APPEAL COURT

Hokitika Guardian, 21 October 1931, Page 2

APPEAL COURT

A TAXATION CASE. OBJECTION TO ASSESSMENT. WELLINGTON, October 19. The Court of Appeal to-day heard the appeal of William Robert Kemball., of Wellington, from the assessment 0! his income tax for the year ended Mach 31st, 1930. The case stated by the Commissioner of Taxes shows that 011 May I«th and June 17th. 1929, respectively, Kemball who was then lessee of the De Luxe end Paramount Theatres in Wellington, amongst others, entered int) agreements with the Western Electric Company (New Zealand.) Ltd., for the installation in those theatres of talk e machines at costs of £3892 11s lid and 4*3743 19s lCd respectively. These machines were subsequently installed and the money raid l>v Kemball. In June. 1930. a company named Kembal’s Theatres, Limited, was incorporated for the purposes of tak’ng over Kemball’s picture interests in these and other theatres. To this company Kemball assigned his interest in the talkie machines, £3348 each. In his return for the year ended March, 19i.ii). Kemball deducted the amounts paid by him for these machines from his income, but these deductions were not allowed by the Commissioner of Taxes, who stated a case for the opinion of the Supreme Court which was removed into the Court of Appeal. Mr A, Gray. K.C., counsel for appellant, 'contended in opening that, the expenditure of £3892 and £3743, incurred ip the installation of the two talking machines, was expenditure exclusively incurred in the production of assessable Income from income tax. The capital expenditure, he admitted, could not be deducted under the ‘onus of tin* Land and Income Tax Act, 1923, Imt expenditure on talking machines, lie contended, owing to the revolution in moving picture exhibiting was necessary for commercial expendiency, and essential if the business were to be carried on at all. Setcndly, he submitted that as the appellant was only leasing the talkie machine, and paid the rent in a lump sum instead of spreading payment over a term of 10 years, as stated in the lease, he could not be liable for assessment on this sum. The Solicitor-General (Mr A. Fair), for the Commissioner, submitted that in order to exempt the payment for the two talking machines from assessment for income tax, appellant must prove that the expenditure was exclusively incurred in the production of income in the same income-tax year as the date of the acquisition of the machines In this case, the benefits from tbe use of the machines were spread over the period of ten years, for which they were leased, and the lump sum paid in respect of the lease was not therefore exempted. He contended that the payment was clearly capital expenditure, and therefore was not exempted ns the expenditure was made from the fixed capital fund as it did not recure annually, and as it produced an enduring asset. He submitted finally that the premiums payable under the lease must be treated as capital expenditure and liable for assessment, whether paid in a lump sum or not, The Court reserved its decision.