9911796707
TMI Blog1932 (7) TMI 11X X X X Extracts X X X X X X X X Extracts X X X X ..... by the present respondent in respect of the year to the 31st March, 1929. The appellants' trading account for the year to the 31st March, 1928, which fell to be treated as the income year for the purpose of the assessment, showed a debit item of £ 10,000 in respect of directors' fees, which they claimed as a proper deduction. But the respondent disallowed this item to the extent of £ 8,000 on the ground that, to that extent, it was not exclusively incurred in the production of the assessable income and he assessed the appellants accordingly; the appellants challenge the assessment in this respect. The provisions of the Land and Income Tax Act, 1923, as to deductions, so far as material, are as follows:- "80.-(2) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d fact and, on such appeal being taken S. 30 provides that the Magistrate should state and sign a case setting forth the evidence taken before his Court and the questions of law arising for the determination of the Supreme Court. As the present case only raised a question of law, it was removed, with the consent of parties from the Supreme Court into the Court of Appeal under the provisions of s. 33. It will thus be seen that in the present appeal the power of review of their Lordships is limited to questions of law, and that the appellants have to discharge the burdens laid upon them by Ss. 14 and 25. The material facts may be summarised as follows:-The company was incorporated in 1923 as a private company, and since then has carried on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were fixed each year by resolution of the company in general meeting. The company having adopted Table "A" of the New Zealand Companies Act, 1908, the remuneration of the directors is provided by Art. 78, which is as follows: The directors shall be paid out of the funds of the company, by way of remuneration for their services, such sum or sums as the company may from time to time fix at a general meeting, and such remuneration shall be divided amongst them in such proportions, as the directors may determine." Prior to the year ended in March 1928, their amount so fixed was accepted as a proper deduction for income tax purposes by the Commissioner. The two directors in question reside in Melbourne and direct the policy of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rendered, was sufficient to exclude any further enquiry by the Commissioner and to entitle them to a deduction in terms of Section 80(2) of the Act. But this contention was not seriously pressed, and in their Lordships' opinion, it is untenable. The appellants maintained, in the second place, that the Commissioner was not entitled to challenge the amount paid by the company to its servants for their services on the ground of excess or over-generosity in its amount, for that was entirely a matter in the discretion of the company, and that he could only challenge such payments on the ground that it was not a genuine transaction, being in fact fictitious or the sums so paid being, wholly or partly, not truly paid as remuneration for their ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conclusion that the £ 10,000 had been exclusively incurred in the production of the assessable income. There was complete identity of the persons interested as shareholders in fixing the amount of the fees to be paid to the directors and of the persons to whom the fees were to be paid, and, except in regard to its bearing on the liability of the company to tax, it made no difference to the destination of the money whether the amount of the fees represented fair remuneration for the directors' services or not. The Messrs. Nicholas, who, as sole shareholders and sole directors alone knew how the fees came to be fixed, not only declined to allow the respondent to examine them on this matter, but did not come forward to give evidence ..... X X X X Extracts X X X X X X X X Extracts X X X X
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