WEMBLEY GUARANTEE

Wanganui Chronicle, Volume 71, Issue 218, 14 September 1928, Page 8

WEMBLEY GUARANTEE

COMPANY TAXATION AN INTERESTING DECISION. An interesting question was raised in the King’s Bench Division, London, when Air Justice Rowlatt upheld the Crown’s contention that guarantees for the Wembley Exhibition could not be deducted from a firm’s profit for purposes of assessing income tax. Messrs J. A, Lawford and Co., asphalt contractors, of Stratford, were among the Wembley guarantors, and were called upon to pay £375. The Income Tax Commissioners decided that the sum was spent for the firm’s business, and could legally be deducted from their profits. The Crown appealed, contending that it was a capital payment, and was not a proper debit item to be placed against the profits. It was stated that Alessrs Lawford and Company submitted an estimate for asphalting work at the Exhibition, and that it was represented to them that, if they subscribed to the guarantee fund of the Exhibition, they would receive a preferential treatment. They gave a guarantee for £5OO, but did not receive an order for work at the Exhibition, and in 1925 they were called on to pay £375 under their guarantee. The firm’s contention was that the money was spent for the purpose of earning profits, and the Crown’s view was that the payment was not an expense or loss connected with the firm’s trade.

Air Justice Rowlatt said that Alessrs J. A. Lawford and Co. gave the guarantee with the wholly commercial and mercenary object of putting themselves in a better position to get a contract for asphalting work. They did not get a contract, bv' in his view, the case would have been precisely the same if they had obtained a lucrative contract. He thought, however, that the Crown was right in contending that this was not expenditure sufficiently connected with the firm’s trade. “I think this case is a most important one,” added the Judge, “because, if the line is not drawn at this case; I really do not know what 'mercenary payments in the nature of ground baiting,’ as the Attorney-General has put it, may not come in and be capable of being found by the Commissioners as having been made for the purposes of trade. ’ ’

The nearest analogy to this case, from the taxpayers’ point of view, was expenditure on advertisements. In a figurative way, this expenditure might be called expenditure on advertisements, as it was meant to influence customers, and was expenditure, not of immediate production, but of salesmanship. The cases, however, were not the same, as money spent on advertisements was expenditure directly inviting trade, and the respondents’ guarantee was given in the hope that they would be favourably considered in connection with contracts. The Crown’s appeal would be allowed with costs.