BANK OF NEW ZEALAND

Press, Volume LXXIII, Issue 21990, 14 January 1937, Page 11

BANK OF NEW ZEALAND

PROFITS OP LONDON BRANCH I CROWN DISPUTES INCOME TAX (from oua OWX COIUIESPONDEST.) LONDON, December 16, The extent to which the profits o£ the London branch of the Bank of New Zealand are chargeable to English income tax was argued last week, when the decision of Mr Justice Lawrence m upholding the Income Tax Commissioners was disputed in the Court of Appeal. The Commissioners fixed the assessment for the year ended April, 1929, at £37,467, but the Crown contended that it should be raised to £116,023. . The appeal was the Master of the Rolls (Lord Wright) and Lords Justices Romer and Greene, upholding the assessment of the • Commissioners. Time'was given to the Crown to consider an application for leave to appeal to the House of Lords. Mr R. P. Hills appeared for the Crown, and Mr A. M. Latter, K.C., and Mr J. S. Scnmgeour for the bank. In his judgment the Master of the Rolls said that the appeal involvedfour separate and distinct points. umere was no question that the profits of the London branch of the bank were assessable to income tax under Case 1, Schedule D, and the two main questions to be decided were:— , . (1) What limitations were to be imposed on those profits in regard to income tax, and (2) In the event of the question being decided against the Crown, the question ■■ arose what were the deductions permissible under the rules in order to ascertain the balance of profit and gains under Case 1.

Four sets of securities were concerned, namely, War Loan, India 3 per cent. Stock, Grand Trunk Railway, and Auckland Electric Power. Board stocks.

War Loan Interest Immune

It was not denied by the Crown that the War Loan interest in question was immune from taxation. But it was said that the Crown was entitled to disregard the immunity and to require the payment of income tax because the bank, although non-resident, was a trader holder. A prospectus of the War Loan issued in 1917 stated that stock or bonds and the dividends payable on them “will be exempt from all British taxation, present or future, if it is shown in the manner directed •by the Treasury that the securities are in the beneficial ownership of persons who are neither domiciled nor resident in Great Britain or Ireland.”

“In my opinion,” said his lordship, “it would be a very serious frustration of what I imagine the parties taking these securities might be assumed to contemplate, if the result were different from what the Legislature intended in 1915 when it was desirous, as many of us know, to attract subscriptions for Government loans. It would be rather deplorable if, notwithstanding what I regard as the clear language of the section of the 1915 act, an owner of War Loan, not being resident in the United Kingdom, was still to be taxed on the interest he received as part of his trading profits here.”

His Lordship agreed with the decision of Mr Justice Lawrence that the interest on this particular War Loan stock was free from British income tax so far as the bank was concerned, and went on to deal with the remaining securities mentioned. He said that, although they involved different considerations, they raised the same question, namely, whether the Crown notwithstanding the relevant exemptions, was still entitled to exact income tax under Case 1, Schedule D, on the footing that the interest ■ in ■ question constituted the profits of a non-resident trader. The answer depended on the general rules of Schedule C, which provided that deducted tax could be reclaimed by a non-resident, holder of the security, The Crown contended that although the provision was effecregarded Schedule C, it had no effect-as regarded an alternative claim under Case: 1, Schedule D.

, His Lordship said it was his conclu-sion.;'-that ; the words of Schedule C, Rule-3- (d),„ were sufficient to give a complete and general exemption in respect of air taxation under the act of 1918 relating to the second stock in the bank’s list, the India 3 per cent Stock. Further, he said he had come to the same conclusion as the Income Tax Commissioners and the Judge as to the effect of Rule 7 (2) of Schedule D on the remaining stocks. Dealing lastly with the Crown’s alternative contention that, if the securities were exempted from taxation, the cost of acquiring them should be excluded from the expenses of the trade carried on by the bank in this country, he said this meant that the Crown’s argument was that, if the expenses of earning the exempted income was also excluded, the taxpayer would be getting a double benefit. # Expenses of Trade

*T confess ‘that there is great force in that argument,” he said;- “but I can find nothing in the authorities to support it. The rule applicable to these circumstances says that the expenses of the trade, if the money is wholly and exclusively laid out for the purpose of that trade, are .to be deducted.. The short result Is that I can find no means consistent with the language of the act to give effect to the Crown’s contention. I think that some such provision could reasonably have been included in the act, but I simply cannot find it there. The result is that on the whole case in my judgment the appeal fails, and must be dismissed.” Lords Justices Romer and Greene agreed, the 1 latter saying that, in his opinion, the arguments of the Crown were completely, unconvincing. EXPORT RETURNS PORT OF GUEYMOUTH The return of exports for the Port of Grcymouth for the four-weekly period ended January 2, 1937, shows a substantial increase over the returns for the same period last year. Export of coal showed an increase of 3050 tons and timber showed an increase of nearly 350,000 superficial feet. Detailed figures are;— Coal: Mine, State mines, tons 3864, corresponding period 1936, 2638; Blackball, 1066 (510); Rapahoe, 1666 (S 58); Paparoa, 532 (651); Dobson. 1255 (401); Wallsend, 984; Briandale, 575 (494); other mines, 681 (2033); total, 10,623 tons, compared with 7585 tons in 1936. Timber; 2,668,968 superficial feet (2,324,017 superficial feet). . THE METALS MARKETS (UNITED PRESS ASSOCIATION—COPYRIGHT.)

LONDON, January 12. Jan. 11. Jan. 12. Copper— £ s. d. £ s, . d. Standard, spot 53 1 3 51 10 0 Forward , , 53 3 9 51 13 n Electrolytic 57 5 0 56 0 0 to , , 58 0 0 57 0 0 Wire bars 58 0 0 57 0 0 LeadSpot • • • 28 3 9 28 '5 0 Forward m m 28 0 0 28 1 3 Spelter— Spot 20 13 9 21 18 9 Forward . 20 18 9 22 1 3 TinSpot . # ( 230 12 6 230 15 0 'Forward 231 12 6 230 12 6 Silver— Fine per 02. 21|d 21-Jd Standard, per oz. .. 22 15-16d 22 13-16d