| 21/8/2008 |
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| Board of Special Commissioners - Cases |
| Case No. 16/52 |
Decided: 16 June, 1953 |
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The expense in respect of the payment of an annuity was deemed to be of a capital nature and not an expense wholly and exclusively incurred in the production of the income - articles 10 and 11, now 14 and 26, Income Tax Act
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A business had been transferred to appellant in consideration of a monthly annuity of Lm15 until the death of the original owner. The annuity had been reduced to Lm6 and later, after the death of the owner, to Lm9. However, following a suit entered by the widow the annuity payment was increased again to Lm16.
Appellant claimed a deduction in respect of the annuity payment as this had been wholly and exclusively incurred in the production of the income. Without the expense appellant would not have earned the income. But the Commissioner disallowed the deduction, arguing that the expense was of a capital nature.
The Board held that the expense for acquiring capital could never be considered to be an expense wholly and exclusively incurred in the production of the income. The fact that the annuity was paid monthly was irrelevant. Article 10 (which lists those expenses which, if incurred wholly and exclusively in the production of the income, are to be allowed) is to be read together with article 11 (which precludes deductions in respect of expenses of a capital nature).
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