TAX QUESTIONED

Evening Post, Volume CVIII, Issue 97, 21 October 1924, Page 8

TAX QUESTIONED

TIMBER COMPANY AND INCOME,

An objection to assessment of income tax was made before the Appeal Court this morning. The appellant was the Kauri Timber Company, in liquidation, represented by . Mr. C. 'P. Skerrett, K.C., and Mr. Tuck; the respondent, the Commissioner of Taxes, represented by. Mr. M. Myers, K.C., and Mr. 'A. Fair. The case: was stated by the Commissioner. The appellant was assessed for income tax in respect to an amount of £115,784, alleged to beia profit on a sale of timber made by the appellant to a new company, of the same name, L which was formed under a scheme of reconstruction. The old company was incorporated in Victoria in 1888, the original capital being *}1,200,----000. Between'lßßß and 1920 the old company acquired in Btanding kauri timber 1,528,162,797 superficial; feet of this 1,400,000,000 was felled, leaving an estimated quantity standing in August, 1920, of 115,784,000 super, feet. In that month the new company came into operation with a "capital of £750,000. The shareholders ancL directors in the old and new companies were identical. In making the apportionment of purchase price the new company apportioned, in respect of the 115,784,000 feet of standing timber, an amount exceeding the amount at which it was entered in the books of the old company by 2s per. 100 feet, or a total increase of £115,784. In an amended assessment for the year ending in March, 1920, the sum .of £115,784 was added by the Commissioner to the income returned by .the old company as "profit on sale of timber from old company to new company." The total tax assessed was increased by £43,418 15s. The question for the Court was whether the old company was liable to pay/ this sum or any portion of it. Tho company's objections were as follows : (1} That the company sold , its business, and, with certain specified ex-v ceptions, tho whole of its assets as a poing concern for a comprehensive consideration not distributed between the different classes of assets, and that no part of such consideration is assessable to income tax as profit made on the salo of standing timber. (2) That any gain made by the company on the sale of standing timber is again made on the realisation of a cnpital asset, and is not in law assessable for taxation as income. Mr. ■ Skerrett said the question was whether .the standing timber was. a capital asset or stock in trade. They held that it was capital. Mr. Justico' Adams remarked that the addition of the 2s would certainly have the effect in a few years of reducing their taxation. • Mr. Skorrett said that was an aspect that did not enter into tho case. (Proceeding).