| 17/5/2012 |
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| Board of Special Commissioners - Cases |
| Case No. 3/61 |
Decided: 8 November, 1961 |
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Whether partners' income from different sources can be consolidated into that of the partnership they hold between them - article 49, Income Tax Act, now article 27, Income Tax Management Act
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Appellant was a partner with his brother in agricultural work ceded to them by their father on condition that they shared the profits. One of the brothers was a self-employed stone dresser. In view of his limited and irregular hours of work on the fields it was agreed that income from both sources be considered as having been earned by the partnership and shared equally. The Commissioner held that income from stone dressing was earned by one of the brothers only and chargeable solely to him.
The Board observed that it agreed in principle that "It would seem that the salary or wages of a person could not be disposed of in such a manner as to free him from income tax liability thereon. A person who assigned the right to receive part of his salary would, it is thought, be still assessable on the full amount (Hannan and Farnsworth)".
Citing the decision in Reade vs Brearley, the Board held that such cases were to be judged upon their particular circumstances. The brothers had entered into a partnership and the agreement reached was valid and binding. The earnings from stone dressing compensated for the extra work being put in by the other brother in the production of income from agricultural work. It was normal commercial practice that, in such cases, income from different sources be consolidated.
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