Scottish Court of Session Decisions

Now the sum of £17,032, 15s., upon which the charge is made under schedule D of the Incometax Act, comprehends the whole portion of the revenue of the Water Commissioners which is applied towards the formation of the sinking fund in redemption of the annuities and mortgages in the manner that I have already mentioned, and also the balance, if any, which is carried forward to the following year's account, to be applied as the Act directs in reducing the domestic water rate; and the question is, whether income arising from this assessment, which is appropriated to such purposes, is assessable for Income-tax under schedule D as profits of this water undertaking. I am humbly of opinion that it is not. It seems to me that this is an Act of Parliament by which the citizens of Glasgow 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. If in the progress of the operation of this Act the City of Glasgow is in so happy a condition that they can afford to reduce their assessments to a mere fraction of a penny, that must be done under the operation of the statute. If that fraction of a penny is sufficient to pay the current expenses of maintaining this Water Commission, and the works under their charge, and I suppose if by some wonderful scheme of good management they should so contrive that they would be able to get water for nothing by-and-bye, then the right to evy assessment would come to an end altogether. But one thing at least is perfectly certain, that it is made matter of absolute statutory regulation that the expense of supplying this water, including all the various items of expenditure that I have already mentioned, and the revenue, are to be kept actually commensurate and equivalent, as near as possibly can be; and that being practically impossible in every year, the way in which the same object is achieved is by carrying over any surplus of one year into the next year, and employing it in reducing the assessments, and so in reducing the revenue for the next year. Now, it seems to me that it is not within the contemplation of schedule D of the Income-tax Act to charge any portion of a local rate raised for such a purpose as profit, or as anything else falling within that schedule D. 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 assessment did not impose it upon the citizens of the particular burgh or locality which obtained the Act. It was not an authority to the citizens of a particular locality to assess themselves. On the contrary, it was a right and privilege given to a particular corporation to assess everybody—the whole public who happened to import, in the one case, coals into the burgh; and, in the other case, to import something else—I forget what it was. But there, it must be observed, the corporation of the particular burgh, or the commissioners—for it does not matter in the least degree which they were—were making a profit out of a tax levied upon the lieges generally, and were applying the proceeds of that tax for the benefit of the community which they represented; and therefore they were held, most justly I think, to be making profit, no doubt not for individual benefit, but for corporate benefit, and for the benefit of the community, represented by the administrative body that levied the tax.

I have only further to say, that if any attempt had been made here to discriminate between that portion of the revenue which arises from the rates levied within the limits of compulsory supply, and that portion of the revenue which is raised in the districts beyond the limits of compulsory supply, I should have been very glad to attend to any grounds which might have been urged for such a distinction. It was said no doubt in argument, but rather by way of illustration of the general claim than anything else, that this corporation does in a certain sense trade in water, and sell it to those people who are outside the limits of compulsory supply—that it is matter of traffic with them; and what they derive from them in the shape of rates may perhaps be fairly represented as coming within the denomination of profit—of revenue derived from the use of a certain subject of which they are the administrators. But it appears to me that that question does not arise here. We have not before us the means of seeing what the result of the transactions between the Water Commissioners and the persons beyond the limits of compulsory supply are or have been. We don't know that any surplus has arisen from these transactions. Most certainly we know that the only sum which is here charged with Income-tax does not represent anything in the nature of profits derived from that special source, but, on the contrary, represents the whole part of the revenue of the Water Commission which is devoted by Parliament towards the ormation of a sinking fund, and which has been directed

Page: 468↓