TMI Blog1959 (11) TMI 66X X X X Extracts X X X X X X X X Extracts X X X X ..... se is by a fiction to place in the hands of a taxpayer income which, though not his in the eyes of the law, is thought to be fairly-attributable to him in the measurement of his taxable capacity. By the first, section 22, the undistributed portion of the total income of certain companies, subject to a limit of 60 per cent. of such income, is deemed to have been distributed as dividend among the shareholders of the company, if the Commissioner of Income Tax makes an order to that effect, and the proportionate share of each shareholder is then to be included in his own total income. The second, section 24, requires that any income which by virtue of a settlement is paid to or for the benefit of a child of the maker of that settlement during t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erson. With regard to the ambit of these words it is, of course, apparent that in the present case no income has in fact been paid to or for the benefit of a child. No payment has been made at all. All that has happened is that a fictitious payment of dividend has been brought about by the operation of the order made under section 22. Unless, therefore, the effect of such an order is to impose upon the meaning of the word paid in section 24 an interpretation which includes sums deemed to have been paid by virtue and for the purposes of another section of the Act, these notional dividends attributed to the children are not within the charge of section 24 and cannot be treated as the income of the father. 4. In the High Court a solution ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . If the relevant words of section 22(1) are set out, it will be seen that they run as follows : the undistributed portion of sixty per cent. of such total income of the company for that period shall be deemed to have been distributed as dividends amongst the shareholders . . . and thereupon the proportionate share thereof of each shareholder shall be included in the total income of such shareholder for the purposes of this Act. It is not merely that there is to be a notional payment of dividend ; it is also that each shareholder's share of the dividend is to be included in his total income for the purposes of the Act. The dividend then must go into the total income of the child who owns the shares, and for the purpose of taxation it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a trustee or beneficiary who had never had any money at all in his hands and, for all that appears, might never at any time receive any distribution on his shares except the fictional one introduced by section 22. Again, section 22(4), which gives a shareholder the right to require the company to pay his tax to the commissioner, where no actual distribution has taken place, operates only when the proportionate share of any shareholder .... in the undistributed profits .... has been included in his total income. This is not just a piece of machinery; some such right as this is an important part of any scheme which taxes persons in respect of income which they have never had and may have no power to obtain. Yet it is impossible to find any ..... X X X X Extracts X X X X X X X X Extracts X X X X
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