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Issues: (i) Whether, for relief under section 27 of the Finance Act, 1920, the United Kingdom comparative income was to be reduced by a New Zealand special exemption allowed under section 83 of the Land and Income-Tax Act, 1923; (ii) whether debenture interest taxed in New Zealand in the company's hands as agent for debenture holders formed part of the company's income for the purpose of relief under section 27.
Issue (i): Whether, for relief under section 27 of the Finance Act, 1920, the United Kingdom comparative income was to be reduced by a New Zealand special exemption allowed under section 83 of the Land and Income-Tax Act, 1923.
Analysis: Relief under section 27 depends upon comparing the statutory incomes charged in the two jurisdictions from the same source and giving relief on the smaller sum. The comparison does not require an analysis of the component allowances, deductions, or exemptions used in computing those statutory incomes. A special exemption granted under the New Zealand taxing law for the purpose of computing assessable income did not show that the corresponding income had not been taxed in New Zealand for section 27 purposes.
Conclusion: The special exemption could not be deducted from the United Kingdom comparative income, and the Crown's contention failed.
Issue (ii): Whether debenture interest taxed in New Zealand in the company's hands as agent for debenture holders formed part of the company's income for the purpose of relief under section 27.
Analysis: The debenture interest was paid out of the company's revenue and was separately assessed under the New Zealand Act, although the assessment was expressed to be as agent for the debenture holders. Actual payment, not ultimate incidence, governed the relief provision. The inability of the company to recoup the tax from the debenture holders made the burden fall on the company in substance as well as form, and the tax was paid in respect of the same part of its income.
Conclusion: The debenture interest was properly included in the New Zealand comparative income, and the Crown's argument based on agency failed.
Final Conclusion: The appeals were dismissed, and relief from United Kingdom income-tax was to be worked out on the basis that the company's United Kingdom comparative income and New Zealand comparative income were compared without dissecting the statutory computation items, while debenture-interest tax paid in New Zealand was treated as tax borne by the company for the relevant income.
Ratio Decidendi: For relief against double taxation, the comparison is between the statutory incomes of the same source in the two jurisdictions, and deductions or exemptions used only in computing those statutory incomes are not to be separately analysed; tax actually paid on income retained by an assessee, even if collected through an agency mechanism, counts as tax paid in respect of that income.
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