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TMI Blog1932 (6) TMI 12X X X X Extracts X X X X X X X X Extracts X X X X ..... , the words pay my wife during her life the annual sum of 5,000 free of income-tax. Eve, J., has held that that freedom so prescribed included' freedom from sur-tax as well as income-tax. Counsel for the appellants, who have presented to us, both of: them very useful and helpful arguments, contend that those words -ought to be confined to income-tax alone, and cannot be made to cover the sur-tax. I am not unmindful that a distinction between what is known as sur-tax, or super-tax, and income-tax can be drawn. I will use in future the words super-tax, because sur-tax was introduced by the Finance Act of 1927, s. 38, sub-s. 1 (b) , but although the name is different I agree with Bennett, J., who said in the case Hulton, In re ; Hulton v. Midland Bank Executor and Trustee, Ltd., after going very carefully through the provisions relative to the matter; In every essential feature, super-tax and sur-tax are, in my judgment, the same tax. Now what is super-tax? It was originally imposed by the Finance (1909-10) Act, 1910, s. 66. By that section it is declared that; In addition to the income-tax charged .there shall be charged, levied and paid for the year ..in respect of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it can be said that here is something which is an additional income-tax. It is called a super-tax, but the mode of its incidence, the mode of its initiation, and the mode of its collection, are different. I pointed that out in the Michelham Case, where I said (14 L. T. at p. 168 ; 15 Tax Cas. at p. 750): The fact that it is paid or may be paid a little differently from the income-tax, that deduction does not apply, does not alter its character. The consideration, therefore, of the nature of super-tax seems to disclose that, in spite of the criticism that might be offered on which differentiation between it and income-tax can be founded, the difference is not effective to destroy the fact that it remains an additional duty of income-tax within the statutes to which I have referred, and for the purposes of the payment; With those observations I feel myself unable to carry into effect any differentiation between the, income-tax and super-tax when the words '' income-tax are used, as they are used in this clause 12 of this will. I am not unmindful of the inconvenience which would be caused to those who have to fulfill the duty cast upon them by this direction in law. Couns ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wife was not entitled to payment of any sum in respect of super-tax. He founded his judgment upon the reference to deduction, and pointed out (94 L. J. Ch., at p. 191 ; [1925] Ch., at p. 159) : Super-tax was not a charge in respect of any particular annuity or sum, but was a charge in respect of the recipient's whole income and was not a matter with which the trustees would be charged or concerned at all. He is dealing there with the judgment of Peterson, J., but as he puts it : The question is : Did the testator mean that only income-tax 'in respect thereof' was to be deducted, and that super-tax was not to be deducted ? He then holds that : The testator did not intend that in addition to income-tax being deducted a proportion of the super-tax payable by his wife in respect of her total income should also be deducted. In the use of the words : such a sum in every year as, after deduction of the income-tax for the time being payable in respect thereof, will leave a clear sum of 2,000 is a restrictive indication. But in the present case the trustees are directed to hand over a sum of 5,000 in each year. I have pointed out that it is not prescribed in what in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he freedom from income-tax did not include freedom from super-tax, relying (inter alia) upon the words in respect thereof' occurring in the bequest, and pointing out that super-tax was not strictly speaking a tax payable in respect of the annuity. Counsel, however, has contended that a gift of an annuity free from income tax must necessarily mean a gift of an annuity free from income tax payable in respect thereof, and that, therefore, the reasoning of Russell, J., in Bates, In re; Selmes v. Bates, ought to be applied to the present case; but it is to be observed that the learned Judge in that case relied upon the express use of the wards in respect thereof as distinguishing the case from the case of a gift such as we have here. 6. I have said that the question was settled, so far as the Courts of first instance were concerned, but the matter does not quite rest there. In the Michelham Case there was an annuity free from income tax simpliciter. Although the question was not argued, the Master of the Rolls stated in his judgment, with regard to the liability in respect of super-tax (144 L. T., at p. 163; 15 Tax Cas., at p. 750): The liability it appears to us is clear. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... difference that the gift of the annuity is only to be found in a direction to a trustee to pay. The trustee, in that case, has to perform the same duty as the executor or trustee, or other person would have had to perform in the first case that I have mentioned, namely, where there is a gift simpliciter of an annuity free of income tax. There are, of course, cases-the Master of the Rolls has referred to some of them-where the testator, by the use of the words ''pay without deduction has shown that he is not dealing with the position as between the annuitant and the Crown, but is dealing with the position that will exist as between the annuitant and the trustee who has to pay, and words that give a direction to pay without any deduction indicate that the testator is providing against a deduction by the trustee which, but for the provision, the trustee would be entitled to make. Now inasmuch as the trustee, in the absence of such words, is not entitled to make any deduction in respect of super-tax, it is plain that such words show that the testator, although referring to income-tax, does not intend to include in those words the super-tax. 10. For these reasons I think t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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