COURT OF APPEAL.

New Zealand Herald, Volume XLI, Issue 12523, 16 March 1904, Page 6

COURT OF APPEAL.

COMMISSIONER OF TAXES V.. THE KAURI TIMBER COMPANY. [BY TELSGRA.PH.-PRES3 ASSOCIATION.] ; Wellington', Tuesday. ; ; Mb. Cotter, continuing the argument for

I the defendant company in the case of the Commissioner of Taxes v. the Kauri Timber Company this morning, submitted that the case of the Commissioner, of Taxation v. Kirk (Broken Hill .case) did not go so far as"had been claimed by the other.side. The judgment of the Privy Council only went to show that part of the profit derived by the Victorian company was taxable in New South Wales. The real judgment of the' Privy Council was simply that, so far as the process and production was carried on in. New South Wales, income was earned and' taxable in that colony. ' The Broken Hill case was valuable as showing that the' process of manufacture or production may be divided into stages and income held taxable in each country according to the stage? which take place in each. That was an equitable principle, which the Privy Council had indicated was the one which should; bo applied. There must be a limit placed upon the amount which the New Zealand Government could tax. The line of demar- - cation should be drawn at the point where the process ceased to take place in New Zealand territory, so that the New Zealand? Government no longer gave protection either, to the property or process, and ought, there-, fore, no longer to claim to tax. Mr. Cotter then dealt with decided cases seriatim, with? a view to establishing that in every case in. which a decision had gone against the' taxpayer a contract had either been entered into in the country where the tax was imposed; or money had been received there. Double! taxation only occurred where the whole pro-, fit earned was in one country, but the re-! cipient resided in another country _ and received and spent it there. V : , ' In, the . course of analysing v cases, with a view to', establishing the above proposition, Mr. Cotter admitted that if a local board in Now Zealand and the defendant company entered in New Zealand into a contract for the sale of timber in London, the whole of j the profit" received by the company from | such "a transaction would be taxable m New | Zealand. '; - Referring to the ' case;- Commissioner,, of: Taxes, v. .the.-. Eastern Extension, I Telegraph "Company, counsel admitted that I the case .was distinguishable, because there," although . profit was earned on service rendered outside New Zealand, yet' the contract to send messages originated in New Zealand, ; the company having its office in New Zealand, by which messages are received for transmission. Coming to the provisions of the Land and Income Assessment Act, 1900,' Mr. Cotter . submitted that income, beingtaxable year by year, must be ascertainable year by year. . The Act defined "income": as " profits derived' or received in any year,": and further 'interpreted " profit" as include ing " gain.'' Income in any year, therefore,; meant gain in. any year, and in many cases, value in any year had to be estimated apart altogether from any sale or sales. Instances' of this, counsel submitted, would occur in the case of a rise in the value ot stock-in-trade during the year, or in case, for instance, tlis defendant company should use timber cut and prepared by itself in the erection of buildings for its own purposes. These cases, he argued, showed that the question of value, apart from sale, must be gone into. In some cases there was, therefore, no reason why.the value of timber at the port of export from New Zealand Should not be looked to for the purpose of estimating the income earned by the company in New Zealand, apart > altogether from the question of sales afterwards' effected else-; where, "whether after further treatment or. not. V • - : ' ' Dealing with the'question of what allowance the timber company was . entitled to. under section 68, on account of hind owned by it and occupied and used by ib for pur- ■ poses fox its business, Mr. Cotter submitted, first, that lopking to the fact that kauri timber requires a long period of growth, it is necessary to justify embarking on such a business that the company should acquire large areas containing material sufficient to enable it to carry on lor a number of years. In that sense it was proper to say that the whole area so acquired was be-. ins? used for purposes of business. - After some discussion, the Court intimated that it did not think that this position was tenable. ' , ■ Counsel then submitted that the company was entitled to a deduction in respect of the value of all blocks, from which it had actu- , ally begun to fell timber. " In any case, the company was entitled to a deduction of 5 per cent, on .= the land which, it actually cleared of timber during any one year. In conclusion, counsel submitted that if the profits earned outside of New Zealand were to be taxed, then certainly expenses of the, head office in Melbourne should be allowed as deduction in estimating those profits.. This should certainly be allowed, unless the language of the Act explicitly prohibited it. Subsections 2 and 6 • of' section 66 could, counsel submitted, be read so as to allow of; such deduction, and should be so read. " Mr. MacCormick, who appeared with Mr. Cotter for the company, did not address ■ the Court. ' • • Mr. Bell addressed the Court for the Commissioner 'in reply, but broke no fresh • ground. The Court reserved its decision.