| 6/1/2009 |
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| Board of Special Commissioners - Cases |
| Case No. 4/63 |
Decided: 1 February, 1964 |
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Share of profits of partnership en nom collectif when fellow partner absconded with all the profits and went bankrupt; receivability without receipt - article 5, now 4, Income Tax Act
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Revenue had assessed taxpayer's share of the profits, maintaining that the mis-appropriation by the other partner took place after the income was earned. This constituted an application of income after it had arisen and was, therefore, chargeable to tax.
The Board noted that the case law on which the Commissioner had based his decision dealt with income earned by a limited liability company that had a distinct personality. In that case it could be argued that the monies mis-appropriated by the managing director constituted application of the company's income. In the case at issue, however, the partner was assessed on monies that ought to have been passed on to him in his personal capacity. One had to consider, in the first instance, whether this constituted chargeable income at all.
The Board referred to the Court of Appeal's decision in case no. 38, wherein it was held that, following precedents established in the U.K. courts, receivability without receipt is nothing and does not amount to an "incoming" as per article 5 of the Act. Moreover, in terms of the same provision it was the income, and not the credit in its abstract form, which had to be "accrued" or "derived".
The relative English case law held that "the question is what income the man has received, and not what income he might have received but for his wilful default" and "... now one must, I think, remember that receivability without receipt for the purpose of income tax is nothing at all."
An appeal was entered before the Court from this decision (see case no. 56).
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