INCOME TAX

Southland Times, Issue 20897, 5 October 1929, Page 8

INCOME TAX

REFUND CLAIMED

CASE BEFORE FULL COURT

INTEREST ON DEBENTURES

(Per United Press Association.)

Wellington, October 4,

The Full Court, consisting of the Chief Justice (the Hon. M. Myers) and Justices Herdman, Adams, MacGregor and Ostler, was engaged to-day in hearing an originating summons issued by the Government Life Insurance Commissioner (plaintiff) against the Attorney-General (respondent) for an interpretation of the Land and Income Tax, Act, 1923.

The questions submitted for the opinion of the Court are:—

(1) Whether the aggregate amount of income tax paid by the plaintiff for the years ending December 31, 1925, 1926 and 1927, exceeded the amount that would have been payable by him if the interest received by him on the debentures issued by local authorities formed part of the taxable income of the Government Life Insurance Department.

(2) At what rate plaintiff Is liable to pay income tax on the income arising from such debentures, having regard to the provisions of the above Act and other relevant statutory provisions.

The plaintiff alleges that for the years ending December, 1925, 1926 and 1927 he has paid the sum of £17,074 3/8 in income tax in excess of what he was liable to pay by law. On the answers by the Court to the above questions rests his right for a refund on this amount. For the plaintiff Mr C. A. L. Treadwell and Mr H. J. James appeared and for the respondent Mr A. Fair, K.C. Mr Treadwell, for the insurance commissioner, said the Income Tax Department had claimed the tax at full rate on interest from debenture securities held by'the insurance commissioner. Plaintiff claimed he was entitled to a refund on the tax paid in pursuance of such claim by virtue of provisions of section 99 (2) of the Land and Income Tax Act, 1923. The rate of debenture tax should not exceed the general rate. By section 93 of the said Act the rate of tax in respect of life insurance companies was halved except in respect of the income derived from debentures, but section 96 provided that plaintiff had not to pay on debenture tax a rate higher than half the rate of the general tax. Plaintiff accordingly sought a refund of difference between the general rate paid by him and the debenture rate. The onus was on defendant to show that plaintiff was not entitled to this benefit.

Mr Fair, K.C., for defendant, said that it was only by consent that the proceedings before the Court were taken in the form that they were. The Commissioner of Taxes had consented to the proceedings in order to have the question decided. If debenture tax had formed part of the taxable income of a tax payer or had not been separately assessed at a different rate, it would have fallen within section 96 of the 1923 Act. This exempting section did not extend exemption to income from debentures. If there had been separate assessments of debenture interest, it would have been charged at the full rate. The income derived from debentures was expressly exempted from the provisions of section 96. Judgment was reserved.