C. v The Board of Inland Revenue
| Jurisdiction | Trinidad & Tobago |
| Judge | Barnes, J.,Burke, J.,Dean-Maharaj, J. |
| Judgment Date | 01 January 1991 |
| Court | Tax Appeal Board (Trinidad and Tobago) |
| Docket Number | Nos. I 4 - I 5 of 1986 and Nos. I 118 - I 121 of 1986 |
| Date | 01 January 1991 |
Tax Appeal Board
Barnes, J.; Burke, J.; Dean-Maharaj, J.
Nos. I 4 - I 5 of 1986 and Nos. I 118 - I 121 of 1986
Mr. Michael A. De La Bastille, Q.C. and Mr. Christopher Hamel-Smith for appellant
Mrs. M. Robinson-Welters and Miss Allison West for respondent
Revenue law - Corporation tax — Unemployment levy — Appellant submitted its corporation tax returns and statements of unemployment levy for the years of income — Respondent made adjustments to the chargeable profits of the appellant — Appellant disagreed with the respondent's contention that the expenses for rough lumber, 20 mats, 148 joints of drill pipe, 24 pieces drill collars and grocery supplies were not admissible — Whether the respondent was justified in disallowing these expenses — Court allowed expenses for the purchase of lumber, mats, grocery and supplies — Assessments to corporation tax and unemployment levy were returned to the respondent for reassessment — Section 8(3)(c)(iii) of the Tax Board Act, Chap. 4:50.
These are appeals against assessments to corporation tax and unemployment levy for the years of income 1978 and 1979. The appeals were heard together following separate consolidations of I 4 and I 5 of 1986 for 1978 and I 118 and I 121 of 1986 for 1979.
The appellant is a close company incorporated under the laws of Trinidad and Tobago go with its registered office at San Fernando. It carried on the business of the supply and operation of oil well drilling rigs during the years of income 1978 and 1979.
The appellant submitted its corporation tax returns and statements of unemployment levy for the years of income 1978 on 9th May, 1979 and for 1979 on 13 th August, 1980.
As a result of tax audits, the respondent made adjustments to the chargeable profits of the appellant, as follows:–
| 1978 | 1979 | |
| Total Adjustments | 1,136,186.00 | 5,339,909.00 |
| Chargeable Profits/(Loss) per return | 256,905.00 | (2,732,872,00) |
| Adjusted Chargeable Profits | 1,393,091.00 | 2,607,037,00 |
Following consideration of objections by the appellant, both assessments were varied and the appellant's chargeable profits were reduced from $1,393,091 to $776,215 for 1978 and from 12,607,037 to $1,726,885,00 for 1979.
By Notice of Appeal of 13th January, 1986 for year of income 1978 the following statement of reasons for the appeal was advanced:–
“The appellant disagrees with the respondent's contention that the undermentioned expenses are not admissible;–
(i) $69992 -Rough Lumber –
(ii) $43,745 - 20 mats –
(iii) 1160,927 - 148 joints of drill pipe –
(iv) 1119,109 - 24 pieces drill collars –
(v) $118,804 - Grocery supplies.”
The appellant contends that items (i) - (iv) inclusive represents revenue expenses while item (v) was wholly and exclusively incurred in the production of the income.
The respondent's Statement of Case at paras 14 - 16 (vide folio 6 in I 4 of 1986) stated the respondent's contentions, as follows:–
“14, The respondent will contend that in respect of the year of income 1978 the appellant incurred capital expenditure which was wrongly treated as revenue expenditure in its accounts, more particularly, in its “Material and Supplies” account, that is to say –
(a) the sums of $6,992.00, $43,745.00, $160,927.00 and $119,109.00 respectively, represented capital expenditure not allowable under the Income Tax Act, Ch. 75:01.
(b) the said sums were incurred on assets and/or were of a lasting and durable nature.
“15. The respondent will further contend that
1) the sum of $118,804 expended on food for the appellant's directors and others was not wholly and exclusively incurred in the production of income in accordance with the Income Tax Act, Ch. 75:01.
(b) the appellant failed to prove by documentary proof or other legal evidence that the expenses claimed in paragraph 4 were allowable expenditure under the Income Tax Act, Ch. 75:01.
(c) The respondent was entitled by virtue of Sec. 89(1) of the said Act, where it appeared that any person liable to tax had been assessed at a less amount than that which ought to have been charged to assess such person at such amount or additional amount as according to its judgment ought to have been charged.
(d) every opportunity was given to the Appellant to prove that the said assessments wire erroneous in law.
“16. The respondent maintains that the assessments are justified both in law and in fact.”
By Notice of Appeal dated September 9, 1986 the appellant appealed the respondent's decision in respect of year of income 1979, and as stated at para. 11 of the respondent's Statement of Case, (vide folio 6 in I 118 of 1986) the statement of reasons to be- advanced in support of the appeal was as follows:–
“The appellant disagrees with the respondent's contention that the undermentioned expenses are not admissible and advances the following reasons:–
Item (I) Materials and Supplies - $810,978.00
This represents the cost of drill pipes which is a revenue expense and is wholly allowable in arriving at the appellant chargeable profits.
Item (v) Wear and Tear disallowed - $3,627,832.00
The appellant will show proof of ownership of the plant rig on which the wear and tear was claimed.
Item (vi) Commissions - $3349900.00
The appellant contends that no rental was ever paid on the rig in question and therefore no commission on rental was applicable.”
The contentions of the respondent were stated at paras. 12 and 13 of the Statement of Case as hereunder:–
“12. The respondent will contend –
(i) that the return of income submitted by the appellant for the year of income 1979 did not reflect the true income of the appellant for the said year of income.
(ii) that as a result of the audit examination undertaken the Respondent, the respondent is of the opinion that the appellant had been assessed at a lesser amount than that which ought to have been charged for the said year of income.
(iii) that the sum of $810,978.00 representing the cost of drilling pipes is in respect of capital expenditure an therefore not allowable as a deduction.
(iv) that the sum of 13,627,832.00 claimed as wear and tear is not allowable as a deduction, since the appellant failed to prove that the ownership of the asset (slant rig) lay with the appellant.
(ii) that the documents provided by the appellant supported the fact that commissions were paid by B to the appellant-.
(vi) that the appellant had failed to provide satisfactory evidence to show that they assessments were excessive and to what extent they are incorrect.
13. The respondent maintains that the assessments are justified in law and in fact.”
At the commencement of the hearing, counsel for the appellant made reference to item (2) Wear and Tear disallowed. The court was informed that following discussions between the parties, a statement of facts agreed to by the appellant and the respondent for the determination of the instant appeals alone had been documented and signed by the parties and filed with the court on 13th December, 1990. The Document was marked “A” by the court for the purpose of identification and is reproduced hereunder:
“WHEREAS:
- The appellant claimed wear and tear allowance on the basis that it was the owner of a slant rig, which it claimed it had purchased from B by and under an aunt styled an “Installment Sale of Drilling Equipment” dated April 29, 1977. 2. As a result of a field audit, the Respondent disallowed the said claim for wear and tear on the basis that the said slant rig was leased to the appellant and not sold to it by B and that accordingly ownership of the asset did not lie with the appellant. further the respondent allowed no deduction for the payments made by the appellant to B for the slant rig which the respondent contended were lease payments, since no withholding tax was paid. 3. The appellant appealed contending that it was in fact the owner of the slant rig on which the wear and tear was claimed.
that the instant appeals should be determined on the basis of the following which facts are agreed by the parties for the purposes of this determination of the instant appeals alone:–
3. That the said agreement made between B and the appellant dated April 29, 1977 should be treated as constituting a lease (as contended by the respondent) and not a sale (as contended by the appellant) of the said slant rig by B to the appellant and that, accordingly, the following payments made by the appellant to B under the said agreement should be treated as lease payment rather than payments on account of a purchase price:
Date of Payment
Period
T.T.$
U.S.$
May 29, 1978
April, 1978
70,199.97
28,996.27
July 27, 1978
May, 1978
117,000.00
48,327.14
Aug 4, 1978
June, 1978
170,700.00
70,508.05
Sept 11, 1978
July, 1978
256,680.00
106,022.31
Nov 3, 1978
Aug, 1978
256,680.00
106,022.31
Nov 21, 1978
Sept, 1978
248,400.00
102,602,24
Jan 29, 1979
Oct, 1978
256,680.00
106,022,31
Feb 20, 1979
Nov, 1978
248,400.00
102,602.23
March 6, 1979
Dec, 1978
256,608.00
206,022.31
Feb 25, 1980
Jan, 1979
256,680.00
106,022.31
Feb 25, 1980
Feb, 1979
215,040.00
88,822.80
2. In the premises, that the appeal on this point should be determined on the basis of whether or not the said payments made by the appellant B were subject to withholding tax as contended by the respondent or were not subject to withholding tax as contended by the appellant.
4. Further, in the light of the above, the appellant expressly concedes that the appeal regarding the sum of $334,800 in respect of commissions cannot be pursued. Dated this 13th day of December, 1990.”
This court has sanctioned the agreement...
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