| 4/2/2012 |
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| Court of Appeal - Decisions in Income Tax Cases |
| Case No: 61 |
Decided 10 February 1967 |
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Non-Deductibility Of Interest When Investment Acquired Through Relative Loan Produces No Income
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Taxpayer took out a loan to buy shares in a company. In the year in question he received no dividend on the shares, but wanted a deduction for the interest paid on the loan against his other income. The claim was summarily rejected by the Board of Special Commissioners which made reference to Appeal cases 31 and 36 that had laid down the principle that there had to be a link between expenses and the relative income which the expenses would have helped to create.
The Court agreed with the Board and referred to the more recent case no 60 which had been decided on the same lines. The Court refused to accept that the provisions of the Income Tax Act lumped together income from all sources and all expenses, and then deducted one from the other. The Court again made reference to the case of trading losses which, in terms of a special provision, could be deducted against other sources. This exception really proved the above rule. Foreign case law was also in conformity with this line of approach.
BSC Case No: 24/64
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