| 7/2/2012 |
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| Board of Special Commissioners - Cases |
| Case No. 30/58 |
Decided: 18 November, 1958 |
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An expense in respect of an annuity was allowed as a deduction as it was deemed by the Board to have been wholly and exclusively incurred in the production of the income and not merely the price for the acquisition of an asset- article 10(1), now 14(1), Income Tax Act
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Appellant and his son had formed a partnership en nom collectif, sharing profits equally. By means of an unica carta will, the father left his share of the enterprise that belonged to the community of acquests to his son by way of a legacy. The legacy was subject to a life annuity in favour of the mother. The Commissioner refused to allow the deduction of the annuity from the profits of the business concern, contending that the expense was incurred in the acquisition of that share of the business that belonged to his mother and, therefore, was capital in nature.
The Board disagreed with the decision of the Commissioner. It based its decision on the provisions of the Civil Code that have since been drastically amended. Then, the Code provided that the husband could dispose of the assets both inter vivos and causa mortis, the latter case being conditional on the wife being compensated. In the circumstances, the annuity consisted of an obligation and not a price payable for the acquisition of the asset. It was being "wholly and exclusively incurred in the production of the income" and, therefore, deductible.
An appeal was entered before the Court from this decision (see case no. 24).
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