Judge grants reprieve in income tax cases

Press, 17 March 1982, Page 12

Judge grants reprieve in income tax cases

PA Auckland A High Court judge in Auckland has granted a reprieve to several high-in-cotne earners facing crippling tax claims on investment schemes arranged by Lemmington Holdings. Ltd.

Mr Justice Chilwell, in a decision just released, has refused an Inland Revenue Department motion to lift interim orders imposed on Christmas Eve.

The orders prevent the department from acting on its decision that the Lemmington schemes do not qualify for export tax concessions.

They are to apply until a case brought by Lemmington Holdings for a review of the department decision is heard in the High Court.

Mr Justice Chilwell said: "The evidence is that if the department's decisions are not reversed the effect on the business of Lemmington Holdings. Ltd. will be ruinous and its effect on the financial affairs of the taxpayers affected extremely serious.

“Justice requires the status quo be preserved until final determination." he said. His Honour found that

since March, 1978, Lemmington's had been submitting to the department schemes involving the selling of injection moulding dies to people wishing to take advantage of export tax incentives. Plastic products made from the dies were to be exported through Lemmington's. a die merchant and export sales agent based in Penrose, Auckland.

Lemmington's told the court it had entered into 53 such schemes, sometimes with an individual investor but usually with a group in partnership. The schemes were approved for tax concessions by the Inland Revenue .Department until March, 1981, when it refused an application for lan Andrew Brown, second applicant with the company in the motion for review of the department's decision.

The company contests the decision to disapprove the schemes and in addition the withdrawal' of special tax code certificates for the investors and the requirement that their employers make P.A.Y.E. deductions from their incomes on the basis

that export concessions no longer apply. An affidavit by Mr L. Y. Baillie, governing director of Lemmington’s, said that the company was advised by the department. in November that discrepancies had been found in the 1981 tax returns of the individual die owners. The department alleged, he said, that the partnerships were not manufacturers and exporters of the plastic goods produced from the dies and it doubted that the partnerships could be held to be businesses within the meaning of the Income Tax Act. His Honour found prima facie that the department had originally approved the tax incentive scheme offered for investment. The approved documents, he said, “indicate by copious arithmetic examples, the very significant taxation relief available to participants in the scheme."