TAX EXEMPTION SOUGHT

Hawera Star, Volume LIII, 26 September 1933, Page 7

TAX EXEMPTION SOUGHT

ASSESSMENT DISPUTED.

CASE: BEFORE APPEAL COURT.

(By Telegraph — Press Association.) WELLINGTON, Sept. 26,

The Court, of Appeal is to-day considering the appeal of Bryant, May, Bell, and Co., Ltd., from an order of Mr Justice McGregor made on July 17, 1933, confirming, the assessment of the Commissioner of Taxes on the appellant company’s income for the year 1930. During that year the appellant company became indebted to Messrs Bryant and May, Ltd., London, to the extent of £55,500 for goods sold and £24,764 dividends due. In view of the adverse rate of exchange the English company agreed, to postpone the payment of both sums, interest being allowed on them by the appellant company at 6 per cent. Both sums were invested in New Zealand Government income-tax free 44 per cent, stock. In its return of income for the year ended March 31, 1931, the appellant company claimed deduction from its assessable income of interest at 6 per cent, payable to the English company, this totalling £1173 16s. As the Commissioner of Taxes disallowed the deduction, application was made by a ease stated for the opinion of the Supreme Court. Mr Justice MacGregor held that as the deduction claimed was not “interest payable on capital employed in the production of assessable income” within SBO (1) (H) of the Land and Income Tax Act, 19-23, and not “Expenditure exclusively incurred in the production of assessable income” within SBO (2) of the same Act, the deduction could not be allowed. An appeal is now brought from this decision. ■ Counsel for the appellant • companysubmitted that the suig of £82,541 which was kept in New Zealand in 1930 to avoid paying exchange on London was capital used in the production of the assessable income and the interest on such a sum was therefore exempt from taxation. If the sum had been invested in 54 per cent. -Government stock instead of in 4J per cent tax-free stock, the company would have had to pay tax and interest from it and would therefore be liable to pay the tax twice over. He contended further that the sum involved was part of the price of goods purchased by the appellant company for the purposes of its trade. It was in the nature of circulating capital and for this reason was exempt from income tax. (Proceeding.)