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TMI Blog1941 (12) TMI 27X X X X Extracts X X X X X X X X Extracts X X X X ..... e services of their groundsman whose function is to keep the surface of the landing-ground in good order; (2) the provisions of firstaid appliances and tools under a condition contained in the licence from the Air Ministry. This condition can apparently be satisfied by keeping the appliances and tools in an accessible place without the necessity of having any staff to use them or hand them out. The first contention on behalf of the Crown was, and is, that the respondents were in respect of some of their activities carrying on a trade and were consequently assessable under case I. This contention the Commissioners quite clearly negatived by implication. This appears from the language of Case VI which only applies to profits not falling under any of the foregoing Cases. Having regard to the conclusions which I have reached, it is unnecessary to consider the question whether, in view of the finding of the Commissioners, it is open to the Crown to argue that the relevant case is Case I. The respondents' contention was to the effect that all their profits are derived from their property rights as owners of the aerodrome, or from the occupation of the land, or alternatively from a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... referable to a trade under Case I of Schedule D, or to a profit under Case VI. Instances of these endeavours are to be found in the case of Schedule A in Fry v. Salisbury House Estates Ltd. [1930] 15 Tax Cas. 296, and in the case of Schedule B in Glanely (Lord) v. Wightman [1933] 17 Tax Cas. 634; 1 I.T.R. 255. The effect of these decisions is that, were profits are referable to property or occupation, the Crown, like the subject, is bound by the statutory measure in accordance with which such profits fall to be ascertained. A further principle I think also emerges, namely, that even if the profits in question are made by means of a highly organised commercial operation, such that in ordinary parlance would be described as a trading operation, the relevant Schedule, be it A or B, must be applied. Once a profit is referable to property or occupation, in that category it must remain. It cannot be taken out of that category by calling the operation which gives rise to it a trading operation. But these considerations do not solve the question, what profitmaking operations are referable to the right of property under Schedule A or to that of occupation under Schedule B. In ordinary lega ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which he makes, or could have made, by exploiting the land itself. The word "exploit" as I have used it requires a word of explanation. To adopt the illustration of Romer, L.J., in the Glanely Case [1933] 17 Tax Cas. 634; 1 I.T.R. 255, a man who occupies his land merely by sitting on it and therein writing poetry is not exploiting either his right of property in the land or the land itself. It is not correct to say that one of the rights of property is to sit on the land and write poetry. It is a right of property to occupy land, but the purpose for which it is occupied is from the point of view of property rights (and apart from such matters as restrictive covenants) irrelevant. The reason why a person can lawfully sit and write poetry on his land is not that his right of property confers any rights to write poetry, but because he is entitled to occupy that particular land by sitting on it, or standing on it, or lying on it, as he pleases. The writing of poetry, on the other hand, is a thing which anyone is entitled to do wherever he may be, just as is the right to twiddle one's thumbs. The word "right" in regard to these activities is used in a totally dif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat he is doing is to exploit his right of property by granting licences to come upon the land. The fact that he keeps the path in order or the monument in repair in order to make a visit more attractive to the public again appears to me to make no difference, any more than does the action of the landlord of a house keeping it in repair. To revert now to my illustration of A and B, it is to be noted that B's position is a dual one. As lessee he has vested in him part of the property rights of A; as lessee in occupation, he is in a position to exploit the land itself to his own advantage. Now suppose that B in his turn sub-demises the land to C. What he is then doing is not to exploit the land itself, but to exploit the rights in the land which the head lease has conferred upon him. In other words the profit which he derives from the sub-lease is a Schedule A matter, not a Schedule B matter. But this does not mean that he is liable to bear tax in respect of the rent which he receives. He may or may not have to bear some tax according to circumstances. For example, if both the head-lease and the sub-lease are at the same rent, being a rack rent, C deducts the tax on paying his re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hing which they can only confer by virtue of their right of property in the land, namely, the right to come upon the land and do certain acts upon it. The matter may be tested by assuming that the respondents had demised the land to X and X had then (in the absence of any restrictive covenant in his lease) granted the lease to Brooklands Aviation, Ltd. It appears to me that X would thereby have been exploiting the right of property vested in him under the lease, not his right as occupier. Now if X's lease to Brooklands Aviation, Ltd., had been a profitable one to him it is to be assumed, as a matter of business, that when X's lease came to an end, if the Brooklands Co., desired to renew their agreement, the rent payable by X under a new lease would be put up, and accordingly the Schedule A tax which would ultimately fall on the head lessors would be increased by reason of the proved increase in annual value. In the result the statutory profits derived from the property rights divided between the head lessors and X would bear one tax which would reflect the increased value of those rights. If, in the present case, the land had been demised to the Brooklands Co., with approp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... might have been covered by Schedule A, yet taking the totality of the activities there is a trade under Case I of Schedule D, or at any rate a profit which is not covered by Schedule A, and is therefore assessable under Case VI. This argument, with all respect, appears to me to be fallacious. Nought plus nought plus nought does not equal one. If the Crown is dissatisfied at the sight of a landowner obtaining by the exercise and exploitation of his property rights a profit greater than the annual value of the land as assessed under Schedule A, its remedy is to obtain, if it can, a revision of the assessment, and not to endeavour to force into another Schedule profits which are already taxed under Schedule A. In my view the present attempt deserves to fail, just as completely as did the attempt in the Salisbury House Case. I have set out the conclusions at which I have arrived on principle. But they cannot of course stand if the authorities forbid it, and I must now turn to a consideration of certain cases on which reliance was placed. I may begin by saying that the Crown's unsuccessful attempts in the Salisbury House and Glanely Cases achieved one most useful result, since the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eless for entertainments. The business of the governers in respect of these entertainments is to have the hall properly fitted and prepared for being heired out for such uses. The profits fall under Schedule D and to such profits the allowance in question has no application, as they cannot be properly described as rents or profits of lands, tenements, hereditaments or heritages." I call attention to the words "the mere tenement as it stands without furniture, etc., would be almost useless for entertainments." As appears from the stated case there, which is printed in the report in 7 Tax Cas., at pp. 518-21, the hospital made no attempt to apportion the profits as between the tenement itself and the other matters provided, and there would obviously have been no point in attempting to do so. In the present case there is nothing analogous to the provision of chattels and services found in the Rotunda Case, and I cannot regard that case as in any way inconsistent with the conclusions at which I have provisionally arrived as above set forth. In the Rotunda Case there was, as Lord Tomlin puts it in the Salisbury House Case (99 L.J.K.B., at p. 416; [1930] A.C., at p. 462; 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess. The question to what extent, if any, the profits from green fees ought to be attributed to property or occupation was not raised--no doubt for the very good reason that without the provision of amenities and services the green fees would not have been earned at all. The judgment of Hamilton, J., is directed to disposing of the argument which I have mentioned. His conclusion upon it is as follows (81 L.J.K.B., at p. 585; [1912] 2 K.B., at p. 187: 6 Tax Cas., at p. 55): "In my judgment, therefore, the club has............annexed to it ordi- nary enterprise of a golf club systematic services to strangers for the purpose of obtaining, among other advantages, the revenue that those strangers provide". In the Court of Appeal there are two observations which must be noted, one by Buckley, L.J., and one by Kennedy, L.J., (82 L.J.K.B., at pp. 841, 842; [1913] 3 K.B., at pp. 81, 83; 6 Tax Cas., at pp. 199, 201). Buckley, L.J., said: "If a landowner laid down upon his land a golf course and charged fees for admission and user--if, that is to say, the links were a proprietary golf links carried on with a view to profit--there can be no question, but that the proprietor woul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any expense incurred by the proprietor in keeping the land in such a condition as to earn profit, are, it seems to me, matters to be taken into account in fixing the Schedule A valuation, just as they would be in the case of a house or other building. Before leaving the Carlisle Case I must observe that the decision was approved in the House of Lords in the Rotunda Case. This fact was not unnaturally relied on by the Attorney-General, but the Carlisle Case was clearly being treated by the House of Lords as being, what in fact it was, a decision based on the provision of services and amenities which fell outside the scope of Schedule A. The next case relied on was that of Inland Revenue Commissioners v. Stonehaven Recreation Ground Trustees [1930] 15 Tax Cas. 419. That again was a case of a ground laid out and provided with all the necessary equipment for various games. It was not and could not have been seriously argued that the profits derived from such a concern were covered by Schedule A. The substantial argument in the case appears to have been that the ground was carried on entirely for the benefit of subscribers, and was therefore a mutual concern. I do not find that this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th my view as to the scope of "property" under Schedule A. The last case was Shop Investments, Ltd. v. Sweet [1940] 23 Tax Cas. 38, a decision of Wrottesley, J., whose judgment, if I may say so, I have found particularly illuminating and is, in my opinion, manifestly correct. There the appellant company whose business was that of acquiring and modernising properties and letting or selling the properties so moder nised had, on one occasion and contrary to their usual practice, let a cinema furnished with all its equipment and plant. Assessments were made in respect of the profits of this letting, the amount of the Schedule A assessment being allowed as a deduction. The company contended (wrongly) that the profits were covered by the Schedule A assessment. It also contended that the profits made by letting the furniture, etc., must be separated from the profit made by letting the cinema building itself, for which purpose an estimate must be made of what part of the total rent was referable to the furniture, etc. The object of this contention was, of course, to enable the company to show that a proportionate part of the rent greater than the assessed annual value was attrib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ur with him. He considered that the profits here in question were derived from occupation and does not refer to Schedule A at all. I have given my reasons for taking a different view. In the example which he gives of the tennis court he appears to regard the occupier's pleasure in using it as one of the things which are taxed. I am not satisfied as to the correctness of this view since Schedule B is concerned with profits actually earned or deemed to be earned, not with pleasure, which is essentially a non-profitable activity. But however this may be, if the tennis court is let or others are given a licence to play upon it, the profits so derived are in my judgment referable to property (whether freehold or leasehold as the case may be) and not to occupation. I should also say that Lawrence, J.'s criticisms of the golf course and similar cases cannot, in my opinion, be supported, as it does not seem to me that (apart from any question of apportionment which might have arisen, but in fact did not) the profits there in question could have been held to be exhaustively taxed under Schedule B any more than under Schedule A. His reference to repairs and the selling of petrol and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o appeals may be stated as follows: (1) Do the facts found, and set out in paragraphs 2 to 5 inclusive of the case stated, justify the conclusion come to by the Commissioners "that there was a liability under Schedule D"? (2) If the answer to the first question is in the affirmative, is the only proper inference from those facts as the Crown contends, that the tax is chargeable under Schedule D, Case I, and not as the Commissioners held under Schedule D, Case VI? Without reciting the facts which are set out in the case, I find it necessary to summarise them shortly in order to show how the problem presents itself to my mind. The Sywell Aerodrome Co., to which I shall refer as "the company", is a trading corporation with among its objects that of acquiring, providing and maintaining aerodromes, garages, hangars, sheds, landing grounds and other accommodation for, or in relation to, conveyances and vehicles of every kind. It owns freehold land which has been laid out as an aerodrome and equipped with hangars and garages. A licence has been granted to the company by the Air Ministry, permitting the use of this aerodrome "as regular place of landing or departu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... House Case Lord Dunedin had no doubt that the respondent company was carrying on a business (see 99 L.J.K.B., at p. 409; [1930] A.C., at pp. 446, 447: 15 Tax Cas. at p. 312), but the greater part of the profits which it derived from that business could not fall within the ambit of Schedule D, because they were already franked under Schedule A. It is necessary to consider, reading the relevant sections of the Act in the light of authority, whether Schedule A or Schedule B singly, or those two schedules together, leave any profits untouched which can be brought within Schedule D. It is elementary that income-tax, being a tax on income, each of the schedules imposes a tax on profits and gains, and that none of these profits and gains must be taxed twice over. Under Schedules A and B, the tax is on a presumed income: in the one case on the profits of ownership; in the other on the profits of occupations. These profits are so far distinct that, in the case of many owners who are also occupiers, tax is charged under both Schedules A and B. Similarly, an owner who occupies his land and carries on a trade upon it may well be liable to taxation on the profits of his trade under Schedule D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts and they also provided heating, lighting and attendants. They remained in occupation of the rooms and continued to exercise a general control over them. It was held that their profits were assessable under Schedule D. "The governors of the Rotunda" said Lord Atkinson (89 L.J.P.C., at p. 178; [1921] 1 A.C., at p. 35; 7 Tax Cas., at p. 592), are in my opinion, engaged in the business of letting for reward their rooms, heated, lighted and furnished with seats......and cleaned, managed and regularly controlled by their servant, the keeper......for the purpose of providing through the operations of those who take their rooms, recreation and amusement to such members of the general public as choose to pay for admission". For a reason which will presently appear, I must also quote the next two lines: "I do not think", Lord Atkinson continued "the services thus rendered can be regarded as mere incidents attached to the letting of the rooms themselves". At first sight there may appear to be some inconsistency between the words of Lord Loreburn, which Lord Dunedin approved in the Salisbury House Case, and this statement by Lord Atkinson. When, however, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tting of his property." It may be noted that in this Court, when counsel for the Crown in the Salisbury House Case sought to rely on the Rotunda Case, Lawrence, L.J., at once pointed out that there the governors remained in occupation, while in the case then before the Court the company was not in occupation of the tenements which it had left; the tenants were the sole occupiers (see [1930] 1 K.B., at p. 313). In the present case the company, in the view which I take of the facts, is paid money for admission and for the right to enjoy the services of the Brooklands Co., by those customers of the aerodrome who came to it in aeroplanes or cars with a view to the enjoyment of the facilities provided. In my opinion such receipts are quite different from "the ordinary receipts which a landlord derives from letting his property" and are not profits of ownership. Whether they can be said to be profits of occupation is, no doubt, a separate question, though the answer to it may depend on similar considerations and with it I will now deal. On the latter branch of the case the Rotunda decision is not a direct authority, because in the circumstances of the Rotunda Case Schedul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e would call a shop, is no more immune from Schedule D taxation than the normal shopkeeper. If I am rights as to such cases as those, it follows that nothing can be made of the point which was strongly pressed on behalf of the company, that clause (b) of the proviso to Rule 1 under Schedule B, which exempts from tax under that schedule "any warehouse or other building occupied for the purpose of carrying on a trade or profession", without including land not covered by buildings which is so occupied, indicates an intention on the part of the Legislature that when land not covered by a building is used for the purpose of carrying on trade the profits of that trade should be taxable under Schedule B alone. If once it is admitted that the profits of some trading activities pursued by an occupier of land, on land on which there are no buildings, are taxable under Schedule D, that point loses its force. What I have found the most difficult question in this case now presents itself for solution. On the facts found, is the company's occupation of the land "in itself and by its enjoyments" (I again quote Lord Buckmaster, ibid.) the source of its profits, in which ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it may be, with the lease of an adjoining cottage) the sole right to engage in this business with them? I have come to the conclusion that in that case he will come under Schedule D liability. There are more ways than one of carrying on a trade; and one is by granting to others the right to carry on various branches of trading activity on pre- mises occupied and controlled by the principal trade on such terms that the principal trader directly profits by those activities. A simple instance is that of the "amusements park" to which reference was made in the argument. An occupier of land which has no natural attractions invites the public to enter it and to pay for the privilege. If the land were bare, or requipped only with immobile and derelict swings and roundabouts, no one would pay to come in. Remaining in general occupation and control he grants to a number of other persons the right to occupy (whether as lessees or licensees) portions of the land, and there to work swings, round- abouts and other devices or to sell refreshments. It could, no doubt, be argued that he was only enjoying the fruits of mere occupation, that is granting to strangers the freedom of the lan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a liability under Schedule D, Case VI" as a finding of fact that the company was not carrying on a trade. As I said at the beginning of this judgment, the findings of fact are contained in paragraphs 2 to 5 of the case. The question for us is whether, as a matter of law and construction, the Commissioners have drawn the proper inference from those findings. I am of opinion that they have failed to do so. I know no better way of describing the company's activities than as an "adventure or concern in the nature of trade"; and I am of opinion that the learned Judge ought to have allowed the cross appeal. I have only to add, with regard to a subsidiary point which was argued before us, that it was in my opinion right in principle to allow a deduction of the Schedule B assessment in arriving at the assessment under Schedule D. We were referred to a statement of Lord Herschell in the House of Lords which justifies the allowance of such a deduction "because it is an essential element to be taken into account in ascertaining the amount of the balance of profits" (Russell v. Town and County Bank, 58 L.J.P.C., at p. 10; 13 App. Cas., at p. 425: 2 Tax Cas. at p. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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