TAX APPEAL.

Star (Christchurch), Volume LXVI, Issue 20276, 10 April 1934, Page 9

TAX APPEAL.

Pratt Estate Company Case. HEARING COMMENCED. Per Press Association. WELLINGTON, April 10. The hearing of an appeal by the Commissioner of Taxes against a Supreme Court decision in favour of the Pratt Estate Company. Ltd., was commenced in the Appeal Court to-day. By his will, William Pratt, of Christchurch, who died in 1905, empowered his trustees to form a company with the object, inter alia, of taking over his estate, which consists mainlv of two valuable city properties in Christchurch. The company was formed in August, 1926. with a capital of £BIO, divided into ten ordinary £1 shares, held 'by the testator’s children and two of the trustees, and 800 £1 preference shares held by the trustees, who are also directors of the company. After providing for dividend on ordinary shares, depreciation, etc., the net income of the company, or so much thereof as the shareholders determine, is divisible rateably among preference shareholders. The trustees hold the preference shares upon trust for the beneficiaries as provided by the will. Supreme Court Judgment. Since its formation the company has been assessed for income tax as an ordinary commercial company. It objected to the assessment for the year ended March, 1932, and upon its objection being disallowed by the Commissioner of Taxes, it required a case to be stated for the opinion of the Supreme Court. The matter was heard by Mr Justice Ostler, at Christchurch, and judgment given, in December, 1933, in favour of the company, his Honor holding tl.at the company was merely the agent of the beneficiaries, and not an independent person having control of the disposal of the whole of its income. The Commissioner of Taxes is appealing from this decision. Mr Donnelly (Christchurch) is appearing for appellant, and Mr Wilding, with Mr A. C. Ferrier, both of Christchurch, for respondent. “Absolute Owner.” Mr Donnelly- submitted that the company was the absolute owner of the property of the estate and that there was no trustee relationship between the company and the beneficiaries. The beneficiaries could not sue the company for income, and were therefore_ not beneficiaries entitled in possession to receipt of income within the meaning of the statute, i For respondent, Mr Wilding submitted that beneficial ownership of both capital and income was vested in the beneficiaries and not in the company. The company was a trustee and under fiduciary relationship with each beneficiary.