INCOME TAX CASE.

Star (Christchurch), Volume LXIV, Issue 938, 7 December 1933, Page 12

INCOME TAX CASE .

Assessment of an Estate

Company. SUPREME COURT APPEAL. An appeal against an income tax assessment by the Pratt Estate Company, Ltd., carrying on business in Christchurch, was heard by Mr Justice Ostler in the Supreme Court this morning. Respondent was the Commissioner of Taxes, for whom Mr Donnelly appeared. Mr Wilding conducted appellant’s case. Judgment was reserved. The statement set out that William Pratt, of Christchurch, died in October, 1905, and by his will empowered his trustees to form a company to take over his estate. The will was administered to August, 1926, and for the last ten years the assets consisted mainly of land and buildings leased to J. Ballantyne and Co. and to the Federal Club. The appellant company was incorporated as a private company in August, 1926, and since its incorporation had been assessed for income tax as a separate entity at the rate payable by companies. For the year ended March 31. 1932, the company had been assessed for income tax. Appellant contended:—(a) That it should not be assessed as though it was beneficially entitled to such income, as it is merely a trustee for the beneficiaries, who are entitled in possession to the receipt of the income earned by such company under the trust during the income year in which it was earned; (b) that the company should be deemed the agent of the beneficiaries and assessed under section 102 (a) of the Land and Income Tax Act, 1923, and its amendments. “An Independent Entity.” Respondent contended: (a) That the company was an independent entity with the control of the whole of its income and with power to dispose of same in carrying on any business, making improvements or providing reserve against the future and the respondent could not have assessed income paid to its shareholders as income derived in their individual capacity at any time during its existence and cannot now do so; (b) that no beneficiary is entitled to the receipt of any portion of the income during the same income year in which the same is derived, but the same is at the absolute disposal of the companj-; (c) that the income is rightly assessed as the income of the company and the assessment is correct; (d) alternatively the income is rightly assessed by the virtue of the Act; (e) in any event the said assessment is correct. It was submitted that the question for the opinion of the Court was whether the assessment was correct and, if not, what was the correct Mr Wilding said that the appeal was on a point of law. The question was whether the Pratt Estate Company had been rightly assessed as a whole, or whether each beneficiary should be assessed separately. He would ask the Court to decide whether the company was a trustee and whether the beneficiaries were entitled to the income in the same income year. Mr Wilding further submitted that the company was in existence merely to carry out the trusts of the will. The primary duty of the company was to administer the will of the testator as trustee. After Air Donnelly had addressed the Court, his Honor reserved judgment.