| 8/2/2012 |
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| Board of Special Commissioners - Cases |
| Case No. 9/52 |
Decided: 16 June, 1953 |
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Payment of part of the profits to partner's widow was deemed not to be deductible as the payments were of a voluntary nature and not a distribution of the profits of the partnership - article 11(c), now 26, Income Tax Act
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Appellant and his business partner ran a business together for fifteen years. At first the profits were shared equally between them but when his partner became sick, appellant's share increased to three-fourths while that of his partner was reduced to one-fourth. Later, a nephew joined the business, receiving half of the profits; appellant started getting half, of which one-fourth (i.e. one-eighth of the whole) was forwarded to his partner. When his partner died appellant continued to give the same share to the widow. He claimed that he was not to be taxed on the share paid to his partner's widow as this was not being derived by him.
Appellant admitted that there was no agreement with his partner as to the way in which the profits were to be shared after the latter's death but his wife insisted that her husband had assured her that she would remain receiving the same share of profits.
The Board held that there had been a partnership between appellant and his partner but not between appellant and the widow. The widow was not entitled to any share of the profits. The fact that appellant kept giving her the same share did not mean that the relationship was one of partnership: the widow was in no way contributing towards the partnership.
Appellant had also admitted that he had been voluntarily giving the share of profits to the widow. Consequently the deduction in respect of the payment was precluded by article 11(h) as the payment was of a voluntary nature.
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