Finance Act, 1963

Payment of interest without deduction of tax.

71.—(1) Notwithstanding anything in the Income Tax Acts, any share interest or loan interest paid by a society shall be paid without deduction of tax:

Provided that this subsection—

(a) shall not apply to any share interest or loan interest payable to a person whose usual place of abode is not within the State, and

(b) shall not render improper any such deduction made before the 1st day of August, 1963, which would have been a proper deduction if this section had not been enacted.

(2) There shall be added to Rule 1 of Case III of Schedule D the following clause:

“(1) share interest or loan interest paid by a society registered under the Industrial and Provident Societies Acts, 1893 to 1936, being interest which by virtue of section 71 of the Finance Act, 1963, is payable without deduction of tax.”

(3) (a) Where, in a case in which section 70 of this Act applies, a society claims repayment of tax under section 36 of the Income Tax Act, 1918, in respect of interest paid by it in any year of assessment, the amount repayable shall be determined on the basis that so much of the interest as exceeds the appropriate proportion thereof was not paid out of profits or gains brought into charge to tax.

(b) Where, in any year of assessment, a society, in a case in which section 70 of this Act applies, pays any share interest or loan interest, from which tax is deductible, or makes any other annual payment, so much of the aggregate of the gross amounts of all such payments as exceeds the appropriate proportion thereof shall be treated as not having been paid out of profits or gains brought into charge and Rule 21 of the General Rules shall apply accordingly.

In this paragraph “annual payment” means any payment from which, apart from any insufficiency of profit or gains of the person making it, tax is deductible under Rule 19 of the General Rules.

(c) Where in any year of assessment a society pays share interest or loan interest (other than loan interest in respect of which a claim such as is mentioned in paragraph (a) of this subsection is made) without deduction of tax in accordance with subsection (1) of this section, it may claim, in a case in which section 70 of this Act applies, that the appropriate proportion of the total amount so paid, or, in any other case, that the total amount so paid, be deducted from its total income for that year and, where such a claim is made, any appropriate relief from tax shall be given by repayment or otherwise.

Subsections (5) and (6) of section 34 of the Income Tax Act, 1918, shall apply to a claim under this paragraph as they apply to a claim under that section, except that it shall not be necessary to use a prescribed form.

(d) Where for any year of assessment the amount of share interest and loan interest falling to be deducted from a society's total income under the immediately preceding paragraph exceeds the amount of the said total income, section 10 of this Act shall have effect as if the society had been assessed to tax under Rule 21 of the General Rules in respect of the payment of the excess and had paid tax under that assessment on the amount of such payment.

(e) In this subsection “the appropriate proportion” of any amount of interest or annual payment paid by a society in a year of assessment means the portion of that amount which bears to the whole the same proportion as the amount of the society's total income for the year bears to what would, but for section 70 of this Act, have been the amount of the society's total income for that year.

(f) For the purposes of this subsection the total income of a society shall be taken to be its total income from all sources for the purposes of income tax computed in the manner in which it would be computed if the society were an individual but without regard to any such interest or annual payment as is mentioned in paragraph (a), (b) or (c) of this subsection.

(g) Any reference in the foregoing provisions of this subsection to loan interest or other interest does not include a reference to interest which is allowable as a deduction in the computation of the profits or gains of a trade carried on by the society.

(h) On or before the 1st day of May in each year (commencing with the year 1964), every society shall deliver to the inspector of taxes a return in such form as the Revenue Commissioners may prescribe, showing—

(i) the name and place of residence of every person to whom share interest or loan interest amounting to the sum of five pounds or more has been paid by the society in the year of assessment which ended next before the said 1st day of May, and

(ii) the amount of such share interest or loan interest paid in that year to each of those persons,

and if such a return is not duly made as respects any year of assessment, the society shall not be entitled to any deduction under paragraph (c) of this subsection in respect of any payments of share interest or loan interest which it was required to include in the return, and the amount of any deduction in respect of any such payments by reference to which relief has been given under the said paragraph (c) may, if not otherwise made good, be assessed under Case VI of Schedule D and recovered from the society accordingly.

(4) This section shall be deemed to have come into operation on the 6th day of April, 1963.