| 6/1/2009 |
Bil-Malti
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| Board of Special Commissioners - Cases |
| Case No. 27/72 |
Decided: 12 February, 1973 |
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Premium payable on maturity of bonds
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Revenue considered premiums payable on maturity of bonds to be "a deferred payment of interest payable at date of maturity under prescribed conditions obtaining at the time of the purchase date" and, therefore, chargeable to tax. Appellant, on the other hand, maintained that the income was capital in nature.
It was observed that in a letter addressed to appellant the Director of Savings (United Kingdom) had stated that "the premium payable on maturity is an accretion to capital". In an analogous case the Court of Appeal of Malta had accepted the Director's interpretation which was based on English case law. Lord Greene had held that "a premium on redemption and a premium on issue are in their nature precisely the same" and were put on offer to investors in view of "the taste of the market, the terms of previous issues, the political or international situation, the expectation of changes in money rates, the instability of the currency." Premiums were a form of payment to make up for the depreciation of capital due, mainly, to inflation. The income received was of a capital nature and, therefore, not chargeable to tax.
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