The Hawaiian gazette. [volume] (Honolulu [Oahu, Hawaii]) 1865-1918, 1902-12-23
WILL MAKE A
TEST CASE
Hawaiian Sugar
Co. Escapes
the Tax.

"a rom NullIlhg l'hN.sD
The Tax Appeal court yesterday rem
dcred an opinion sustaining the Ha-
wailan Commercial and Sugar Com
pany IN its appeal from the assessment
OF S21O,il4 on income claimed as ex-
empJ as a loss. The decision means
the saving to the sugar company CI
S5,4OO in income tax, but Assessor
Pratt will carry the case to the Su-
preme Court.
The Hawaiian Commercial claimed
that it could deduct from its income
all losses which occurred during TIE
year, and the amount so shown and
the value of abandoned property should
be deducted from the profits of the
year. Pratt claims that under this
contention the revenue from income
tax would be heavily cut. as the same
exemption could be claimed, not only
by the other plantations, but by pri-
vate property owners. Thus, If a man
made improvements during the year,
he could claim q deduction on the loss
of the old buildings which might be
abandoned for the new. 1t Is for this
reason that the appeal is taken, for it
10 ctiIu tIdI lilf IA Soul l . h'Nlolph
practically invalidates the principal
part of the income tax law.
The court holds that prior to De
cember l, 1901, the company was the
owner of mill and building at Spreck-
elsville, being a nine-roller mill. max
ing 140 to $50 tons of sugar, or 175 tons
at the highest, in "a hours. Owing to
the increase of cultivated area the site
became inconvenient. A new mill was
erected at Puunene, three miles from
the old site. having a capacity of 300
tons in "a hours, with possibility Of
increase to $50 tons. The old buildings
we're abandoned and were of no use.
Residences, shops, warehouses, and a
railroad system of so miles of track
also became worthless, except as old
material. The sum of Sl1 69579 was
received from the sale of the old mill
and $1i,596.54 from the railroad. The
acts of the company were done in good
faith, pursuant to business require
monts.
at can hardly be questioned that 4
mill destroyed by fire or other natural
c2use was a loss, even though new
and superior one of greater capacity
was built and the value of the whole
estate enhanced. But other causes
than natural ones might operate more
or less effectually to necesSitate n new
mill: In the case before the court
business necessity is indicated. Good
management and the fuller develop
ment of the appellants property re-
quired the abandonment of the Ol!
properties and the construction of new,
and the large amount expended in so
doing, as shown by the evidence in the
case Of the new mill, $99S. .1OS91 from
inception to date of July !, 1902. and
in case ,Of new railroad, $lOl, ,1O9.95,
would indicate that such works were
not lightly undertaken but were in the
nature Of business necessities.
The law does not specify how loss
must he incurred, though IL is reason
able to suppose that it Is intended to
cover any loss properly incurred In
connection with the business concern
ed In this case it appears that the
Abandonment of the old mill and prop
critics were required of appellant and
not sought by 1t.
"As to the amount of such loss in
this case. specific details and figures
are not given, but an estimate is fur
standing in the community, one of
whom has great familiarity with the
sugar industry in general. and as man
ager, with the mill and plantation
pronerty of the applicant in particular.
at Is in evidence that the amount
necessary to replace the old properties
superseded and abandoned would he
not lcec than $4,000. The claim for
loss of s27O, ,444.72 does not by compart-
son appear unreasonable under the
conditions.
"The court finds that the appellant is
entitled to deduct from the gross
amount OF income as Losses other
wise incurred'
Loss on old mill and mill
buildings: ...... Sl5o, if9.a2
Loss on old buildings. 100000
Loss on railroads. .......... 1903 ,695.0
"TotaI so7O lAi -