Deposit-account interest source rules: a later lodgment can be treated as an addition to a taxable source of income.

A further lodgment into an existing deposit account can constitute an addition to a source of income for tax purposes where the taxable source of interest is the deposit of money made on the terms of the banker-customer contract. The Court of Appeal held that the continuing contract alone was not the relevant source; the later deposit increased the fund generating interest and was therefore a taxable addition to the source. Interest attributable to that additional deposit was assessable under the relevant Finance Act provisions, and the appeal failed.

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Issues: Whether the taxpayer's lodgment of 2,000,000 into an existing deposit account created a new source of income or an addition to a source of income for the purposes of taxing the interest received.

Analysis: The Court held that the source of the interest was not merely the continuing banker-customer contract, but the deposit of money on the terms of that contract. A further deposit increased the fund from which interest was generated and therefore constituted an addition to a source of income within the meaning of the relevant Finance Act provisions. The argument that each deposit account involved only one continuing contract did not prevent the later lodgment from being treated as a taxable addition to the source. The interest attributable to the additional deposit accordingly fell to be assessed under the provisions governing new sources or additions to sources of income.

Conclusion: The taxpayer did acquire an addition to a source of income, and the assessments were properly computed by reference to section 21 of the Finance Act, 1951. The appeal failed.

Ratio Decidendi: In a deposit-account case, the taxable source of interest is the deposit of money on the terms of the banker-customer contract, so that a substantial further lodgment constitutes an addition to a source of income for the purposes of the applicable tax provisions.

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