| 22/8/2008 |
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| Court of Appeal - Decisions in Income Tax Cases |
| Case No: 52 |
Decided on 3 June, 1964 |
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Interest Accruing Or Received. No Retroactivity Emerges From Taxation In Year When Received. Japanese Bonds Interest
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This case was essentially a re-run of case no 38 which had decided that, in non business matters, there was no taxability on income before the income was actually received. The concept that "receivability without receipt constitutes no income" was reaffirmed, so also that "income arising or accruing" is not equivalent to the words "debts arising or accruing". Until the relevant interest was paid, there was no income arising to anybody.
The only difference between this case and case no 38 was that in the former case the taxpayer had bought his Japanese bonds after the relevant payment scheme had come into operation, while in this case the bonds had been owned for a long time, even before the Income Tax Act was on the statute book. In this sense, the taxpayer claimed that he was being taxed on income which referred to pre-income tax years.
Both the Board of Special Commissioners and the Court of Appeal rejected this argument, holding strictly to the principle that income become one's income in the year in which it was received. Retroactivity simply did not arise. The Court also drew an analogy with shares that were sold "cum dividend", that is to say before the dividend is paid. In such case, the shares increase in value, but it cannot be argued that, consequently, when the buyer receives his dividend he is receiving back a part of his capital outlay.
The Court also rejected a plea that as the Revenue had once issued a letter (not to this particular taxpayer) to the effect that no tax would be charged in cases when the bonds in question had been owned before the payment arrangements were made, the Commissioner should not go against his own ruling. The Court rejected this argument, saying that there was nothing in general law prohibiting a change of interpretation, and quoted foreign cases where this had been done with the court's approval.
BSC Case No: 4/62
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