| 6/1/2009 |
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| Board of Special Commissioners - Cases |
| Case No. 24/60 |
Decided: 20 May, 1961 |
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A company has a distinct personality from that of its shareholders and its profits or losses do not devolve on its shareholders - articles 10 and 11, now 14 and 26, Income Tax Act
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Appellant had incorporated a limited liability company with the object of generating business for his private commercial enterprise. The company went bankrupt and appellant claimed that once the setting up of the company was to augment his private earnings chargeable to tax the initial capital he had lost ought to be considered as a deductible expense.
The Board observed that it was a fundamental principle that a limited liability company had a distinct personality from that of its shareholders and its profits or losses could not devolve on the shareholders. The latter were only entitled to a dividend and were not considered to be a trader at law. Appellant could only have been considered as such had he been a dealer in securities himself.
Moreover, the loss suffered was of a capital nature and its deduction was expressly prohibited by the provisions of article 11 of the Act.
An appeal was entered before the Court from this decision (see case no. 43).
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