LICENSING FIGHT.

Star (Christchurch), Issue 16471, 6 July 1921, Page 4

LICENSING FIGHT.

i CHRISTCHURCH BREWERS OUTLAY. INCOME TAX PROBLEM. (Special to the “ Star.”) wetjjxgtonc July 5. i The Appeal Court had before it today an unusual question for decision, . arising out of large expenditure by a ; firm of Christ church brewers in proItccting its business from the possible consequences of the special licensing I poll in 1919. I The Commissioner of Taxes, represented by the Solicitor-General, Air "NY. 1 C. .MacGregor, asked for a ruling as to whether the sum oi £2123 odd, spent by Ward ami Company, brewers, maltsters and hotel owners, Christchurch, in connection with the liquor referendum light of 19.19, was assessable for the purpose of computing income tax payable hv the company. Mr A. AV. Blair and Air 1\ B. Cooke appeared for ; Ward and Co. 1 The case stated by the Commissioner, after setting out the formal position ol Ward and Co., and referring to the I circumstances leading up to the liquor j referendum, detailed the expenditure j ma.de by the company in connection I with the campaign, including £6 So J4s | Sd for a casual staff of canvassers, per- | rnanent staff assistance, room clearing. I etc. : .£'622 16s 2d for advertising, £304 j 18s for taxi hire, £202 Is 5d for i age. etc.. £364 16s for rolls and grants ! to country committees, and £202 Is j lid for circulars and sundries, the total ; being £2383 8s 2d. of which sum £2123 ' 3s lid was specified expenditure on I the campaign, in his amended assess--1 moot the Commissioner disallowed the second sum. intimating that such expenditure was not proper to be nlloAvcd as part of the firm’s necessary expenses, or allowed by law to be paid by the company in producing its income assessable for income tax. Tt was contended by the company flint that expenditure was proper in the production of assessable income for the following reasons :—(*) That it was legitimate and necessary expense, because had the money not been expended the company's manufacturing business would not have been in existence to-day. (b) it was necessary to enable the company to continue its business and to enable! brewery and publicans’ licenses to be retained. (c) That the expense of fighting the poll was forced upon the company by the Government, ! which, did nothing to assist the poll, and further that as the poll was taken at a time other than of a general election there was not the usual interest on the part of voters and inducement to them to attend the poll. (d) That the expenditure was imperative, because of 1 lie apathy of the general public, which had no direct financial stake in the venture, and, moreover, the poll in Christchurch was taken on a. wet day, when the expense of getting voters to the poll was heavy. *(e) That the first concern of a business should be the guarantee of its continuance. (t) That l the Commissioner had established | a precedent in respect to insurance preI miums being regarded as just dcduc--1 tions. (g) That the expenditure was I inclusively incurred in the production !of income. (h) 1 hat the money was not paid into the Licensed Victuallers’ j Association and could not bo looked upon as a subscription. I Afr Blair elaborated the company's 1 case, with frequent reference to uu--1 thorities. TTe said that a like expenditure was involved in the second poll j of the year and that such expenditure i was actually recurring every three j years, although the U nefit of the exI peoditurc was spread ever ,each of the | three years. Upon the vote of the I people depended the capacity o! the j company to earn income, and the ox- | penditure was as. it wore. an nssurI a nee that income-'a ruing capacity i would continue. The Commissioner had | said that, expenditure must be exclusively referred to one year, otherwise ! no deduction would ho allowed* but i that contention, counsel submitted, was absurd, for surely if one paid three j vears' rent iu advance c-ne was entitled to write off. say, £IOO for this year, j £IOO for next year and £IOO for the i third year. “Why, we buy barley this i year,” said Air Blair, “ and it does not 1 become beer till next year. “ What about bottles?'’ was a query j from the Bench. j Afr Blair: We might buy a stock ten years ahead, but possibly that would be capital expenditure, i Tu reply the Solicitor-General held that the company rnu*L pay. and.ceri tainly it was upon the company to S prove uon-litib'.lity lor miyinont. Ward ’and Co., he. submitted, had made a i bold attempt to esc-ano the incidence of the Act, and he proceeded to cite English anti other authorities upon • parallel cases. ft had held by 1 the High Court of Australia that cxj penditure laid out with a view 5, :> bon* - i fits over a period of years could not ■ be considered in relation to deductions. but only such expenditure as Trlafcd Ito the rear. Had the vote been nd- | verse would the company -till have eon- ! tended that the expenditure was made | to ensure profit -earning capacity? j Air Justice Hosting: Do you mean I that every expenditure must he eucI cessful? The Solicitor-Gcrmral : T mean that J taxation must 'he naid whether ii. is ! successful or not. If the poll had been ! adverse it would have been money j thrown away, for poll or no noil the j business would have gone on for twelve | months, and after flirt, when nori-cou-ti nuance was the rule, the company 1 would have earned no profits. Ihe underlying principle, continued the So- ! licitor-Genera 1, was that income tax ] must he paid each yeai. ! Air Blair having replied the Court • reserved its decision