Rowan v. Commissioner of Income Tax.
Present: Poyser S.PJ. and Hearne J.
ROWAN v. COMMISSIONER OF INCOME TAX.
114—D. C. (Jnty.) Special.
Income tax—Solicitor employed as assistant in firm—Admission as partner—No cessation of employment or commencement to carry on profession—Income Tax Ordinance, 1932, ss. II (b) and II (3).
Where the assessee, a solicitor, was employed until March 31, 1936,as an assistant by a firm of Proctors and Notaries and was paidby way of remuneration a monthly salary and a certain percentage ofnett profits as commission, and on April 1, 1936, he was admitted apartner of the firm under a deed of partnership according to which hewas to get as his remuneration a share of the profits,—
Held, that, on the admission of the assessee as a partner in the firm,there did not occur the cessation of an employment within the meaningof section 11 (6) of the Income Tax Ordinance and the commencementof the exercise of a profession within the meaning of section 11 (3) ofthe Ordinance.
HIS was a case stated for the opinion of the Supreme Court by theBoard of Review under section 74 of the Income Tax Ordinance.
The assessment of the assessee, who is an English solicitor, for the yeanof assessment April 1, 1934—March 31, 1935, was revised under theprovisions of section 11 (6) (b) of the Income Tax Ordinance under thefollowing circumstances. He was- employed till March 31, 1936, as anassistant by a firm of Proctors and Notaries practising in Ceylon and waspaid by way of remuneration a monthly salary and a certain percentageof the profits. On April 1, 1936, he was made a partner of the firm under' a deed of partnership according to which he was to get as his remunerationa share of the profits of the firm.
The assessor treated him as having ceased an employment on March31, 1936, and as having commenced to carry on or exercise a professionas from April 1, 1936, within the meaning of section 11 of the Ordinance.He accordingly revised the assessment for the Income Tax Year 1934—1935.The assessee appealed to the Income Tax Commissioner who confirmedthe revision of the assessment. On appeal to the Board of Review, thelatter allowed the appeal.
The Commissioner of Income Tax thereupon requested the Board ofReview to state a case for the opinion of the Supreme Court.
G. P. Jayetileke, JK.C., S.-G. (with him S. J. C. Schokman, C.C.),for appellant.—The point for consideration is whether there was a cessa-tion of employment within the meaning of section 11 (6) of OrdinanceNo. 2 of 1932.
Until March 31, 1936, the assessee was clearly engaged in a contract of■service. There was a relation of master and servant between Messrs.Julius & Creasy and the assessee, and the latter cannot be deemed tohave practised his profession as a Proctor during that time. Thedifference between “ profession ” and “ employment ” is fully discussedin Davies v. Braithewaite
* (1931) S K. B. 628.
Rowan v. Commissioner of Income Tax.
[Poyser S.P.J.—Is there not a case dealing with a barrister’s positionwhen he becomes a King’s Counsel?]
Yes, it is Seldon v. Croom-Johnson'. That case is not in point becausethere was no cessation of employment. According to Davies v. Braithewaite'(supra) a professional man can enter an employment. Rowlatt J. saysthat if a professional man taken a situation for years and makes it his lifeoccupation it would be no answer to a claim to assess him on the footingthat he is in employment that he is a very skilled and distinguished personbecause he would be exercising an employment. The present case canwell be compared with the position of a Crown Counsel.
[Poyser J.—Is not the case of a Crown Counsel different?]
No. He does the work of the Crown for a salary. By joining the firmof Messrs. Julius & Creasy the assessee did not carry on his profession inthe way in which his profession is carried on. To work for anotherproctor on a monthly salary was not an incident in the conduct of hisprofessional -career.
[Poyser J.—Was he not practising his profession all along?]
In a colloquial sense, yes. He was, in fact, working as the paid servantof the firm. He did not exercise independently the profession of aproctor. Section 76 (6) of our Ordinance throws light on the pointin question. The word “ employment ” presupposes an employer.“ Profit and income ” and “ profits from any employment ” are separatelymentioned in section 6 (1) (a) and section 6 (1) (b) respectively. Thus,there are two categories. The source of the assessee’s income was thecontract of service.
As soon as the assessee became a partner of Messrs, Julius & Creasy, hewas liable to be assessed on a different footing (Humphries v. Cook*).
Section 76 was amended in 1934 to grant an employee certain privileges.The assessee has availed himself of those privileges and thus admitted hisposition as an employee. He cannot now take up the position that hecomes under section 6 (1) (a) and not under section 6 (1) (b). There arefurther provisions in section 6 (2) regarding employees.
Section 76 was amended in 1934. The Board of Review have, however,followed the judgment of Drieberg J. in Commissioner of Income Tax v.Rodger*, which was decided in 1933. That judgment dealt with theinterpretation of section 11 (4) and not of section 11 (6). If that judg-ment is followed, it will be difficult to understand what “ employment ”means. Drieberg J. gives no reasons for stating that the word “ employ-ment ” refers to occupation other than trades, businesses, professions orvocations.
H. V. Perera, K.C. (with him Van Geyzel), for respondent.—The onepoint for consideration is that which is set out in the case stated. Thereis no question of estoppel. A consideration of the provisions of section 76does not, therefore, arise in the present case.
Mr. Rowan was exercising his profession in Ceylon from the commence-ment of his employment as an assistant by the firm of Julius & Creasy
1 (2932) 1 K. B. 759.3 (1934) 19 Tax Cases 127.
3 (1933) 35 N. L. R. 169.
226POYSER S.P.J.—Rowan v. Commissioner of Income Tax.
and it is impossible to say that merely because he becomes a partner inthat firm he ceases to exercise his profession. The Commissioner tookthe view that on April 1, 1936, when Mr. Rowan became a partner, hecommenced the exercise of his profession. If that view is correct it mustfollow that Mr. Rowan was not acting as a proctor prior to that date—which is obviously not the case. The profits from the exercise of aprofession may be derived from contracts of service or employment butthese are mere incidents of the professional work. The case of Davies v.Braithewaite, cited by the appellant, is in my favour.
The respondent is also entitled to succeed on the strength of the case ofThe Commissioner of Income Tax v. Rodger1, where the Supreme Courtwas of opinion that the word “ employment” in section 11 of the IncomeTax Ordinance is used in reference to occupations other than “ trades,businesses, professions or vocations ”.
E. G. P. Jayetileke, K.C., S.-G., in reply.— Davies v. Braithewaite is inmy favour. Miss Braithewaite, who was an actress, earned her livingby accepting and fulfilling engagements. She had contracts to act invarious plays in England, America and other places. It was held thatsuch contracts were nothing but incidents in the conduct of her profes-sional career. The position of the assessee would have been similar ifhe had entered into agreements with a large number of clients to attendto their work. He has not done that. On the contrary, he has accepteda post resting on a contract.
Cur. adv. vult.
January 24, 1939. Poyser S.P.J.—
This is a case stated by the Board of Review under the provisions ofsection 74 of the Income Tax Ordinance, 1932.
The material facts are as follows : —
The assessee, Mr. Rowan, is an English solicitor and a proctor of theSupreme Court of Ceylon. He was employed as an assistant byMessrs. Julius & Creasy, a firm of Proctors and Notaries, carrying onbusiness in Colombo, until March 31, 1936, and received as remunerationa salary and a percentage of the nett profits.
On April 1, 1936, he was made a partner in the firm under a dulyexecuted deed of partnership, and from that date ceased to receive anysalary but only a share of the profits.
The assessor considered that Mr. Rowan had ceased an employmenton March 31, 1936, and commenced to exercise a profession; he accord-ingly revised Mr. Rowan’s assessment for the Income Tax Year 1934-35.
Mr. Rowan appealed first to the Commissioner, who confirmed therevision, and then to the Board of Review. The latter decided thatthere had been no cessation of employment and commencement of theexercise of a profession and accordingly allowed the appeal.
The short question for this Court to decide therefore is whether therewas “ a cessation of employment ” on March 31, 1936, when Mr. Rowanceased to be an assistant, and “ the commencement of the exercise of aprofession ” on April 1, when he became a partner in the firm of Julius &Creasy.
> 35 N. L. R. 169.
POYSER S.P.J.—Rowan v. Commissioner of Income Tax.
In my opinion the Board of Review came to a correct conclusion. Thecase they relied on was Commissioner of Income Tax v. Rodger
In that case Drieberg J. held that an accountant who terminated hiscontract with one employer and entered into another contract withanother employer for the same kind of employment did not “ commenceto carry on an employment
The material part of the judgment which strongly supports the casedor the assessee is as follows :—
(Page 173.)“ I do not think the word “ employment ” is here used
in that sense to indicate a particular contract of service but that itrefers to occupations other than trades, businesses, professions orvocations. The assessee must be regarded as,having commenced anemployment as an accountant . . . . when he first began to dothe work of an accountant taking remuneration for his servicesAnother case which supports the decision of the Board of Review isDavies v. Braithewaite in which it Was held that an actress who acceptedengagements for which her professional qualifications fitted her wasassessable in respect of the profits she derived from her profession orvocation as an actress and not in respect of the profits of her employment.Rowlatt J. in the course of his judgment stating, “ I think that whatevershe does or whatever contracts she makes are nothing but incidents in theconduct of her professional career
In my opinion, Mr. Rowan commenced to exercise his profession whenhe first began to do the work of a proctor and receive remuneration forhis services. The fact that his remuneration has been increased and hisstatus altered does not in my opinion affect the matter; nor do I think,having regard to the cases above referred to, that he would cease to carryon his profession if he severed his connections with Messrs. Julius &Creasy and entered into a contract on a salary basis with another firm ofProctors.
His position is similar to that of the actress. His professional quali-fications fit him for a certain class of work and whatever contracts hemakes must be regarded as incidents in his professional career.
The Solicitor-General urged that Mr. Rowan had the benefit of theprovisions of section 76 of the Ordinance and other benefits, and havingelected to receive such benefits cannot now say that his status has notaltered.
On the other hand, as Mr. Perera pointed out, the question of estoppeldoes not arise. The only question before this Court is set out in paragraph8 of the case stated, viz., whether there was a cessation of employmenton March 31, 1936, and the commencement of the exercise of a professionon April 1, 1936, and, for the reasons above stated, I consider Mr. Rowanhas at all material times exercised his profession.
The decision of the Board of Review is accordingly confirmed and Iorder that the Commissioner of Income. Tax do pay to Mr. Rowan hiscosts of the proceedings in the Supreme Court.
Hearns J.—I agree.
> (3931) 2 K. B. O. 628.
ROWAN v. COMMISSIONER OF INCOME TAX