Soldier Taxed On Gift Money From Company

Northern Advocate, 19 November 1941, Page 4

Soldier Taxed On Gift Money From Company

[Special to "Northern Advocate”! AUCKLAND. This Day. In the supreme court yesterday the assessment made by the Commissioner for Taxes on the income of a soldier who has an allowance paid to him by his firm while he is on active service, was challenged in an appeal. The appellant was Neil Melville Louisson, of Auckland, formerly a director and salaried officer of Fairbairn Wright and Co., Ltd., and now a lieutenant abroad with the N.Z.E.F. The question for the court was whether the amount paid by the firm to appellant was to be treated as part of his assessable income or to be regarded as a gift and therefore free of income tax. Discouragement “This is a matter already of importance,” said Mr. H. P. Richmond, for the appellant, “and it will increase in importance as older and married men in lucrative positions are called up. If the Commissioner is right it will be a direct discouragement to all employers to assist men with large family commitments, because a double taxation of this kind may 'in fact reach over 20/- in the £.” Mr. Richmond said appellant was in receipt 'of a salary of over £IOOO a year, and in the six months from the date of his enlistment on October 1, 1939, to the end of the taxation year, the company paid him £453 to make up the difference between his previous salary and his military pay. The appellant furnished an income return of £IO2B, including in it the sum of £453. The company claimed a deduction of £4 a week, or £lO4 from its assessable income, and the appellant contended that £453 less £lO4, or £349, was a gift to him from the company. The company paid tax on the £349. Gratuitous Contribution Mr. Richmond expressed the view that appellant might well have appealed in respect of the £lO4 also. The Commissioner having taxed the company on the allowance to appellant then again taxed him on the same amount.

This payment was a purely gratuitous contribution made in practical acknowledgment that men were risking their lives on active service. The contract between appellant and the compay came to a complete end when he entered military service. For the Commissioner for Taxes, Mr. G. S. R. Meredith submitted that if the legislature had intended to exempt such payments as those of the company to appellant it would have expressly said so. When the appellant went into camp he did not thereby terminate his contract of employment or service. The real question was whether this payment was truly income or a gift. Because of Sacrifice His Honor said it seemed to him that the amount was paid because appellant was serving in His Majesty’s forces and making considerable sacrifice. Mr. Meredith submitted that the payment was made in respect of his employment. His Honor: It is not “in respect of his employment,” in the ordinary sense. It is in respect of his ceasing his employment. His Honor said he thought appellant must succeed. The Commissioner based his claim on the ground that this payment was made to appellant in respect of or in relation to his employment or service. His Honor assumed that appellant remained an employee of the company on account of the resolution it passed to make up the salary of employees on active service. It seems that the paymefit was not made in respect of employment but out of a sense of appreciation of public spirit shown. That took it out of the category of income or salary and put it in that of a personal testimonial. Appeal Succeeds His Honor said there was nothing to satisfy him that the £453 was not paid as a single gift at the discretion of the company. His decision was not to be regarded as being of general application, except in so far as it dealt with payment of a lump sum. The appeal would be allowed. The Commissioner should have included in the assessable income only the sum of £679. The appellant was allowed £lO/10/costs.