TAX APPEAL ALLOWED.

New Zealand Herald, Volume LXI, Issue 13747, 28 June 1924, Page 13

TAX APPEAL ALLOWED.

PROBLEM OF ASSESSMENT,

AMMUNITION COMPANY'S DEAL,

SALE OF DOMINION ;

INTEREST.

A written judgment of outstanding interest to the accountancy and legal professions was delivered by the Chief Justice, Sir Robert Stout, in the Supreme Court, yesterda}-, in an appeal by the Colonial Ammunition Company, Limited (Mr. Ostler and Mr. West), against an assessment for income tax. The Commissioner of Taxes (Mr. Meredith), was tho respondent to the appeal. The amount at issue was between £4000 and £5000.

His Honor, outlining ihs facts, said that Major John Whitney, a large shareholder in the company, de:iir«:d to decline control of the New Zealand branch of it; business. The company, which had practically been founded by him, carried on operations in England, Australia and New Zealand. He made an offer to buy tilte New Zealand interests as a going concern, and an agreement was made on March 4, 1921, whereby the sale was arranged to take effect as from- December 31, 1919. The price agreed upon was £46,730, tins sum to be paid by the purchaser surrendering shares in the vendor company for that amount, at par. The question was whether the commissioner had any authority to charge income tax on this transfer of a going concern to a part-owner. His Honor, proceeding, said Major Whitney executed a deed of gift of the whole New Zealand business upon which gift duty was paid. Under this gift the property was transferred to C. A. Whitney, to hold it on trust, and to cause a company to be incorporated in New Zealand to acquire the business, the-purchaso price to be paid by the new company by the allotment of fully-paid-up shares to Major Whitney's donees. The balancesheet of the appellant company showed how the assets were valued, military stocks appearing at £11,617 and'goodwill at £5000. In the new company's balancesheet stock was put. down at £22,479 and there was no entry of any sum for goodwill. The commissioner relied upon the balance-sheet of the new company as proof against the old company of the value of the stocx sold by it, but the appellant company had no hand in the preparation of the balance-sheet of the new company. The only evidence of the new value of the stock was the statement appearing in the balance-sheet oil tho new company for which the appellant company was in no way responsible. His Honor, after citing certain cases bearing upon the position, found that the old or apellant company could not be made liable for income tax under the circumstances existing. He allowed the appeal with costs.