Commissioner for Inland Revenue v Mitsubishi Motors New Zealand Ltd: PC 1 Nov 1995

(New Zealand) The taxpayer company sold cars to its dealers who resold them with warranties, for which it gave the dealers indemnities calculated on statistical average. The company sought to set off the reserve it created to make payments under the indemnities against the revenue of the year in which the cars were sold. The commissioner appealed its case to the Board.
Held: The reserve was claimable in the year of the car sale, even though the losses remained contingent. On the year of the sale the company acquired an accrued legal obligation, and had properly deducted the liabilities incurred against its profits.


Lord Hoffmann


Gazette 01-Nov-1995, [1996] AC 315


Inland revenue Act 1976 (New Zealand) 104

Income Tax, Commonwealth

Updated: 10 May 2022; Ref: scu.79312