CHIEF JUSTICE HEARS LEGAL ARGUMENT ON TAXATION OF ANNUITY

Wanganui Chronicle, 25 February 1948, Page 4

CHIEF JUSTICE HEARS LEGAL ARGUMENT ON TAXATION OF ANNUITY

The question of whether a farmer paying an annuity of £2OO to his sister in terms of a family arrangement was entitled to deduce this amount when calculating his assessable income, was argued before the Chief Justice, Sir Humphrey O’Leary, in the Supreme Court, Wanganui, yesterday. The case was “stated” pursuant to Section 35 of the Land and Income Tax Act, 1923, appellant being Ewan Duncan Grant, Turakina, and respondent the Commissioner of Taxes. Mr. C. N. Armstrong appeared for appellant, and Mr. J. Byrne, of the Crown Law Office, Wellington, represented the respondent. The Chief Justice reserved his decision. The facts of the case, as set out, were that John Grant, farmer, Turakina, died in April, 1942, probate being granted to his three sons, Thomas Henry Grant, Hector Stuart Grant, and appellant, and to the trustees. Deceased gave all his properties to the trustees for conversion and provision was made for his widow, Mary Grant, to receive an annual Income. On her death the trustees were. to pay deceased’s daughter, Margaret Stewart Grant, an annual sum of £2OO during her life and as long aS she remained unmarried. The widow died in May, 1942, and by deed dated August 17, 1943, made between the trustees and Margaret Stewart Grant and appellant provision was made for the trustees to sell to Hector Stuart Grant certain lands forming part of the estate, and to transfer the remaining assets to appellant, who covenanted with the trustees and Margaret Stewart Grant to pay her £2OO annually during her lire while she remained- unmarried. Appellant also covenanted to execute to the trustees a mortgage over the land transferred to him, together with other land belonging to him and containing 290 acres. It was further stated that during the year ended March 31, 1944, appellant paid £2OO to his sister, pursuant to the covenant. Appellant contended that the £2OO was exclusively incurred in the production of his accessable income, and that the deduction was permitted under Section 80 (subsection 2) of the Act Further, It was contended that the expenditure of £2OO represented interest payable and capital employed in the production of assessable income, within the meaning of the Act, and that it had been the practice of the respondent to allow such expenses as a deduction in calculating the assessable income of a person engaged in farming operations. Respondent contended that the expenditure of £2OO was not exclusively incurred in the production of appellant’s assessable income, and that its deduction in calculating his assessable income was prohibited by Section 80 (sub-section 2) of the Act. It was also contended on behalf of respondent that this expenditure constituted an expenditure of capital and its deduction was prohibited. The question for the Court to decide was whether in calculating his assessable Income lor the year ended March 31, 1946, appellant was entitled to deduct £2OO. After hearing legal argument, the Chief Justice reserved his decision yesterday afternoon.