Lord Phillimore. -

This is an appeal from the judgment of the Court of Appeal of New Zealand reversing the decision of Stout, C. J., on an application by the Commissioner of Taxes seeking to assess the appellant to income-tax in the sum of £6,010 in respect of income for the year ending on March 31st, 1921.

On the proceedings taken in respect of this assessment a case was stated by the Commissioner which, according to the practice in New Zealand, was traversable and was accordingly traversed by the present appellant in his answer, and the matter came in the first instance before a Magistrate and was decided in favour of the Commissioner. His decision was, however, appealable both on grounds of fact and law to a Judge of the High Court, in this case Stout, C. J. The decision of the C. J. is final on fact, but not on a matter of law.

The circumstances are these: The appellant and one Arthur John George carried on business at Wellington as wholesale soft goods merchants and drapers in partnership. On the 25th June 1920 they converted their partnership into a private limited company, of which they were the only two shareholders. The company had a nominal capital of £175,000 in £1 shares