| 6/1/2009 |
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| Board of Special Commissioners - Cases |
| Case no. 22/53 |
Decided: 28 November, 1953 |
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Donations made to unmarried children - article 21(2), now 51(3), Income Tax Act
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By a public deed, made during 1948, appellant donated to his unmarried children certain property which belonged to him and renounced, in their favour, to the usufruct from property which had belonged to his deceased wife.
The Commissioner invoked article 21(2): "where as a result of any disposition made during the life of the disponer, any income is payable to a child, the income shall, if at the beginning of the year the child was unmarried or was below eighteen years of age, be treated as the income of the disponer and not as the income of the child. The Board held that for the basis year 1949 the income of appellant's son from the partnership was to be taxed on appellant."
Appellant maintained that (a) the said article applied only to one year, that is, the year in which the disposition was made and not to all subsequent years; and (b) the Act, which came into force in 1949, could not be applied retroactively to the 1948 income.
Regarding (a) the Board held that the wording of article 21(1) was very clear: the words "any year" of the phrase "in any year immediately preceding the year of assessment" cannot be restricted to mean one year only. Regarding (b) the Board noted that the Act was enacted on 7 December, 1948 with effect from 1 January, 1949.
It is widely held that laws should not be retroactive, however the Income Tax Act was retroactive in the sense that the tax due for 1949 was to be assessed and paid on the income for 1948 (according to a specific legal provision, a previous Board decision and Court case no. 1). Consequently the Commissioner was correct in charging to tax in 1949, a disposition which had been made in 1948.
Finally, the Board noted that the said deed had been entered into towards the end of 1948, therefore appellant must have been aware of the enactment of the Income Tax Act and the provisions of article 21.
The Board decision was appealed before the Court. The Court (case no. 10) confirmed the Board decision.
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