| 6/1/2009 |
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| Board of Special Commissioners - Cases |
| Case No. 4/72 |
Decided: 21 March, 1973 |
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Compensation for loss of earnings over a number of years is chargeable to tax wholly during the year it is actually received - article 5, now 4, Income Tax Act
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In 1962 the Rent Compensation Board granted to appellant damages to make good for loss of rent incurred during the period 1945-56 in respect of premises destroyed by enemy action. Revenue considered the income as having been earned wholly during basis year 1962. Appellant, on the other hand, contended that such income was not taxable and, in any case, should have been brought to charge in the years in respect of which he received compensation.
The Board rejected the first plea. It held that whereas the income could not be classified as "rents" in terms of section 5 of the Income Tax Act, it definitely formed part of "any other profits arising from property" provided for by the same section. Compensation had been granted expressly to make good for loss of earnings. It was, therefore, chargeable to tax.
In regard to the alternate plea, a distinction has to be made between "payment of rent" and "compensation for loss of rent". In order to qualify for such compensation one had to submit a formal application. Compensation is not granted as of right, as in the case of rents proper, but depended upon the Rent Compensation Board's considerations. Applicant became entitled to damages only when that Board actually approved the application. In the meantime no income could be said to have been "accruing". Both approval and payment of damages were effected in 1962 and, in the circumstances, Revenue was correct to consider the whole of the income to have accrued during that single year and not over a period.
An appeal was entered before the Court from this decision (see case no. 96).
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