Peterborough Royal Foxhound Show Society v. Commissioners of Inland Revenue

[1936] 1 All ER 813

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(Judgment by: Lawrence J)

Between: Peterborough Royal Foxhound Show Society
And: Commissioners of Inland Revenue

Court:

Judge:
Lawrence J

Subject References:
taxation
Income tax
Exemption
Charity
Society to promote interests of foxhound breeding
Agricultural society

Legislative References:
Income Tax Act 1918 (c 40) - s 37
Finance Act 1921 (c 32) - s 30
Finance Act 1923 (c 14) - s 11
Finance Act 1924 (c 21) - s 23
Finance Act 1927 (c 10) - s 24

Case References:
Income Tax Special Purposes Commissioners v Pemsel - [1891] AC 531; 28 Digest 10, 51
Re Macduff, Macduff v Macduff - [1896] 2 Ch 451; 8 Digest 296, 731
Re Nottage, Jones v Palmer - [1895] 2 Ch 649; 8 Digest 265, 226
Inland Revenue Commissioners v Yorkshire Agricultural Society - [1928] 1 KB 611; 13 Tax Cas 58; Digest Supp.
General Medical Council v Inland Revenue Commissioners, English Branch Council of General Medical Council v Inland Revenue Commissioners - (1928), 13 Tax Cas 819; Digest Supp.
A-G v National Provincial & Union Bank of England - [1924] AC 26; Digest Supp.

Hearing date: 20 March 1936
Judgment date: 31 March 1936

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Judgment by:
Lawrence J

The first question I have to decide is whether the appellant society is exempt from income tax on the profits of its show by reason of the Finance Act 1924, s 23, which provides that profits arising to an agricultural society from a show held for the purposes of the society shall, if they are applied solely to the purposes of the society, be exempt from income tax, and defines an agricultural society as one established for the purpose of promoting the interests of agriculture, horticulture, live stock breeding, or forestry. By its constitution, the purpose of the appellant society is to promote the interests of foxhound breeding, and the only question on this branch of the appeal is whether foxhound breeding is live stock breeding within the meaning of the Finance Act 1924, s 23. In my opinion, it is. The words "live stock" are ordinarily and properly used in contrast with dead stock and include all live animals and birds the breeding of which is regulated by man. In Murray's, the only dictionary to which my attention was called, the words are defined as "domestic animals or animals kept for use or profit." They are defined in the Finance Act 1923, s 11, for the purpose of exempting live stock shows from entertainment duty, as including animals of any description, and they are used in a somewhat similar sense in the Agricultural Holdings Act 1923, ss 12(6), 34, 35, 36, and 57.

It was contended for the Crown that the words ought to be construed, in view of their context, in accordance with the maxim noscitur a sociis, as referring only to animals whose use is an integral part of agriculture, horticulture or forestry. But such an interpretation would exclude many animals which are bred in the ordinary course of agriculture and shown throughout the country; for example, town, and van horses, hackneys, hunters, race horses, most breeds of dogs, and fur-bearing animals. I see no reason why the words should receive this limited interpretation, particularly as it was the will of the legislature that such societies should be exempted from entertainment duty.

The second question is whether the appellant society is exempted from income tax on the proceeds of its investments under the Finance Act 1918, s 37, on the ground that it is established for charitable purposes only. It was contended for the Crown, though but faintly, that the question is one of fact and that the commissioners' finding is binding upon me; but as I read the decisions upon this subject, it is for the commissioners to say what are the purposes of the society, and for the court to decide as a matter of law whether those purposes are charitable. The only finding of fact as to the object of this society is in para 3 of the case, namely, that it is to promote the interests of foxhound breeding. The appellants seek to bring their society within the fourth category stated by Lord Macnaghten in Pemsel's case on the ground, inter alia, that fox hunting is good for the community at large because it keeps money in the country and brings it into the countryside, and also good for officers in the army and those who take part in it, and that it makes for the well-being of animals, which is for the benefit of the community. Though I am firmly convinced of the truth of these propositions of fact, I am unable to take the view that the appellant society is established for charitable purposes only. It has, I think, been authoritatively laid down that Lord Macnaghten's fourth category must be tested by reference to the subjects mentioned in the statute of Elizabeth itself; see Re Macduff at page 464. Adopting this method of interpretation, I can see no satisfactory analogy between a foxhound show and the matters referred to in the statute of Elizabeth.

The difficulty in this class of case arises principally from the mixture of motives or purposes which appear to exist in the minds of the founders of such societies. A society may be established with an immediate direct but incidental motive or purpose which is not charitable; for example, to promote the sports of a particular regiment, but with an ultimate indirect but main purpose which is charitable, and in that case it comes within the exemption; see Re Nottage at page 656; per Rowlatt J, Inland Revenue Commissioners v Yorkshire Agricultural Society at page 77; per Sargant LJ, General Medical Council v Inland Revenue Commissioners, at page 849; and per Lord Haldane: in A-G v National & Union Provincial Bank of England, at page 267. Similarly, in the Yorkshire Agricultural Society's case, the benefit of members and, as I think, the hound show were incidental purposes, agriculture being the main purpose.

The question then, in my opinion, is whether the society's main or dominant purpose is charitable. In the present case I am of opinion that the main purpose of the appellant society's activities is to benefit fox hunting, not to benefit the community.

The case most favourable to the appellants' contention is the Yorkshire Agricultural Society's case. There agriculture was held to be the main purpose of the society and was considered to be directly beneficial to the community, whereas here, fox hunting cannot, in my opinion, be said to be directly beneficial to the community. At any rate, fox hunting is not, in my opinion, analogous to the subjects mentioned in the statute of Elizabeth, and I therefore hold that the appellant society is not established for charitable purposes only.

The appeal will be allowed in part with reference to the live stock breeding point.

No order for costs.