COMPANY'S INCOME

Poverty Bay Herald, Volume LX, Issue 18203, 26 September 1933, Page 6

COMPANY'S INCOME

DISPUTE OVER TAX INTEREST ON BONDS APPEAL COURT ACTION (Per Press Association.) WELLINGTON, this day. The Court of Appeal to-day is considering the appeal of Bryant and May, Bell and Company, Limited, from the order of .Mr. .lusiiee MacGregor, made on July 17, 1933, confirming the assessment of the Commissioner of Taxes on the appellants’ income for the year 1930. During that year trie appellant company became indebted to Messrs. Bryant and May, Limited, London, to the extent of £55,500 for goods sold and £24,764 for dividends due. In view of the adverse exchange rate, the English company agreed to postpone tile payment of both sums, interest being allowed by the appellant company at 6 per cent. Both sums were invested in New Zealand Government income free 4£ per cent, stock. In its return of income for the year ended March 31, 1931. the appellant company claimed to deduct from its assessable income interest at 6 per cent, payable to the English company, totalling £1173 16s. As the commissioner disallowed the deduction, application was made, by case stated, for the opinion of the Supreme Court. Mr. Justice MacGregor held that as the deduction claimed was not “interest payable on capita] employed in the production of assessable income” within section 80 (1) (h) of the Land and Income Act, 1923, and not “expenditure exclusively incurred in tho production of assessable income," within section 80 ! (2) of the same Act, the deduction could not be allowed. An appeal is now brought from this decision.

Mr. Hudfield 1 , counsel for the appellant company, submitted that the sum of £82.541 kept in New Zealand 1 in 1930to avoid paying 5 per cent, exchange on London was capital used in the production of assessable income, and the interest on such sum was, therefore, exempt from taxation. If the sum had been invested in per cent. Government stock, instead of in 4J, per cent, tax free stock, the company would have had tii pay tax on the interest from it, and would, therefore, he liable to pay the tax twice over. lie contended, further, that the sum involved was part of the price, of the goods purchased by the appellant for the purposes of its trade. It was in the nature of circulating capital, ami for this reason was exempt from income tax. —(Proceeding.)