| 21/8/2008 |
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| Court of Appeal - Decisions in Income Tax Cases |
| Case No: 49 |
Decided on 28 May 1962 |
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Deductibility Of A Voluntary Payment
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A brother and a sister took over two adjoining houses which they reconstructed and furnished to be leased accordingly. The brother however allowed his son to occupy one house at a low annual rent, whereupon his sister took over the business in the other house and kept all profits. Eventually, both brother and sister died, and the brother's son, as sole heir of the sister, inherited his aunt's business. In the meantime he continued to pay rent on the house he was occupying. His mother (the brother's widow) complained that she was being treated unfairly, and an agreement was reached with the son whereby a fixed sum was to be paid to her yearly irrespective of whether the house falling under the deceased aunt's estate was let or not. Taxpayer claimed that the payment being effected to the mother should be allowed as a deduction.
The taxpayer's claim was admitted by the Board of Special Commissioners. The Court disagreed, saying that the mother had no legal right to the payment, just as her predeceased husband could not ask his sister for a share of the profits since he had installed his son in one of the two houses. The Court concluded that the payment made by the son to his mother was not an expenditure incurred in the production of the income, but a voluntary and gratuitous payment whose deduction was prohibited by the law.
BSC Case No: 29/61
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