Scottish Court of Session Decisions

At a meeting of the Income Tax Commissioners for the County of Haddington, held there on 10th May 1912, Miss C. E. Wylie, Eastfield, North Berwick, appealed against an assessment on the sum of £60 (at the rate of Is. 2d. per £1) for the year ending 5th April 1912, made upon her under the Acts 5 and 6 Vict. cap. 35, section 100, Sched. D; 16 and 17 Vict. cap. 34, section 2, Sched. D; and 1 and 2 Geo. V, cap. 48, section 14.

The Commissioners having confirmed the assessment, a case for appeal was stated.

The facts were as follows:—“The assessment was made on Miss Charlotte Ethel Wylie in respect of rent received by her for letting her house, Eastfield, North Berwick, furnished, for the months of August and September 1911.

“The rent received for said two months was £90 and the following deductions were allowed:—

Valued rent for two months	£14
Proportion of rates	3
Wear and tear of furniture	9
Cleaning	2
Agency	2
		30
		£60

For the appellant it was contended (while the fairness of the above deductions was not disputed) that the rent paid by Miss Wylie for a furnished house at Aberfeldy, during the period for which she let and endeavoured to let her house at North Berwick, is a proper deduction, and the assessor had not allowed anything for it. The house at North Berwick was the appellant's only house, and she had no other house to which to remove in order to vacate the North Berwick house and so render it a lettable subject. The address of the house so rented by her was Cuilaluinn, Aberfeldy, and the amount paid by her for the use of it for four months was £70 (seventy pounds).

The Surveyor of Taxes (Mr W. J. Eccott) maintained that the rent paid by Miss Wylie for the house she occupied during the time her house at North Berwick was let is not a proper deduction for the following reasons:—The Income Tax Acts contemplate the assessment of profit and are not concerned with the application or destination of the profit when it is made.

This principle has been repeatedly laid down, and particularly in the following cases:—Mr Justice Day in Paddington Burial Board v. Commissioners of Inland Revenue ( 2 T.C. 50), 1884; Lord Trayner in Californian Copper Syndicate v. Harris ( 5 T.C. 168, 1904, 41 S.L.R. 691).

The Surveyor further argued that if the appellant contended that no profit could be said to be realised until she had actually returned to her house, and had set over her expenditure upon lodging against her receipts from letting her house, she was confusing two totally distinct things. What was sought to be ascertained were the expenses necessarily incurred in the process of letting the house at North Berwick furnished. Now, the expense incurred by Miss Wylie in taking another house elsewhere was not such an expense. She might have gone to stay with friends. Or again, supposing she had not let it, but she wished to take a holiday abroad or at Aberfeldy, she could not claim to set the expense so incurred against any other portion of her income.”

The case was heard on 30th October 1912 before the Lord President, Lord Johnston, and Lord Cullen.

Argued for appellant—Profits were ascertained by setting against the income earned the necessary cost of earning it—Dowell's Income Tax Laws (6th ed.), p. 185, and cases there cited. The appellant had only one house, and in order to let it she had to take another, for she was entitled to a roof over her head. The rent of the second house therefore was a necessary incident of earning the profit in question—Hallett Fry on Income Tax, p. 20. Esto that the appellant would not be entitled to deduct the cost of maintaining herself, that was because the Income Tax Acts had expressly so provided. The appeal therefore ought to be sustained.

Argued for respondent—Taking a second house was not a necessary incident of letting one's house. The rent of the second

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house was therefore not a proper deduction. No allowance could be made for expenses which (like the expenses in question) were not necessary to earn the profit, but came out of the profit after it had been earned—Dowell ( cit. supra), pp. 185, 197; Strong & Company, Limited v. Woodifield, [1906] AC 448.