TMI Blog1941 (5) TMI 13X X X X Extracts X X X X X X X X Extracts X X X X ..... pinion, 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 nurseries or gardens for the sale of the produce (other than lands used fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. acre lucerne. 26 acres peas. 18 acres beans. 44 acres brussels sprouts. 4 acres savoys. 18 acres cauliflower. 3 acres leeks. 4 acres carrots. 6 acres parsnips. 2 acres asparagus. 5 acres plants. 1 acre rhubarb. 17 acres pl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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) That the farming operations on the arable land (apart from that used for the growth of hops) are ancillary to the market garden operations. (2) That the whole of the arable land (apart from that occupied for the growth of hops) is occ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 determination is the decision of law at which the Commissioners have arrived upon the facts proved or admitted before them. It is, of course, only a determination on a question of law which is liable to be corrected by the High Court; the Commissioners' statement of the facts is final. The High Court can only discharge its proper funct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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' conclusion. 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. The Lord President says (21 Tax Cas., at p. 604): Counsel for the appellants admitted that, if the use of land for growing ve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 Commissioners for the general purposes of the income-tax for the division of Pershore West, in the County of Worcester. The Lord Chancellor has fully set out the material paragraphs of the case. The question is whether the appellant was rightly assessed to income-tax for the year ended April 5, 1937, in respect of a single mixed farm of some 550 acres by two separate assessments. The w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 1 of Schedule B. In contrast to this rule 8 provides that the profits of the nurseries or gardens must in every case be assessed and charged under Sche- dule B as profits arising from the occupation of lands. The farm lands may thus be assessed and charged under Schedule D, the nurseries and gardens must be assessed and charged under Schedule B. The conclusion is inevitable, that the two kinds of lands are quite distinct. Either a certain are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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- tioned occupy in this case 129 acres out of 160 acres of arable land (apart from the land used for fruit and the fallow), which the Com- missioners have treated as garden within the meaning of rule 8. There are some vegetables grown on the arable land as to which I do not think it can be asserted as common general knowledge that they are commonly grown by farmers as ordinary farm crops, though for all I know it is so. There are 4 acres of savoys, 18 acres of cauliflower, 2 acres of asparagus, 1 acre of rhubarb, and in addi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tain 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 prove that it is a garden rather than a farm. The matter, however, does not rest there. As Scott, L.J., pointed out, the Commissioners did not suggest that there was any physical separation which had enabled them to split the holding geographically into two self-contained units, and to decide that the whole of the arable land was not part of the farm, but was a garden for the sale of produce. Indeed, the Lord Justice states that it was admitted in argument that arable fields were in fact interspersed with mowing grass or pasture fields. There are, however, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied, 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 wrong view of the meaning of the words nurseries or gardens . In my opinion it is impossible to define in precise language the meaning of the word garden as used in the rule; and I have no intention of attempting the impossible. It is, however, possible to state the general nature of the various characteristics which go to make up such a garden. I have already pointed out the remarkable contrast between the effect of rule 5 and rule 8 in relation to the scheme of taxation. Next, I think some weight should be given to the fact that a garden is prima facie an area which is enclosed, and it is a little surprising that nothing in the case stated suggests such a separatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onfident 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 separately from agricultural labourers . The greater care employed in raising vegetables in a market garden generally results in better shape and quality in the produce. Peas and beans, as I have pointed out, may be grown on both farms and gardens; but they will not usually have quite the same taste and quality. The occupier of a farm carried on as a single unit must prima facie be entitled to be taxed as if it were a unit. It is in fact a unit of occupation. As pointed out above, he is entitled, if he pleases, to be assessed and charged under Schedule D, and this must prima facie be on the whole of his profits and gains. I think this follows from Schedule D, Cases I and II, rule 16, which provides that his statement of profits ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 finding of fact in the case stated which justifies such a con- clusion. On the contrary, I think that the findings of fact to which I have more than once referred lead only to the conclusion that the arable land is part of a mixed farm used for the purposes of husbandry and cannot be brought within rule 8. For the above reasons I think this appeal should be allowed, and I agree with the motion proposed by the Lord Chancellor. VISCOUNT MAUGHAM.- My Lords, I am asked by my noble and learned friend Lord Russell of Killowen to say that he concurs in the opinion which I have just delivered. LORD WRIGHT.- This appeal comes to your Lordships upon a case stated by the Commissioners for Taxes under Section 149 of the Income Tax Act, 191 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 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 shall be upheld. His own view was that the finding in the special case that the whole acreage was worked as a single mixed farm was inconsistent with the decision to uphold an assessment on one part as gardens and on another as farm lands, because the land to be assessable as gardens must be distinct and separable from the farm. He thought, however, that there was some evidence to support the Commissioners' finding on the authority of Lowe Sons, Limited v. Inland Revenue Commissioners [1938] 21 Tax Cas. 597, where it was held by the Court of Session that the Commissioners could apportion the assessment even where lands were held and worked as one unit. In the Court of Appeal by a majority, Scott, L.J., dissenting, the decision, of Lawrence, J., was upheld, except that the Court restored t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 sale as the object of growing the produce is to distinguish a garden within rule 8 from a private, noncommercial garden, ranging from the cottage garden to the garden of a great mansion, in which the fruit or flowers or vegetables are grown for home consumption or for the pleasure or the pride or the benevolence of the occupier. To distinguish gardening operations in this connection from other agricultural operations to raise produce from the land there must be some other criterion. Scott, L.J., in his judgment has thrown light on this question by tracing back rule 8 to its first appearance in the Act of 1806, then, when that Act lapsed, to its re-enactment in 1842. I disregard the special treatment of hoplands. Nurseries then as now were coupled with gardens . Scott, L.J., quotes from an interesting work, Middleton ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 sale. The question in the case was who was occupier, but throughout, as a matter of course, the operation is referred to as farming or husbandry, and the assessment was under the ordinary rules of Schedule B. This view seems to me to be right. The same must be true, I think, of the raising on a large scale of crops of a particular produce such as cabbages. It does not follow that because certain produce is grown in gardens any land on which it is grown is necessarily a garden. The word gardens is not used in rule 8 in a technical sense. It is an ordinary word, to be understood as in ordinary popular usage. But whatever else may be included in the word gardens in the rule, I think it cannot be wholly divorced from its root idea, of a substantially homogeneous area, substantially devoted to the growth of fruits, flowers and vegetables. The diction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 gardens. Gardens within the meaning of rule 8 cannot be notionally constituted by kicking out from the total area about 16 scattered fields, used in the year of assessment for producing fruit and vegetables. It would logically be just as easy to say that if there were in the middle of the farm lands in a large farm a single field of cabbages that single field was a garden within rule 8. I do not doubt that in a large holding there might be two distinct portions spatially severable, one devoted to farming operations, the other to the growing of fruit and vegetables. Each of these separate areas might properly be separately assessed, the one area as a farm under the ordinary rules of Schedule B, the other as gardens under rule 8. But that is a different matter. There is in that case no intermingling of garden and farm. The Commissioners' conclusion would also involve serious administrative difficulties. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o 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 year he would have the same problem and presumably settle it in a different way. Lawrence, J., was of opinion, as I have already observed, that the first finding was inconsistent with a decision to uphold an assessment on one part as gardens and on an another part as farm lands. I agree with him, and I also agree with him in taking as an essential criterion of gardens in rule 8 that the lands to be characterised as gardens must be distinct and separate from the farm. This was also the view of Scott, L.J. Lawrence, J., was diverted from his own view because he felt bound to follow the Scots decision, Lowe Sons, Ltd. v. Inland Revenue Commissioners [1938] 21 Tax Cas. 597. But in that case the taxpayer admitted the possibility of picking out individual separate fields and aggregating them to form notional gardens . I think the case cannot be supported in principle. The other cases cited do not appear to me to help, and I do not discuss them. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... viewed 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 brevity's sake I omit the words for the sale of the produce ) and the other not so occupied. Nor do I think he would be right if he did. Provided it is clearly shown that one part of the land is so occupied and there is a definite separation in the method of working, I see no reason why the two portions should not be separately assessed, and speaking for myself I think this conclusion might be arrived at though the portions separately worked were not divided into two continuous parts, but were made up of broken portions of the area. In the latter case, however, it would, I think, require very clear evidence that the working and method of working of the part classified as a garden differed from that of the other portion of the lands. The appellant did, I think, contend that in no case was it permissible to deduce the conclusion that the land was occupied as a garden solely from the type of crop grown, that is, from the fact that it was what the representatives of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry 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 as, if land as a whole is occupied for husbandry it, or a portion of it, does not become a garden because garden produce is cultivated from time to time on some part of it. It is the cultivation as a whole that is to be looked at, not its temporary variations. These principles are, I think, consistent with the decided cases. In both Monro and Cobley v. Bailey [1933] 17 Tax Cas. 607, 1 I.T.R. 269 and in Dennis v. Hick [1935] 19 Tax Cas. 219 the whole of the land occupied was found to be occupied as a garden because substantially that was its use, though in the earlier case a much larger acreage was cultivated in order that the room necessary for the replanting of bulbs might be available. In the latter the portion not used for gardening purpose was found to be merely ancillary to the part so used, by which I understand it to be meant that the additional portion was worked with the garden as one unit because it was convenient to do so. In neither case was the finding dependen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 portion was occupied as a garden. The only evidence is derived from the crop, the fact that part was sold through an agent, and that supplies were sometimes obtained from other growers. Many of the crops are such as might be grown either on a farm or in a garden. If there had been a finding that a substantial portion of the crop was such as in the district was grown in garden only and not on farms the conclusion that the arable was occupied as a garden might be justified, at any rate on an undivided farm, but to my mind it is not enough for facts to be set out which do not of themselves (apart from circumstances which may possibly exist and be known to the Commissioners to exist) point to a conclusion either way, and then to have a finding of fact from those inconclusive matters. There may, it is true, be other facts justi fying the conclusion, but your Lordships, like any other tribunal to whom the case is referred, are bound to consider only the facts found. It seems to be not unusual, if my exa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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