| 22/8/2008 |
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| Court of Appeal - Decisions in Income Tax Cases |
| Case No: 63 |
Decided on 20 August 1967 |
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Japanese Bond Interest. Taxability Of The 'arrears' Portion In The Hands Of A Usufructuary.
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This was the third case regarding the arrears portion of Japanese Bond interest.
The novelty in this case was that the original owner of the Bonds had died, and for death duty purposes his estate was deemed to include the arrears element of the interest. When the interest was paid, it was brought to charge to income tax in the hands of his surviving spouse as usufructuary. This applied to the deceased husband's share of the community of acquests. No problem arose regarding the widow's own share.
Both the Board and the Court held that this novel feature did not make much difference. The death duty and income tax laws were two separate legislative measures and each had to be applied in its own context. In any case, the market value had to be brought to charge for death duty purposes and this was precisely what was done.
Esentially the decision in this case reaffirmed the Court's ruling in cases nos 38 and 52. The Court refused to accept arguments based on Civil Law regarding the actual entitlement to the arrears interest as between the heirs of the deceased and his usufructuary. While accepting that the Income Tax Act, like all other legislation, could not be interpreted in isolation from Civil Law, the fact was that this was an income tax case, and had to be decided accordingly. Moreover, the Court was not ready to be involved in possible disputes between the usufructuary and the heirs as to whom, at Civil Law, the interests belonged. This issue had not been taken up by any of the parties involved before an appropriate tribunal.
BSC Case No: 8/62
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