| 22/8/2008 |
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| Court of Appeal - Decisions in Income Tax Cases |
| Case No: 91 |
Decided: 31 May, 1974 |
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Interest On Loans. Actual Borrowing Of Money Not Necessary For Deduction To Be Due. It Is Only Necessary That Interest Be Payable On Money Due Following A Transaction
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On finishing his studies, taxpayer joined the family business which was run as a partnership "en nom collectif." His four brothers each transferred to him one fifth of their capital account. Interest was payable by taxpayer at 5% on the amounts still due by him which he actually paid to his brothers. The Revenue referred a deduction for the amount paid on the grounds that the transaction did not involve the borrowing of money as specifically required by the winding of the Income Tax Act.
The Court disagreed and allowed the deduction. The transaction, judicially speaking, did involve the borrowing of money which taxpayer had to return to his brothers. The law did not require the actual transfer of money from one person to the other for a situation to arise where it could be said that he had borrowed money. The existence of an unpaid purchase price was sufficient.
The Court also held that the provisions of the law relative to this taxation of profits from a partnership, as reviewed in case no. 56, were not a hindrance to the deduction.
BSC Case No: 25/71
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