TaxTMI 
TaxTMI 
1943 (2) TMI 16
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.... examine the nature of the payment which company received. It was a sum of Sterling Pound 15,000, received under a policy taken out for the benefit of the company covering injury or death by accident of Mr. Crawford, one of the directors of the company. It was a very small company. There were three principle shareholders and directors. Mr. Crawford was a gentleman who had very special experience and knowledge of bloodstock, with the sale and purchase of which the companys business was mainly concerned. The nature of his special value to the company is set out in the case stated, and I need not read the passages which refer to it. The company adopted the policy of effecting insurances of a similar character in respect of Mr. Crawford and also in respect of the other two directors, who, in different ways, appeal to have had qualifications and experience of special value to the company. But Mr. Crawford obviously stood in a category by himself. The object of the insurance was not to cover any temporary loss. That is stated in the case, although when one comes to look at the policy it is not quite clear how that conclusion was reached by the Special Commissioners. But the suggestion ou....
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....ng Pound 50 a week in respect of temperate partial disablement from engaging in or giving attention to profession or occupation. Bearing in mind the object of this policy, if Mr. Crawford had, for instance, suffered a temporary disablement over a period of six months, and the company had thereby been deprived of his services during that period, the company would, nude this policy, have been receiving Sterling Pound 50 a week, and that Sterling Pound 50 a week would have been received by it not for the porpoise of handling it over to Mr. Crawford but for the purpose of putting it into its own coffers in order to make up in whole or in part for the loss which it would suffer by being deprived of his services during that period. The provisions of the policy therefore fall into line with the general purpose which the company had in taking it out. In point of fact, what happened was that Mr. Crawford unfortunately was killed in an accident. The company therefor was deprived for ever of his services in the future, and its assets were increased by the sum of Sterling Pound 15,000 received undo the policy. That sum was distributed among the shareholders. What we have to consider is whether....
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....s or earns less profits. It may say to itself : "The services of this employee are so important for our business that it is worth our while by way of insurance to protect ourselves against the loss which we shall suffer in our trade if he is temporarily incapacited." That loss is, of course, of two kinds : (1) the payment of salary during the incapacity, and (2) the actual loss of the profits which the company would otherwise have made. If the company takes out a policy for a sum which the directors estimate will fairly represent the los or part of the loss - it matters not which - that they will suffer if they are deprived of those services, can it be said the the Sterling Pound 50 a week or whether the figure may be, that the company receives under such a policy is anything but a revenue receipt ? It seems to me that the insurance moneys received to cover the company against the revenue loss which it suffers by being deprived of those services are receipts on revenue account and nothing else. But supposing the company carries the matter a step further rang says" "We shall suffer loss not merely by the temporary incapacity of our servant, but if he dies during ....
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....ticular commission agent, and it might be in a position to fix very closely the appropriate sum for insurance against his incapacity or death. It seems to me that whether the amount of the insurance is fixed on an estimate which in the circumstances can be made with substantial accuracy or whether it is fixed on the basis of a broad estimate by the employer, as to the sum for which it will be worth his while to insure the employee makes no difference. Therefore, it seems to me that in this case the receipt must be treated as a receipt on revenue account. The matter can be looked at from rather a different pointed of view. I do not wish to lay down any general proposition which would lead to the result that the test in the case of payment is necessarily the same as the test in the case of receipts. In the case of payments the question whether they are to be treated as deductible expenses is complicated by the special provisions of the Income-tax Acts which lay down certain categories of expenditure which are not deductible. But looking at the matter from the broader point of view, on the question whether a particular item of expenditure or a particular item of receipt falls into th....