APPEAL FROM ORDER

Manawatu Standard, Volume LIII, Issue 256, 26 September 1933, Page 8

APPEAL FROM ORDER

ASSESSMENT OF INCOME. Per Press Association. WELLINGTON, Sept. 26. The Court of Appeal to-day is considering the appeal of Bryant, May, Bell and Co., Ltd., from the order of Mr Justice MacGregor, made on July 17, 1933, confirming the assessment of the Commissioner of Taxes on appellants’ income for the year 1930. During that year the appellant company became indebted to Messrs Bryant and May, Ltd., London, to the extent of £55,000 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 tax free 4) per cent, stock. In its return of income for the year ended March 31, 1931, the appellant company claimed to deduct from its assessable income the interest at 6 per cent, payable to the English company, totalling £1137 lbs. As the Commissioner disallowed tho deduction application was made to have a case stated l’or tho opinion of the Supremo Court. Mr Justice MacGregor held that as the deduction claimed was not “interest payable on capital employed in production of assessable income,” within section 80 (1) (li) of the Land and Income Tax Act, 1923, and not “expenditure exclusively incurred in the production of assessable income” within section 80 (2) of the same Act, the deduction could not be allowed. The appeal is now brought from this decision. Mr Hadfield, counsel for the appellant company, submitted that the sum of £82,541 kept in New Zealand in 1930 to avoid paying the 5 per cent, exchange on London was capital used in the production of assessable income, and the interest on such a sum was, therefore, exempt from taxation. If the sum had been invested in 5£ per cent. Government stock, instead of in per cent, tax free stock, the company would have to pay tax on tho interest from it and would, therefore, he liable to pay the tax twice over. Ho contended that the further sum involved was part of the price of the goods purchased by the appellants for tho company’s trade. It was in the nature of circulating capital and for this reason was exempt from income tax.

. Tile hearing of evidence is proceeding.