The Pacific commercial advertiser. [volume] (Honolulu, Hawaiian Islands) 1885-1921, 1902-12-20
WILL MAKE 4
TEST CASE
Hawaiian Sugar
CO. Escapes
the Tax.
ABANDONED MILL
CONSIDERED Loss
Tax Appeal Court Gives an
Opinion From Which Tax
Assessor Will Appeal.

The Tax Appeal court yesterday rem
dered an opinion sustaining the Ha-
waiian Commercial and Sugar Com
pany in it's appeal from the assessment
of s270, 444 on income, claimed as ex-
empt as a loss. The decision means
the saving to the sugar company Of
5,400 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
wear. 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 a 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 1t
is said that the Tax Courts decision
practically invalidates the principal
part of the income tax law.
The court holds that prior to De-
cenber 1, 1901, the company was the
owner of a mill and building at Sprech-
elsyille. being 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. new mill was
erected at Puunene, three miles from
the old site, having a capacity OF 800
tons in "a hours, with possibility Oh
increase to $50 tons. The old buildings
we're abandoned and were of no use.
Residences, shops, warehouses, ana
railroad system of so miles of track
also became worthless, except as Old
material. The sum of S11, $3.50 was
received from the sale of the old mill
and s14.596.54 from the railroad The
acts of the company were done in good
faith. pursuant to business require
ments.
..It can hardly be questioned that a
mill destroyed by fire or other natural
cause was a loss, even though new
and superior one of greater capacity
was built and the value OF the Whoie
estate enhanced. But other causes
than natural ones might operate more
or less effectually to necessitate a new
mill: In the case before the coui'
business necessity is indicated. Goo'
management and the fuller develop
ment of the appellants property re
ouired the abandonment OF the OH
nroperties and the construction OF new
and the large amount expended III -
doing as shown by the evidence In tn
case of the new mill, 9S,lOS.sl, iron
,rcantian to date of July 1, 1902, AM
in case of new railroad, slOl' foS.Ss
ronl5 indicate that such works wer
not lightly undertaken but were IN III
nature of business necessities.
Tho law does not specify how los
-o,,st he incurred, though it is reason
able to suppose that it is intended
cover any loss properly incurred
connection with the business concern
ed. In this case it appears that tn
abandonment of the old mill and prof.
critics were required of appellant an
not sought by it.
"As to the amount of such loss
this case. specific details and figure
are not given, but an estimate IS III
rished by witnesses of character al
standing in the community, one
whom has great familiarity with II
sugar industry in general, and as ma
ager, with the mill and plantatiC
property of the applicant in particula
1T is in evidence that the amour
necessary to replace the old properti
superseded and abandoned would
not less than $4,000. The claim f
loss of 1910, 444.72 does not by compa,
son appear unreasonable under t
conditions.
+'The court finds that the appellant
entitled TO deduct from the gre
amount of income as Losses 9th,
wise incurred
Loss on old mill and mill
buildings: $500 $50. 749
Loss on old buildings. 80. 10000
Loss on railroads. 10000. los. 6s5
Total ACKNOWLEDGEMENTS 70, 444