INCOME TAX.

Otago Daily Times, Issue 19737, 13 March 1926, Page 12

INCOME TAX.

EMPLOYEES’ POSITION. SHIPPING COMPANY’S TEST CASE. LORD CHANCELLOR'S JUDGMENT. £Fkom Ode Own Correspondent.) LONDON, January 26. An interesting case regarding income tax was brought before the House of Lords Uy an employee of the New Zealand Shippu-g Company. This was an appeal the result of which will serve ss a guide not only to the company ir. question, but to all companies who are in the habit of paying salaries free of income tax. The question arising on the appeal was whether, when a company paid to an employee holding an cilice chargeable under schedule E of the Income Tax -Act, 1918, salary free of income tax, but witnout any request from or arrangement with he employee the amount of the profits for income tax purposes was the sum paid to the employee or that sum plus ihe amount paid in respect of income tax thereon by the company to the revenue authorities. The facts pany to the case were these:—Tne appei lant was throughout the year of assessment in the employ as its accountant of the New Zealand Shipping Company. The assessment appealed against included, in addition to the appellant’s salary of £SOO, a further sum of £BO 5s arising in the following way; It had been the custom of the company since 1912 to pay every year the income tax in respect of the salaries of all its employees, including; the appellant, and for the yea* assessment the amount so paid was included in the working accounts of the company under the heading "Income tax staff,” and had been allowed as a trade expense and deducted in arriving at the profits of the company for the year of assessment. The sum of £BO Ss was the sum so paid by the company in respect of the salary of the appellant. The company entered into no agreement, either verbally or in writing, with the appellant as to the payment of income tax in respect of his salary, but the company had in fact jsaid and borne the income tax in respect of the appellant’s salary since 1912. LORD CHANCELLOR’S JUDGMENT. The Lord Chancellor said that at first sight this upepal seemed to involve a question of mere technicality and of trifling im portance, and ho was surprised that the appellant should not have been content with the decision of the Court of Appeal; but their Lordships were now informed that this was a test case. After stating the facts, his Lordship said that the tax was chargeable under schedule E in respect of an office or employment, and by the first rule of that schedule it was charged in respect of all salaries, fees, wages, requisites, or profits whatsoever accruing from the offices and employments mentioned in the schedule. Then by Ihe fourth rule the perquisites to be assessed under the Act were to be deemed to be such profits of offices and employments as arose from fees or other emoluments. The question, therefore, was whether this £3O 5s came within the description of perquisites or. emoluments in that schedule. If it came within that description it was plain that d was rightly added to ‘ke assessment That appeared from North British Railway Cocpany v. Scott (39 The Times L.R., 66; (1923) A.C., 37). But was it a profit or perquisite? That the payment was voluntary made no difference. That appeared from Blakiston v. Cooper (2o The Times L.K.. 161; (1909) A. 0., IM). where is was held that Easter offerings were chargeable to income tax. But it was said that this sum was not an emolument because it was not paid to the appellant or at his request, though it was in fact paid regularly during a series of years. He did not agree. There was that continuity of payment which reference was made in Biaaiston s C!l, l'he effect of this payment was to relieve the appellant from his liability to pay income tax. He did not indeed, receive cash in hand, but he received money s worth J « after year. That being so, he (Lord Chancellor) could not resist the cone! lwion’ that this payment was in effect part of the ap pellant’s profit or emolument ns « officer nf the company in respect of which he had been properly assessed. He therefore thought that the appeal failed, and he moved then ctbcr° °n and learned Lords concurred.