Revenue. "(2) That there is nothing in the terms in which the Fourth Case Feb. 6, 1912. of Schedule D is worded to restrict the liability to interest actually Scottish earned within the same year as it was remitted to, and received in, Provident the United Kingdom. Such a restriction would exempt interest Institution v. received at the end of one year which could not possibly reach the Inland United Kingdom until the following year, and would, in fact, provide a means of evading taxation in respect of all such foreign interest, in that a person owning foreign investments would only need to hold up the interest abroad until after the expiration of the year in which it was received to put himself outside the scope of the Act. "(3) That interest is assessable when remitted to this country irrespective of the year in which it is earned (Scottish Provident Institution v. Inland Revenue, 1901, 3 F. 874, Lord President Balfour at p. 879). "IV. The Commissioners having considered the facts and arguments submitted to them were of opinion that the sum of £15,681, representing the proceeds of the bearer bonds realised in the United Kingdom, was interest received in the United Kingdom within the meaning of the Fourth Case of Schedule D, and as such, chargeable with income-tax. They confirmed the assessment on said sum, and discharged the balance of the assessments. The case was heard before the First Division (without Lord Mackenzie) on 22nd November 1911. Argued for the appellants;- What the Crown sought to do here was to bring into charge for the year 1908-9 income which had accrued in a previous year. There was no statutory power to do so. Income-tax was re-imposed by the Finance Act of each year, and the tax was imposed only for the year, and affected only the income of that particular year. There was no provision in the Income-Tax Acts by which the income of previous years could be brought into charge. It was doubtful if the income from foreign investments, which had not been sent home but had been invested abroad, could ever be converted into taxable income by a subsequent sale. But in any event the effect of the Income-Tax Acts was that, when the year of assessment came to an end, the income of that year ceased to be income chargeable with income-tax. Income which had been dealt with by taxation or exemption (as here) could not be subjected to taxation in a subsequent year. The contention of the Crown that income-tax could be charged on income whenever received in this country, no matter when it might have been earned, led to absurd results. It meant that on a man's death the whole of his estate might be subjected to income-tax on the ground that it represented the investment of income earned in previous years. It meant that income-tax might be exacted upon income which had been earned in the years before income-tax was imposed. It meant that income would be taxed, not at the rate of the year when it was earned, but at the rate of some subsequent year. The case of the Scottish Provident Institution v. Inland Revenue, relied on by the respondent, was not The following references were made to the Income-Tax Acts:-5 and 6 Vict. cap. 35, sec. 52, sec. 100, Sched. D., Rule First, Fourth Case, sec. 176, Bec. 190, Sched. G, Rule X.; 16 and 17 Vict. cap. 34, sec. 2, Sched. D.; 43 and 44 Vict. cap. 19, sec. 52 (2); 7 Edw. VII. cap. 13, sec. 23 (2); 8 Edw. VII. cap. 16, sec. 7. 3 Colquhoun v. Brooks, (1889) 14 App. Cas. 493. (1901) 3 F. 874, aff. (1903) 5 F. (H. L.) 10. Scottish Feb. 6, 1912. an authority, for the point had not been argued there and the dictum of the Lord President was merely obiter. Further, the Crown had adopted the standard of assessing income-tax on the Company's last Institution v. completed balance-sheet, and that balance-sheet, being of date 31st December 1907, did not include the sums now sought to be charged. The Crown having adopted one standard were not at liberty to throw. over that standard arbitrarily and seek to charge upon a different system. Inland Argued for the respondent;-There were two questions here. (1) Was this £15,000 income? It admittedly represented the proceeds of income from foreign investments, and therefore its character as income seemed clearly established. (2) Was it subject to assessment for the year 1908-9? The year during which money was earned was not the criterion of chargeability for income-tax, but the year of realisation; and receipt of profits in this country was therefore the sole test. According to that test this sum was chargeable, as it had, on realisation, been received in Great Britain in the year of assessment.1 If the contention of the appellants were sound, an easy way of avoiding income-tax on all foreign investments would be provided, for all that would be necessary would be to retain the income abroad until the end of the year of assessment and transmit it home the following day. There was no unfairness in the contention of the Crown, for there were statutory provisions which prevented any risk of income being subjected to taxation twice over. At advising on 6th February 1912,— LORD PRESIDENT.--This is a case under the Income-Tax Acts, and the facts upon which it depends have been clearly set forth in a joint minute of admissions for the parties, which forms part of the proceedings. The Scottish Provident Institution, which is an insurance company in this country, is possessed of considerable funds abroad. Those funds are invested in, among other places, America and Canada, and the dividends from investments become part of the income of the Institution. It is set forth in the case that with about £15,000, which had so accrued, the Institution purchased bearer bonds in New York in 1907. The corpora of these bearer bonds were transmitted by them to this country for safe custody. The There was a case before your Lordships in which the Crown contended that receipt of the corpora of such bearer bonds was equivalent to receipt of the money they represented, but your Lordships held otherwise. bonds here in question, after being kept from 1907 till 1908, were sold. It is admitted that the proceeds of the sale were received at the head office of the Institution in Edinburgh. The Crown proposed to charge, and 1 Surveyor of Taxes v. Northern Investment Co. of New Zealand, (1887) 14 R. 734; Scottish Mortgage and Land Investment Co. of New Mexico v. Commissioners of Inland Revenue, (1886) 14 R. 98; Universal Life Assurance Society v. Bishop, (1899) 68 L. J., Q. B. 962; Scottish Provident Institution v. Inland Revenue, 3 F. 874, aff. sub. nom. Scottish Provident Institution v. Allan, 5 F. (H. L.) 10. 2 Taxes Management Act, 1880 (43 and 44 Vict. cap. 19), sec. 60; IncomeTax Act, 1842 (5 and 6 Vict. cap. 35), sec. 171. 8 Scottish Widows' Fund v. Inland Revenue, 1909 S. C. 1372. have charged, income-tax upon this sum, and that view has been upheld by Feb. 6, 1912. the Commissioners, and this case is presented against their determination. Scottish The whole of the argument before your Lordships turned upon this fact, Provident Institution v. as will be apparent from the statement which I have made, viz., that the Inland. actual earning of the interest upon which the charge is now proposed to be Revenue. made was not in the year of assessment with which we are dealing; but Ld. President. the realisation of the earnings by means of the sale of the bonds in this country was in the year of assessment. The matter really turns upon two parts of the Income-Tax Acts, and two alone. First of all the charging section is under section 2, Schedule D, in the Act of 1853, and it is in these terms: . . 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 to be charged for every twenty shillings of the annual amount thereof." There is no question that this case falls within that general description; and then the other section, which specially applies, is the Fourth Case of section 100 of the Income-Tax Act of 1842, which says that the duty to be charged in respect of interest "shall be computed on a sum not less than the full amount of the sums (so far as the same can be computed) which have been or will be received in Great Britain in the current year without any deduction or abatement." Now, the argument for the Crown is that the interest in question was received in Great Britain in the year of assessment and therefore must be charged. The argument for the Institution is that inasmuch as it was not earned in that year it does not fall within the Income-Tax Acts at all. I am of opinion that the determination of the Commissioners is right. There is nothing said in the Acts about profits or gains being necessarily earned within the year of assessment. No doubt that will be the natural result of the way in which the whole matter is worked; but I would like to make, first of all, this observation, that although the Act is full of the expression "annual profits and gains" in almost every section which deals with this matter, the presence of that word "annual" does not seem to me to connote necessarily the idea of nothing being chargeable which is not earned within the year of assessment, but it is there for the purpose of showing that the tax which is being levied is a tax upon income, or, in other words, upon annual profits and not upon capital. When a profit or an interest is earned in this country, the question really cannot arise, because the profit which is earned in this country is necessarily received in this country. I use the word "received," because you may quite well have a profit which has not been paid to you in hard cash. Many partnerships do not pay profits in hard cash, or a partner does not take his profits in cash, but nevertheless the profits are earned, and being earned, they are necessarily received by the partner at the time they are earned. But when the profit is earned abroad it is not necessarily received at the same time in this country. It is, of course, received in the sense of there being a right to it there, but it is not received in this country, and accordingly this Fourth Case provides that the duty shall only be computed on sums "which have been or will be received in Great Britain in the current year." As soon as they are received I think they become chargeable. Feb. 6, 1912. Scottish Provident Inland Revenue. Ld. President. 2 I have only to say another word, and it is this. The case of the Scottish Provident Institution v. Inland Revenue, which is reported in the House of Lords under the name of Allan, undoubtedly involves this point. Institution v. The rubric in the Court of Session case is rather misleading upon this matter. If you read the rubric you would think that the only point decided there was with regard to two specific sums of £25,000 and £15,000. Really, as matter of fact there was a sum of £217,000 adjudicated upon, and there is no doubt whatsoever that a considerable portion of that sum had been earned, as here, outwith the year of assessment. It is not exactly so stated in the report, but it is very evident; and a shorthand way of getting at it is to look at the figures, which show that if it was earned within the year of assessment the Scottish Provident Institution must have been in the particularly fortunate position of laying out the whole of its money at twelve per cent. The matter, however, of profit so earned was involved in that decision. I am quite aware that it was not argued, and there is a sentence in the House of Lords' report which rather looks as if Mr Blackburn had made a very late attempt to argue it in the House of Lords and was stopped because it had not been argued in the Court of Session. But there it remains, and though I do not think it is conclusive, yet, on the other hand, I think it is unlikely that if the point had been a really good one it would have been missed. On the whole matter I think the determination of the Commissioners is right. LORD KINNEAR and LORD JOHNSTON Concurred. THE COURT affirmed the determination of the Commissioners. DUNDAS & WILSON, C.S.-SIR PHILIP J. HAMILTON GRIERSON, No. 72. HIS GRACE JOHN DOUGLAS SUTHERLAND, DUKE OF ARGYLL, Pursuer (Reclaimer).—Clyde, K.C.-Macphail, K.C.—A. M. Trotter. ANGUS JOHN CAMPBELL AND ANOTHER, Defenders (Respondents).Cooper, K.C.-R. S. Brown. Feb. 6, 1912. Duke of Prescription-Positive Prescription-Habile title-Title by progress-Service--Competency of looking at prior writs to ascertain character of possession. In an action between a superior and his vassal, the latter asserted a proprietary right in a castle situated, as he alleged, on certain lands held by him, and founded his right on possession of the castle for the prescriptive period following on a decree of special service of the lands (in which the castle was not mentioned), with their parts and pertinents, recorded in 1880. Held (rev. judgment of Lord Cullen), that it was competent to look at the prior writs to ascertain the nature of the vassal's possession of the castle, and that, as these writs disclosed that the vassal's possession thereof was not as proprietor but as keeper for the superior, the service was not a habile title on which to found prescription; and claim for vassal repelled. Observations on the effect of a decree of service as the foundation for a prescriptive title. Earl of Argyll v. Laird of M'Naughton, (1671) M. 10,791, and Munro v. Munro, May 19, 1812, F. C. distinguished. Title to Heritage-Ward-Holding-Fortress-Possession by vassal as keeper Feb. 6, 1912. of the castle-Effect of abolition of ward-holding on vassal's title-Superior Duke of and Vassal-Property-Parts and Pertinents-Clan Act, 1747 (20 Geo. II. cap. 50). From ancient times the lands of Pennycastle of, Dunstaffnage with their parts and pertinents were held by a vassal on a ward-holding, the reddendo including (besides a feu-duty) the rendering of military services to the superior and the military guardianship of the castle of Dunstaffnage, as well as the duty of maintaining the castle fit for the residence of the superior and of rendering certain services of fuel whenever he should reside there. The property in the castle admittedly remained with the superior, but the vassal's duties as keeper of the castle involved the occupation and possession of it by him. After the passing of the Clan Act in 1747, by which ward-holding was abolished, the military services were commuted for a money payment, but the other obligations of the vassal still continued. the castle was burned down and was never rebuilt. In 1810 In an action between the superior and the vassal brought in 1909, the vassal asserted a right of property in the castle, and maintained that, after the passing of the Clan Act, his possession of the castle was no longer that of military keeper for the superior, but was that of proprietor. Held that the superior was still the proprietor of the castle, in respect that the Clan Act, though abolishing military services, did not alter the proprietary rights in the subjects, and that after 1747 the vassal had continued in possession of the castle solely as keeper for the superior for the purpose of rendering the civil services enumerated in his charters. Argyll v. Ox 21st May 1909 an action was brought by the Duke of Argyll 1ST DIVISION. against Angus John Campbell of Dunstaffnage, and Mrs Jane Camp- Lord Cullen. bell, his mother, as his curator, concluding for declarator, " First, that the subjects following, videlicet, All and Whole the Castle of Dunstaffnage, with the whole houses, buildings, gardens, yards, and other enclosures and pertinents thereof lying within the lordship and barony of Lorne and county of Argyll, pertain and belong heritably in property to the pursuer; and Second, that the defender the said Angus John Campbell has no right or title of any kind in and to the said Castle of Dunstaffnage, houses, buildings, gardens, yards, and other enclosures thereof, or any of them." The summons also concluded for a decree ordaining the defender to remove from the subjects. The pursuer averred, inter alia:-(Cond. 1) "The pursuer is proprietor of the lands, lordship, and barony of Lorne, under and by virtue of numerous Crown grants in favour of his predecessors and authors..." (Cond. 2) "The defender Angus John Campbell (hereinafter referred to as 'the defender') is proprietor of All and Whole the lands of Pennycastle of Dunstaffnage, Penny Chenich, the one-penny land of Gannivan, the one-penny land of Penginaphuir, the one-penny land of Garupengerie, the one-penny land of Kilmore, and the one-penny land of Davagavach, with the pertinents lying in the said lordship of Lorne, conform to extract decree of special service as eldest son and nearest and lawful heir of tailzie and provision to his father, the deceased Alexander James Henry Campbell, dated 26th, and recorded in Chancery 27th May, and in the Division of the General Register of Sasines applicable to the |