PresentHutchinson CJ. and Wood Renton J.
Nov. 2, 1010
CRAWFORD etal. v. MUNICIPAL COUNCIL OF COLOMBO.243—D. C. Colombo, 29,252.
Havelock racecourse—Annual value—Assessment—Principles on which
the assessment should be made—Municipal Councils Ordinance,
1887, s. 133.
To assess the annual value of the Havelock racecourse it is notenough to take the difference between the receipts and expenditureof the Turf Club ; a deduction should be made for the interest of theClub’s capital and for its profits.
Hutchinson C.J.—It is unreasonable to suppose that anytenant, including the Club as a possible tenant, would be contentto carry on the business for the sole benefit of the landlord, and tohand over to the landlord the whole of the receipts, deducting onlythe necessary expenses. It seems to me to be clearly right to deductfrom the gross profits—that is, from the difference between thereceipts and the expenditure of the Club—a sum for the profitswhich the tenant would expect to make, and for interest on thecapital which he would.require to carry on the business.
Donations to outstation race meets and the expenses of theTurf Club Ball must be included among the working expenses ofthe Club.
Sums earned by the Club on lotteries should be included amongthe items of income.
fJIHE facts appear from the judgment.
Sampayo, K.C., for the Municipal Council, appellants.
Van Langenberg, Acting S.-G. (with him Morgan de Saram), forthe respondents.
Cur. adv. vult.
November 2, 1910. Hutchinson CJ.—
The trustees of the Ceylon Turf Club brought this action for thereduction of the assessment of the Havelock racecourse, of whichthey are the owners, for the year 1909 by the Municipal Council ofColombo. It was assessed at Rs. 12,161, and they claimed that itshould be reduced to Rs. 10,560. The District Court has orderedit to be so reduced, and the Council appeals against the order.
The assessment must by section 133 of the Municipal CouncilsOrdinance, No. 7 of 1887, be of the “annual value” ; and bysection 3 “ annual value ” means the annual rent which a tenantmight reasonably be expected, taking one year with another, to pay
34——.T. N. A 03343 (11 ’40)
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Nov. 2, iujo jf he undertook to pay all public rates and taxes, and if the landlordHutchinson undertook to bear the cost of repairs, maintenance, and upkeep.
J. The question to be decided was, therefore, what rent could theCrawford v. owner, if he were not the same person as the Club, expect to getThe Muni- from a tenant, taking into account the Club as one of the possiblem^CoUrr*bo tenants ? In considering this the District Judge said that hedoubted, on examining the accounts, whether the racecourse couldbe conducted with profit (that is as a racecourse) by any one under-taking it as a purely commercial business. He then found that thegross yearly receipts for the three years ending in September, 1907,were Rs. 61,901. The Council said that to this should be added' Rs. 2,759 earned by the Club on lotteries ; and this is clearly right,unless the addition of that sum would raise the assessment to a sumbeyond that at which the Council fixed it. That makes the grossreceipts Rs. 64,660. The Council contend that the property shouldbe assessed at the full amount of the difference between that incomeand the expenditure of the Club. Before considering this I willdispose of one or two minor matters.
The Club exists for the purpose of encouraging horse racing inCeylon. In its expenses it includes (1) donations which it makesto outstation race meets, which the Judge computes to be on anaverage Rs. 1,565 a year ; and (2) expenses of the Turf Club Ballgiven during the August meet in Colombo Rs. 1,379. The Councilobjected to these items, but the learned Judge allowed them, andI think quite rightly. If the Club were carrying on the businessfor the purpose of making a profit, it would doubtless make the sameexpenditure for the purpose of obtaining the support of the public.There are some small items amounting to Rs. 1,748 which the Judgehas also allowed, rightly in my opinion, and one of Rs. 285 formanure and gravel, which he has not allowed, but which it seemsto me might properly have been allowed.
We then come to the most important point, whether the rentwhich might be expected is the total difference between the receiptsand expenditure, or whether a deduction should be made for tenant’scapital and tenant’s profits. It is unreasonable to suppose that anytenant, including the Club as a possible tenant, would be contentto carry on the business for the sole benefit of the landlord, and tohand over to the landlord the whole of the receipts, deducting onlythe necessary expenses. It seems to me to be clearly right to deductfrom the gross profits—that is, from the difference between thereceipts and the expenditure of the Club—a sum for the profitswhich the tenant would expect to make and for interest on thecapital which he would require to carry on the business. And lthink that the sum which the District Judge, has deducted on thataccount is reasonable ; he has estimated the capital required atRs. 34,000, and he allowed 1 per cent, on that, viz., 5 per cent,for interest on the capital, 10 per cent, for profits, and 2£ per cent,
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for risks and casualties. If, then, the gross receipts are put at Nov- 2>1910Rs. 64,660, and we deduct from that sum the expenses (including Hutchinsoninsurance), and the taxes, and the interest on capital, and the C'-J-
profits, the result is a sum less than Rs. 10,560.
I would therefore dismiss the appeal with'costs.
Crawford v.The Muni-cipal Councilof Colombo
Wood Renton J.—
In this case the plaintifls-respondents, who are the trustees of theCeylon Turf Club, sued the defendants-appellants, the MunicipalCouncil of Colombo, for a reduction of the assessment for 1909 ofthe annual value of the Havelock racecourse from Rs. 12,161 toRs. 10,560. The learned District Judge gave judgment in favourof the respondents as prayed for with costs, and the MunicipalCouncil appealed.
The main points argued in support of the appeal were these.(1) That the District Judge was wrong in treating the Ceylon TurfClub as a commercial undertaking, whose trade profits have to betaken account of before assessable value is arrived at ; (2) that theamounts derived by the Turf Club from sweeps should have beenincluded as an item of income ; and (3) that the figure, namely,Rs. 34,000, at which the District Judge has fixed the necessarycapital of the Turf Club for the purpose of ascertaining the amountto be deducted as interest on capital, is excessive.
No authority, either English or local, bearing directly on thequestion of the assessment of a racecourse, conducted, as is theHavelock racecourse, under the auspices of a purely voluntaryassociation, was cited to us. In the absence of any such authorityI am of opinion that the learned Distict Judge was right in treatingthe undertaking here in question as a commercial one. In all casesof this character we have to consider the point of view of thehypothetical tenant. I do not believe for a moment that anyvoluntary association even would set on foot such an undertakingas a Turf Club without having regard to the amount ofthe profitsthat can be made by it. The present case was argued before us onthe basis that there is no division of the profits derived from theoperations of the Turf Club among its members. But that, to mymind, is quite immaterial. Even if the profits were not dividedamong the members, they would be devoted to the furtherance ofthe objects of the Club itself ; to the improvement for example, ofthe grounds, to attracting the importation or breeding of betterhorses, and to anything and everything that would tend to secureto the Club a good position among kindred societies. If a voluntaryassociation were confronted with the alternative of either notstarting a racecourse at all, or handing over to the landlord all theprofits that could be made by running it, it would, in my opinion,leave the enterprise alone.
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Nov. 2, mo
. WoodRenton J.
Crawford v.The Muni-cipal Councilof Colombo
Although the point as to the exclusion of the sweeps does notaffect the actual decision of the present case, we are pressed byMr. de Sampayo, the appellant’s counsel, to give our ruling uponit as a matter of principle. I think that the sweeps were clearly anitem of income, and should have been so treated by the DistrictJudge, in spite of the fact that they were not included in the originalassessment, provided, always, of course, that the effect of theinclusion was not to raise that assessment above its original amount.The learned District Judge has arrived at his estimate of the neces-sary working capital of the Club by taking into account all theexpenditure necessary to earn the profits of the August races, whichhe computes at Rs. 24,132-89, and, in the next place, the working •expenses from January to July, which he estimates at over Rs. 10,000.These figures are arrived at from an examination of balance sheets.
I do not think that the principle of assessment on which the Judgehas proceeded is unfair or unsound, or that his estimate can, on thematerials before us, be said to be excessive.
As the points were mentioned, although not very strongly arguedby Mr. de Sampayo, I would add that, in my opinion, the Judgewas right in including the donations made to outstation race meetsand the loss on the Turf Club Ball as tenant’s working expenses.These items are really connected with the successful working of theracecourse itself.
On these grounds I dismiss the appeal with costs.
CRAWFORD et al v. MUNICIPAL COUNCIL OF COLOMBO