siderable, largely owing to the attempt, which has failed, to show that the applicant had by her own conduct disentitled herself to the benefit of the statute. Solicitors for the applicant: Hankins & Loughnan (Palmerston North). Solicitor for the defendants: J. Bruce Beale (Palmerston North). THE COMMISSIONER OF TAXES v. THE AUSTRA- Revenue "The Land and Income Assessment Act, 1900," Sections 55 and 68 A life-insurance company cannot make a deduction from the income on which income-tax is payable by it (under section 55 of "The Land and Income Assessment Act, 1900") in respect of land occupied and used by it for business purposes, as an ordinary taxpayer may under section 68 of the Act. THIS HIS was a special case stated in an action by the Commissioner of Taxes to recover the sum of £93 4s. from the defendant society. The society was assessed on its income from investments, but claimed to deduct from the amount of such income the abovementioned sum, being a sum equal to 5 per centum on the capital value of its business premises. The question for the Court was whether the society had the right to make the above deduction. Findlay for the plaintiff. M. Chapman for the defendant. STOUT, C.J.:— Cur. adv. vult. By section 68 of "The Land and Income Assessment Act, 1900," a taxpayer who occupies and actually uses for the sole purposes of business any land of which he is the owner is S.C. IN BANCO WELLINGTON. 1901. May 3, 11. STOUT, C..J. S.C. COMMISSIONER v. entitled on any return of income derived from such busi1901. ness to deduct as an outgoing a sum computed at the rate of £5 per cent. per annum on the capital value of his interest in the land, or, as the case may be, in the improvements thereon. The question raised in this special case is whether this deduction can be made by life-assurance companies in their returns of income under the beforementioned Act. AUSTRALIAN MUTUAL PROVIDENT SOCIETY. Life-assurance companies have their income assessed not as ordinary taxpayers, but in a special way. Section 55 of the statute provides, "In the case of a company carrying on the .6 business of life insurance (including the Department created "under The Government Insurance and Annuities Act, "1874'), such income shall be deemed to be a sum equal to "its total income from investments of any kind other than “investments in or on land, and income-tax shall be payable accordingly." 66 The contention of the plaintiff is that life-assurance com panies must pay on the gross income from their investments, without any deductions either for rent or for the allowance equivalent to rent provided in the 68th section; further, that these companies cannot deduct anything from what is called their "income" in section 55, and in arriving at that income they must take the gross returns from their investments, without such deductions as ordinary taxpayers make-viz., clerks' salaries, stationery, postages, gas, &c. The defendant contends that, at all events, this class of companies is entitled to the deduction mentioned in section 68. Income," it was urged, means, according to the interpretation, profits, not mere receipts. 66 It was urged that the policy of the statute must be looked at, and that it could not have been intended to tax provident companies, which are beneficial institutions, at a higher rate than other companies or private capitalists. The Court, it was said, should assume that such companies, which encourage thrift and providence, would be favoured, not discouraged, by the Legislature. It is obvious that, if these companies are not to get the benefit of the deduction in section 68, and perhaps other deductions that the ordinary taxpayer is allowed, such as business expenses, clerks' salaries, &c., they are treated unfairly, and are called on to pay a higher rate of taxation. Their only escape from what is, compared with other taxpayers, an unfair impost would be to invest their funds in buildings. Returns from buildings pay neither land nor income tax. But, even then, if these companies invested in buildings they would be getting no advantage over ordinary taxpayers: the capitalist who invests his money in buildings escapes taxation. The Court cannot, however, deal with such questions: it must try and ascertain what the Act states, and, however unequal or apparently unfair the impost may be, the words of the Act must be literally followed; and, however improbable it might be supposed that provident societies should be taxed on gross income whilst ordinary taxpayers are allowed to make deductions from gross income, still the law cannot be altered by the Court. 66 Section 55 is one of a series of special sections dealing with special classes of taxpayers-viz., sections 52, 53, 54, 55, and 56. Section 52, for example, deals with banking companies. That section says that the income of a bank shall be deemed to be a sum equal to 10s. in every £100 of the average of its total assets and liabilities, and "income-tax shall be payable accordingly." So that a bank that may make no profits, but losses, still has to pay an income-tax. If Mr. Chapman's contention in reference to life-assurance companies is well founded, then banks would have the same right as life-assurance companies to the deductions mentioned in section 68, and also, I suppose, to the other deductions allowed to the ordinary taxpayer. If these were allowed, banks would escape all income-tax, for I suppose their expenses and rent would equal the half per centum on their assets and liabilities. I am of opinion that section 55, like section 52, must be read as a short way of arriving at what is to be "deemed " to be income of life-assurance companies. The income is to be "deemed to be a sum equal to its total income from invest"ments." "Total income" means, in my opinion, gross income, or total returns without deductions. I think, inde VOL. XX.-17. S.C. 1901. COMMISSIONER OF TAXES V. AUSTRALIAN SOCIETY. . 66 pendently of the exact meaning of the words "total income," the framework of the sections shows this. It is true that income,' when used alone," [see section 3] means any profits derived or received by any person in any year or by any means or from any source which are made the subject "of taxation under this Act." When "total" is prefixed to it it must mean profits without any deductions for expenses -else why use "total"? If Mr. Chapman's view is correct, "total" is an unnecessary word, and he would read a word like "net" before "income." The fact that there are special sections dealing with various companies-banks, fire-insurance companies, life-insurance companies, mining companies, &c. -shows that these companies were not to be treated as the ordinary taxpayer. They are to pay income-tax on what under the special sections dealing with them is deemed to be their income. Both the actual wording, therefore, of section 55 and the framework of the statute show that the deductions which ordinary taxpayers can claim cannot be claimed by lifeassurance companies. They are really called upon to pay on not what a merchant, or trader, or manufacturer pays on, but on a gross income. I must therefore answer the question put in the case in the negative. Solicitors for the plaintiff: Findlay, Dalziell, & Co. (Wellington). Solicitors for the defendant: Chapman & Tripp (Wellington). [IN THE COURT OF APPEAL.] THE COMMISSIONER OF STAMPS v. W. B. GIRLING & CO. Revenue-Deed-of-Gift Duty-Deed of Partnership between Brothers and A widow, who had been carrying on a drapery business, died leaving a will by which she disposed of all her property amongst her two sons and three daughters. After her death the sons and daughters executed a deed reciting that for various good reasons they had mutually agreed between themselves that a distribution of the estate and effects of the testatrix should be made in manner afterwards appearing in the deed, instead of the distribution provided for by the will, and that the drapery business carried on by the testatrix should be continued in manner afterwards appearing; and by this deed it was agreed between the five parties that they should become partners in and carry on the drapery business for a period of ten years, and that (with the exception of certain properties to which one of the sons was to be solely entitled) the interests which the parties respectively took under the will in the property of the testatrix should be brought into the partnership capital. Certain of the parties were minors. Those who were of age conveyed and assigned their interests in the property to the eldest son and another person as trustees for the partnership, and the deed purported to vest the whole property in the same persons as trustees. Looking merely to the value of the interests contributed by the daughters to the partnership, and to the value of the shares which they were to take in its total capital, the daughters appeared to be the gainers to the extent of about £1,000, and the deed was assessed by the Commissioner of Stamps as liable to duty as a deed of gift on that amount. Held by the Court of Appeal (affirming Stout, C.J.), 1. That the scope and aim of the deed was not to transfer or otherwise dispose of the property to or for the benefit of any person, within the meaning of section 6 of "The Stamp Acts Amendment Act, 1895," but to establish a partnership and to provide the capital with which it should be carried on; and that it was not, therefore, liable to duty as a deed of gift. 2. That it was not liable as a conveyance on sale. S.C. IN BANCO. WELLINGTON 1901. Mày 22, 29. STOUT, C.J. C.A. 1901. July 2, 17. |