary farm labourers, who were not highly skilled and who work indiscriminately on the whole farm. I have mentioned these crops because it is common general knowledge that crops of this nature are and have for years past commonly been grown on ordinary farms in different parts of Britain where the soil is suitable for raising them. A reference to the Government Paper (Cmd. 285) giving a return of the agricultural output for England and Wales, 1925, is sufficient to support this statement. It is, for instance, impossible to suggest that potatoes, peas and beans are not now just as commonly grown on farms as cereal crops, or for that matter as turnips, cabbages, rape, mustard and other cruciferous and leguminous crops. The crops I have men- tione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ortion of it so employed is in any true sense a garden for the sale of produce. In this connection it also has to be remembered that a farmer's business does not consist simply of raising crops in a single year of assessment. It is his duty to his landlord if he is a tenant, and I think also to the State itself, to do his best by his farming operations to preserve the fertility of the soil. I suppose most educated persons know something of various systems of rotation of crops, and of the advantages to the soil which may be obtained by the growing of certain non-cereal crops in certain soils, for example, by the growing of nitrogen-accumulating plants or of deep-rooting plants such as currants. It would be singular and very unfortunate if it could be held that the existence of such a crop in the year of assessment would justify the Commissioners in treating the farm or a selected part of it as a garden within the rule. To avoid misconception I will state here that many of the crops I have referred to can be and are grown in market gardens. My point is that they are to a much greater extent grown on farms, and the mere fact that you find such crops on a piece of land does not pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ruit. Clauson, L.J., uses the words "garden crops" as a description of the crops raised. This for the reasons I have already given seems to me with all respect to be misleading, for most of them are common farm crops; but the Lord Justice indicates clearly that if the only reason for deciding that an area is a "garden" is that it is concerned with "garden crops", that would not be sufficient. With that I entirely agree. He, however, comes to the conclusion that the Commissioners must have had some other reason because they included in the so-called garden the 16 acres of wheat. As I have already said, a piece of land cannot be occupied, from the point of view of income-tax, both as a farm and as a garden for the sale of produce at the discretion of the Commissioners. It must be either one or the other. No facts are stated or suggested in the special case which go to show that the 16 acre field on which wheat was grown was part of a garden, or "ancillary" to a garden, within the meaning of rule 8. The fact that the Commissioners thought that they could so describe that area seems to me a further reason for thinking that they were acting on a w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. It is the character and nature of the operations on the land which mainly determines whether or not it is a garden for the sale of produce. I agree with Scott, L.J., that the distinction between farm and "garden" may be expressed in general words as the difference between lands cultivated by agricultural methods lands on which horticultural methods are employed. Produce which re- quires the attention of skilled men would generally be found grown in a garden. The use of the plough in such a place would be something of a rarity. The soil in the garden would usually be prepared by the employment of the homely spade and the tiresome operation of trench- ing and digging in manure. At any rate I am confident that that was the case when the words "gardens for the sale of the produce" were employed in the early Acts relating to income-tax. Certainly, hand labour would usually be employed, and it would be very unusual to find (as in this case) that the land was for the most part both machineplanted and machine hoed. It is not altogether irrelevant to note that in the census returns gardeners and nurserymen and "gardeners' labourers" are enumerated separa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f a market gardener. Finlay, J., (as he then was), not without some doubt, held that there was evidence to justify the Commissioners in finding that the whole area was occupied as a garden for the sale of produce within rule 8. I will only add with respect that, with the same modicum of doubt, I should have come to the same conclusion. That case can certainly be distinguished from the one before us. I do not wish to be understood as saying that a farmer cannot carry on ordinary farming and at the same time carry on the business of a garden for the sale of produce on a distinct area adjacent to or situate within his holding, so that as regards the latter he would be taxable under rule 8. I do, however, express the opinion that it is wholly erroneous to select from the area of a farm occupied and worked in one unit, which is used for raising crops and small fruits predominantly of kinds grown by farmers all over the country, the land being cultivate by ordinary agricultural methods and by ordinary agricultural labourers working indiscriminately on the whole farm, and to give to the selected portion the name of a "garden for the sale of produce." To my mind there is no find ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... und that the farming operations were ancillary to what they described as "the market garden operations" carried on upon the remainder of the 229 acres. These, apart from 11½ acres of fallow, were used for growing, as set out in the case, sixteen different kinds of crops or produce, potatoes (7 acres), peas (26½ acres), beans (18½ acres), brussels sprouts (44½ acres), savoys (4 acres), cauliflo- wers (18½ acres), leeks (3½ acres), carrots (4 acres), asparagus (2 acres), plants (5 acres), rhubarb (1 acres), plums (17 acres), blackcurrants (1½ acres), strawberries (32 acres), raspberries (5 acres) and loganberries (2 acres). The conclusions of the Commissioners were that the whole of the 229 acres were occupied as gardens for the sale of produce and assessable under rule 8, and that the remainder of the land occupied by the appellant was devoted to farming operations assessable under the ordinary rules applicable to Schedule B. Lawrence, J., held that the acres under wheat, parsnips, mangolds and lucerne were, on the face of the case, outside rule 8, but as to the remainder he decided that the decision of the Commissioners sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be applied to an acreage which is worked as a single mixed farm in one unit. This latter point is that in which Lawrence, J., would have, if he had felt free to do so, decided for the appellant, on the footing, as I follow it, that, according to the findings in the case, the whole area of 536 acres is not capable of being split or divided into two separate undertakings, one garden, the other a farm, but there is one single agricultural under- taking, and that the parts which might otherwise be regarded as gardens are nothing more than parts of a single farming unit. What, however is the test by which it may be ascertained what are gardens within rule 8 as contrasted with a farm generally? It cannot be merely that the land is managed for the sale of the produce, that is, to make profits. All that a husbandman grows is for sale, subject, of course, to deducting such produce as is grown for use in connection with other parts of the undertaking (as, for example, in this case the parsnips and lucerne) or for the use of himself and his family. The farmer is a trader so far as he sells, though apart from election under rule 5 he is assessed under Schedule B. The specific reference to sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich the appellant used. The growth of the population, now mainly urban, and the great facilities for transmission must tend to the use, even in lands occupied as gardens within rule 8, of agricultural methods. I therefore do not think that the use of such methods as contrasted with horticultural methods in the stricter sense can serve as a general criterion to distinguish gardening within rule 8 from farming, although that factor may be taken into account in considering whether particular lands are garden lands as contrasted with farm lands. The nature of the produce raised is no doubt also an important factor. But there again the line cannot be drawn with precision. Garden produce as meant by rule 8 has been described as what is sold in greengrocers' shops. But modern methods and demands have in many cases led to specialised production on a large scale. Potatoes are clearly an ordinary and important part of a greengrocer's stock. But it seems to me impossible to treat a case of cultivation like that illustrated in Back v. Daniels [1924] 9 Tax Cas. 183 as gardening in contradistinction from farming. There a large area, about 187 acres, was devoted to potato growing for sal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was at times used for other crops. That may be described as an easy case, but it is no authority to govern this case. Indeed, it is in sharp contrast and illustrates the absence from this case of the factors necessary to constitute a garden. There was there a defined unit of occupation as a garden. Here there is no defined unit of occu- pation as a garden. On the contrary, the only defined unit of occupation is, according to the Commissioner's finding, a mixed farm. The main area was called Springhill, which covered 508 acres. Within that area the great bulk of the mixed farming operations was carried on. The accuracy of the statement made by Scott, L.J., in his judgment was accepted in argument in this House. He said: "There is nothing in their [the Commissioners'] findings of fact to indicate that the fields they added together [to constitute the 229 acres which they held to be gardens] were not scattered over the whole holding so as to be interspersed with mowing grass or pasture fields; and indeed it was common ground, as we were informed, that the arable fields were so interspersed." In my opinion, this state of things is inconsistent with the conception of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laiming to aggregate the disjecta membra, the scattered and islanded fields, in which fruit or vegetables are grown. But apart from all these difficulties the matter is concluded, as I think, by the first finding of the Commissioners: "The whole acreage occupied by the appellant was worked as a single mixed farm in one unit. The appellant employed ordinary farm labourers who were not highly skilled". The case adds that the workers worked indiscriminately upon the whole farm, whether upon the sheep, pigs, cattle and poultry or upon the pasture or the arable land, and the methods of cultivation were the ordinary accepted agricultural methods. In my opinion these findings mean that there was one unit of cultivation, and that it was a farm. They exclude the idea that the farm was partly "gardens", or that there was any division into component or separate parts. I picture the farmer facing the problem of what would be the best use to make of his farm of 500 odd acres from year to year, deciding what different kinds of produce or stock would pay best, what rotation of crops is required, and deciding how best to apportion his land among the different purposes. Another ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ofits made, save in so far as they affect its assessable value. The reason for the differentiation is agreed by both parties to be due to the much greater amount of profit expected to be earned proportionate to the acreage occupied in the case of lands occupied as gardens compared with that expected when they are used for husbandry or other purposes. The distinction goes back to the period at which income-tax was imposed in 1806, when not dissimilar language was used, and to the renewal of the tax in 1842, when the language was almost identical with that now in use. Under rule 8 hop gardens are now, after some changes in the law, left to be dealt with under the ordinary provisions of Schedule B, and under rules 2 and 7 lands occupied for the purpose of husbandry and woodlands managed on a commercial basis and with a view to the realisation of profits may at the option of the occupier be assessed under Schedule D instead of under Schedule B. [His Lordship reviewed the proceedings below and continued:] I did not understand the appellant to seek to establish that in a proper case a holding could not be divided into two portions, one of which was occupied as a "garden" (for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proved to be intensive, make it impossible to hold that land was occupied as a garden. Methods of cultivation change, and what at one time can only be accomplished by the spade may at another be brought about by some mechanical substitute; but, even so, the large-scale operations of a farm are still likely to be distinguishable from the more individual cultivation of a garden crop. Some continuity of treatment is also, I think, predicated. No doubt a garden must be begun at some time, and the fact that it has only just been brought into being will not prevent it from being a garden, but income-tax under or in accordance with the principles of Schedule D is chargeable upon the profits of the year to come, now estimated by the profits of the year before, and formerly upon the average profits of the three previous years. It is inconsistent with such a provision that land should in one year be regarded as occupied for husbandry and the next as a garden merely because the crops vary from year to year. No doubt if land as a whole is occupied as a garden it is immaterial that it is found advisable in the ordinary rotation of crops to grow farm produce from time to time on a portion just a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not merely ancillary activity is shown by the value and amount of the stock and the magnitude of the sums derived from its sale. Each activity was an important one and each assisted the other. That the labour was not highly skilled and that ordinary agricultural methods were used might, I think, support an argument that the appellant was a farmer, but afford no reason for dividing up his holding. Except the nature of the crop and the fact that part was arable and part pasture, the only difference between the two portions appears to be that a heavier expenditure was incurred for labour on the arable than on the other, and that to my mind is not enough, even though I accept as accurate the statement in (K) that the cost of labour over the whole farm was £ 12 per acre, and over the land upon which fruit and vegetables were grown £ 18 per acre, a statement which appears to be inconsistent with the allegation in (J) that the wages for the year amounted to £ 9,684 17s. 10d. a figure which makes wages over the whole area amount to not £ 12 but £ 17 12s. per acre. Even if splitting up were justified, I should have difficulty in holding that the divided porti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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