INCOME TAX APPEAL

Evening Post, Volume CV, Issue 24, 29 January 1923, Page 7

INCOME TAX APPEAL

LINE BETWEEN CAPITAL AND

LABOUR

WARD AND OO.'S CASE.

(FJSOII OCR OWN CORRESPONDENT.)

LONDON, 14th December.

The decision of the Judicial Committee of the Privy Council in Messrs. Ward and Company's appeal forme the subject of a prominent article in the "Finanoial Times" this week. "It is true," said the writer, "that t judgment of the Privy Council J s,-n-°t' binding in this country, bjit the Judicial Committee is often constituted of the same members who sit as Lords of Appeal in the House of Lords, and there.is no reason to suppose that their mind aots in a different way when it is exercised in the Privy Counoil Chamber, from the way in which it acts when it does duty in the House of lords itself." It will be 1 remembered that Messrf. Ward and Co, maintained certain expenditure in canvassing, advertising, printing, and other matters connected with the antiProhibition propaganda campaign was exclusively incurred in the production of the assessable inoome. "From the point of view of the trading community," _ the writer says," "this deoision (which is. I think, in complete harmony with other decisions on the question) is undoubtedly a hard one. The point, of view which the layman quite naturally takes is that it his trade involves him in certain expenditure he ought to (ret an. allowance in rerespect of that expenditure. But it is always to be borne in mind. that, strange though it may seem, the income ta* is a tax on income, and that while on the one hand this principle excludes capital accretions from the charge, it also excludes capital payments from , the area of admissable deductions. The^dividing line between a capital payment and a payment deductible for inoome tax is often an obscure one, and it can only be drawn by reference to the exact facts and circumstances in the particular case in question. PARALLEL" OASES. . "There v used to be an idea that expenditure could only bo deducted in so far, as it could be related to profits of the year under assessment, but that view was finally exploded in the case of the "Vallambrosa Kubber. Comuany, Ltd.. when the Lord President in "the Court of Session (Scotland) said tout nettement that the proposition only needed to be stated to be upset by its own absurdity. The question was further illuminated by the Lord President in the folloivinj dictum: 'Now \ do not say that this consideration i» absolutely final or determinative, but in a rough way I think it is not a bad criterion of what is capital expenditure—ac against what is income expenditure—to say that ptvpital expenditure is a thing that is going to be spent once and for all, and income expenditure is a thing which is going to recur every year.' (_ "In commenting on this dictum in the case of Ounsworth v. "Viokeri, - Ltd., Mr. Justice in the High Court, pointed put that no importance need be attached to the words 'every year,' andj,. stated: The real test is between expenditure wliioh is made to meet a continuous demand for expenditure as pnposed to an expenditure which is made once for all —that is, I'lsuggest, expenditure which is made once 'for all in the sense that itis applied tp'a demand-which arises once for all.' This, on the face of it, appears to be a quite simple statement of the posi- | tion. but I can assure the reaclor that when he comes to try to apply it to his own particular problems he will find that ! all the simplicity has vanished. The true doctrine in the income tax is not unlike the ignis fatuus."