APPEAL COURT

Hokitika Guardian, 12 July 1930, Page 5

APPEAL COURT

(By Telegraph— Per PreßS Association.^

WELLINGTON, July 11

At the Court of Appeal, in the case Aispro Ltd. v. the Commissioner of Taxes, Mr Gray, K.C., for the appellant Company, said that this case was one of a kind that came before the courts for just time, in which the right of the Commissioner to decide what was fair remuneration for the Directors of a private comany Was involved. As a result of the first years' working, the profit was shown by the appellant company, and the ■substantial directors’ fees fixed. f|Tn tlie succeeding years profits increased, and the directors’ fees were enlarged to big sums. The question was really whether the Commissioner had the power to interfere with the affairs of what was practically a private part' nership. The Commissioner had contended that the money voted as remuneration was really a distribution of profits, and that it should be assessed accordingly. If the appellant company there were only two shareholders who were also the only directors. They found the nrorieyand the brains to push business,’, and,.'in the circumstances, the>Go*imissibner liad.b mo right to say -whafi'Wfis' a .fair remhneration-, for tkeirt services', if- they,' ns shareholders, chose to" payf. themselves as Directors,: sums whlclfjthey considered they were entitled to. If they were a firni, instead of a company comprised of two gentlemen holding an equal number of shares, they would divide the profits and pay income on that basis individually.

Mr Fair, for the. Commissioner |f Taxes- said that two questions arose : ay. Whether the statement by a taxpayer that a payment was made for'a certain purpose was conclusive against the Commissioner that such payment was made for that purpose; and (2) whether, on the facts proved in the court below, the appellant had not discharged the onus of proving that the expenditure was incurred in the pro? duction of the assessable income. The Commissioner of Taxes had the power to enquire into The services for which directors’ fees were paid. The test was whether, the, expenditure was reasonable; ; If the construction contended for by, the Commissioner was not accepted by the Court,; the door would be left open , evasion of income tax.! The Directors’ fees in the . case 'before the court were not paid for the remuneration of services; but constituted a distribution of profits, for the purpose of reducing the rates of income tax., ■ >’\"

The decision of the court was feS served.