Scottish Court of Session Decisions

The Northern Investment Company of New Zealand, Limited, incorporated under the Companies Acts, was formed in 1880 principally for the purpose of borrowing money on debentures in this country, and lending it, along with the paid-up capital, upon securities in New Zealand.

The head-office of the company was in Edinburgh, with a managing board of six directors. There was a local board of directors in New Zealand with a manager there. Since its formation it had in each year been assessed on its profits and gains, and had paid duty thereon in terms of the first case of Schedule D of the Act 5 and 6 Vict. c. 35, sec. 100. For the year ending 5th April 1886 the Surveyor of Taxes made a surcharge of £236, 3s. 4d., being duty on the sum of £7085, the said sum representing the difference between the sum on which the company was assessed for the year 1885–1886 in terms of the first case, and the amount of the profits or gains from colonial securities computed in terms of the fourth case of the said Schedule D. The Surveyor and the company were agreed as to the figures.

Before the Commissioners it was maintained on behalf of the company that it, the company, was “an adventure or concern in the nature of trade,” and that for the purposes of assessment to income-tax the profits of the company for the year of assessment should be estimated according to the rule contained in the first case of Schedule D, section 100 of the Income-Tax Act, 5 and 6

Page: 531↓

Vict. cap. 35, on the average of the three preceding years, in the same manner as it had been hitherto assessed.

The Surveyor maintained on behalf of the Crown that the profits were of the nature described or comprised in the third clause, Schedule D, section 2, of the Act 16 and 17 Vict. cap. 34, viz., “for and in respect of all interest of money, annuities, and other annual profits and gains not charged by virtue of any of the other schedules contained in this Act;” and that the company was liable to be assessed on the total amount of interest which had been or would be received in the United Kingdom in the year of assessment, according to the rule contained in the fourth case of Schedule D, section 100, of 5 and 6 Vict. cap. 35.

The Surveyor further contended that a species of profit or gain appropriately set forth in the statute by its true specific denomination as chargeable in a particular way under a particular rule could not properly be classed under another and more general designation, in order to bring it under the operation of another rule regulating the assessment of a different description of profit; the Surveyor referred to the case of The Scottish Mortgage and Land Investment Company of New Mexico (Limited) v. The Commissioners of Inland Revenue, November 19, 1886, ante p. 87, 14 R. 98.

The Commissioners were of opinion that the profits of the business carried on by the company were chargeable with income-tax under the rules applicable to the first case of Schedule D aforesaid, sustained the appeal of the company, and discharged the surcharge by the Surveyor.

The company appealed, and a Case was stated by the Commissioners. Reference is made to the report of The Scottish Mortgage and Land Investment Company of New Mexico (Limited) v. The Commissioners of Inland Revenue, supra cit., where the cases of Schedule D are quoted.

The appellant maintained that the case could not be distinguished from that of The Scottish Mortgage and Land Investment Company of New Mexico (Limited), supra cit.

Argued for the company—This case was distinguishable from the case of the New Mexico Company, on the ground that the New Mexico Company was a new company, and the assessment imposed was a first assessment. The New Zealand Company had, however, been assessed under the first case of Schedule D, and it was now proposed to assess it under the fourth case of that Schedule. It was quite possible that an assessment might be imposed under either of the cases. The Lord President, in his opinion in the New Mexico Company's case, recognised that the Commissioners had an option as to the case under which they should assess. This option was in the general Commissioners, and not in the Inland Revenue Commissioners. They had exercised that option, and they thought they were entitled to continue to assess according to that rule. The Commissioners could not be allowed to change their minds as to the case under which they should impose an assessment. If that were allowed the same income might be subjected to a double assessment.

At advising—