PRIVY COUNCIL CASE

New Zealand Herald, Volume LXIX, Issue 21247, 29 July 1932, Page 10

PRIVY COUNCIL CASE

NEW ZEALAND APPEAL DISMISSAL ANNOUNCED LONDON, July. 27 The Privy Council has dismissed with costs the appeal of Aspro, Limited, versus the New Zealand Commissioner of Taxes. The question at issue in the case referred to in the cablegram was whether the New Zealand Commissioner of Taxes had the right to interfere with the allocation of directors' fees in a private company. The case was heard by the New Zealand Court of Appeal in July, 1930, when it was stated that when the company was established a profit was shown on the first year's workings, and the directors' fees were fixed at £ISOO each. The profits had increased in each succeeding year, and the directors' remuneration was now fixed at £SOOO each. The Crown argued that as the company became established the directors' duties would become lighter. In this case the fees had grown higher instead of lower. It was contended for the Crown that this was a distribution of profits as fees in order to lower the rate of income tax. .. ! .j • By p majority the Court of Appeal held that the distribution was not justified. " The outlay was so unreasonable and extravagant that it at once raises the presumption that it was illicit," said Mr. Justice Herdman. Mr. Justice Blair con curred, bat the Chief Justice, Sir Michael Myers, dissented. Aspro, Limited, was an incorporated Company, with share capital held equally between two shareholders, who were also directors of the company. In its incometax return the company claimed the deduction of £IO,OOO as directors' fees, leaving a net assessable income of some £5145. A stipendiary magistrate upheld the Tax Commissioner's decision disallowing £3OOO of the deduction for directors' fees, whereupon the case was removed by consent into the Court of Appeal.