The Hawaiian gazette. [volume] (Honolulu [Oahu, Hawaii]) 1865-1918, 1902-03-28
IS EXEMPT
FROM TAX
Oahu Railway CO.
Need Not
Pay.

The oahu Railway and Land Com-
pam, is exempted from tHe payment ut
Income tax hN virtue .. thy franchise
r.auiod by thc government under "a
uuluIWuu. decision handed down yes
t,rduN boy che supreme Court
The opinion is written by Justice CAL
hra.fh. aul conDurryd Boo by Justice
Perry but two members ui the court
sitting m the hearing.
The suit was before the supreme
count un an agreed submission of facts
with the Tax Assessor j. ". Pratt
The following Is the syllabus.
s. tax 'u income ls iu substance ana
effect "a tax on the property producing
ua same.
Income derived from property exempt
from taxation by contract, authorized
by statute, Is also exempt
An annual subsidy granted by the
legislature Is not fairly necessary TO
IN, reasonable construction, operation
and maintenance" of a railroad after
m, road is completed and being oper-
atcd at "A profit, nor Is such subsidy
exempt from taxation under contract
cNemptiug all the property of the rail-
road fairly necessary to the reasona-
bile construction, operation and main
tenance' of the railroad.
In the submission four questions were
presented for the decision OF the Su-
preme Court. To the first question, lis
the plaintiff wholly exempt from taxa
ton on its income" negative reply IL
returned the plaintiff conceding that
the exemption of income from taxation
cannot extend further than the exemp-
ton of the property from which the in
come is derived"
As to the second question the court
holds that the Oahu Railway and Land
co. lis exempt from taxation on the in
come derived from property fairly nee
essary to the reasonable construc ton,
maintenance and operation of the
road" this having been one of the pro-
visions of the company's franchise. to
hold good for twenty years The Tax
Assessor contended that of the $780,
S46.S3 of gross income, S207,S $50 was de-
rived from property not necessary 10
the construction and maintenance.
TO tax this gross income the court
holds, would be "a violation OF the
terms OF the contract, eXempting such
property from all taxes for a term of
twenty years"
The court further holds that the
wharves, warehouses, scales. etc, are
not taxable, the income being S3l 1886
for wharfage, $5,l9G for storage and
81, a6S for use of plaintiffs scale.
The subsidy of $i2 700 the court holds
IL properly "A subject OF taxation. on
this noint Justice Galbraith says: SIS
the Subsidy granted plaintiffs com
pany within the exemption? Whatever
may have been the necessity for this
annual subsidy to aid in the construc-
ton Of the road at the time 1t was au-
thorized, 1t is clear now the subsidy Is
not fairly necessary or in any sense
necessary or essential to the operation
and maintenance of the road, 1t appears
from the submission that the road Is
operated at a profit and that the sub
sidy goes only to Increase the surplus
earnings and the dividends declared.
From these facts we conclude that the
| subsidy is not within the exemption.
The answer we return to question 3 IL,
that revenue derived from the wharf,
warehouses and scales Is within the ex-
emption and that the subsidy is not
and Is subject to the tax as claimed by
| the defendant