Eckel v Board of Inland Revenue
| Jurisdiction | Trinidad & Tobago |
| Judge | Koylass, C. |
| Judgment Date | 31 July 1984 |
| Court | Tax Appeal Board (Trinidad and Tobago) |
| Docket Number | I 25 — I 28 of 1981 |
| Date | 31 July 1984 |
Tax Appeal Board
Koylass, C.; Burke, M.; Julumsingh, M.
I 25 — I 28 of 1981
M. Haynes for appellant
Mrs. M. Robinson-Walters for respondent
Revenue Law - Appeal vs assessment to income tax and unemployment levy — Whether appellant's wife had derived income from trading in land which was chargeable to income tax — Meaning of “trading” — Evidence that appellant's wife purchased land under terms of an agreement by which it was to be conveyed to a company — Appeals against assessment allowed.
These appeals are against assessments to income tax and unemployment, levy for the years of income 1973 and 1974. The assessments had been made after the respondent had conducted an audit examination of the affairs of the appellant in 1978.
The grounds of appeal as set out in the notices of appeal are as follows –
“1973
The appellant is a resident of Trinidad and Tobago.
For the year of income 1973 the appellant paid tax of $12.92 on a chargeable income of $287.00 and no levy.
By notice of assessment dated 27th August, 1979 the respondent re-assessed the appellant's chargeable income in the sum of $34,639. The appellant objected to the said assessment on the 21st September, 1979 which was acknowledged by the respondent on the 18th October, 1979.
By notice dated 19th September, 1980 the respondent refused to amend the said re-assessment.
The respondent alleged that the additional chargeable income of $34,352 consisted of income which had accrued to the appellant's wife from the sale of land at the Fort George development.
The appellant claims that his wife Mrs. Rosemary Eckel was not in the business of trading of lands and had set out his reasons in a letter of 9th October, 1979 referring to the respondent's audit of his return for the year of income 1972.
The reasons are as follows:
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(1) Over one year after she had purchased the lands for a residence and not having in any way improved them, Mrs. Eckel decided for personal reasons to dispose of the property because the economy was upset and not being an entrepreneur herself sold the lands in September, 1970 to a development company, Messrs. Gerald A. Eckel Limited.
Subsequent to September, 1970, therefore, Gerald A. Eckel Ltd. was the beneficial owner of the lands, and thereafter proceeded at their expense, expertise, and risk to develop and market the same.
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(2) The fact that Mrs. Eckel contracted to sell the lands in September, 1970 before she actually had title to them is not in any way abnormal or illegal. The reason for this delay was that the lawyers involved, had difficulties in resolving the questions relating to title and other legalities (e.g. absence of condominium legislation) to their mutual satisfaction.
1974
The appellant is a resident of Trinidad & Tobago.
The appellant paid taxes in the sum of $1,770.00 and levy in the amount of $101,15 on his chargeable income of $12,023.00 (for some reason the revenue credited him with tax paid of $39069.00). By notice of assessment dated 10th September, 1979 his chargeable income was re — assessed to an amount of $30,440 for tax and $391,483 for levy purposes. The appellant objected to the said re — assessment by letter dated 1st October, 1979 which was acknowledged by the respondent on 1st October, 1979, By notice dated 19th September, 1980 the respondent refused to amend the said re — assessment.
The respondent alleged that the additional chargeable income to taxes of $18,417 consisted of income which had accrued to the appellant and or his wife on the sale of Lot #1 and for levy purposes the additional chargeable income was made up of:
(a) 30% share of the profit on the sale proceeds from twenty (20) houses amounting to $82,885.81.
(b) A 50% share of the profit on the sale proceeds of another fifteen (15) houses amounting to $139,624.94, and
(c) 100% share in the sale proceeds from six (6) houses amounting to $138,53159.
In addition, the respondent refused to allow the interest payment to the First National City Bank of $26,258.64 which had not been claimed by the appellant in his return and which he claims was utilized in supporting his various business ventures.
The reasons are as follows:
(1) Over one year after Mrs. Eckel had purchased the lands for a residence and not having in any way improved them, she decided for personal reasons to dispose of the property because the economy was upset and not being an entrepreneur herself sold the lands in September, 1970 to a development company, Messrs. Gerald A. Eckel Limited.
Subsequent to September, 1970, therefore, Gerald A. Eckel Ltd. was the beneficial owner of the lands, and thereafter proceeded at their expense, expertise and risk to develop and market the same.
(2) The fact that Mrs. Eckel contracted to sell the lands in September 1970 before she actually had title to them is not in any way abnormal or illegal. The reason for this delay was that the lawyers involved had difficulties in resolving the questions relating to title and other legalities (e.g. absence of condominium legislation) to their mutual satisfaction•
(3) The respondent claims “that the profits to be assessed to tax arose when the sales were made and that such sales were made only when the relevant deeds of conveyance were executed.” We contend that profits were math: when agreements for sales were executed and monies in accordance with the terms of these agreements were either received or due to be received as this is proper accounting practice in accordance with accrual accounting, which is the basis on which the company has always kept its records.”
In paragraph 11 of the statement of case the respondent stated its Contentions as under —
“(1) That during the years of income 1973 and 1974 the appellant's wife traded in land Situate at Fort George.
(2) That in accordance with Section 45(1) of the Income Tax Ordinance, Chapter 33 No. 1 the respondent was entitled to assess the appellant as such amount or additional amount as according to its judgment ought to have been charged for the years of income 1973 and 1974.
(3) That although every opportunity was given to the appellant he failed to support his claim to the satisfaction of the respondent that his wife Rosemary Eckel had not traded in land for the years of income 1973 and 1974.
(4) That for the years of income 1973 and 1974 the income of the appellant's wife was deemed to be his under Section 18 of the Ordinance and therefore was assessable in the hands of the husband.
(5) The purchase and subsequent sale by the wife of the appellant of the several parcels of land hereinabove mentioned constituted a trade within the meaning of Section 2 of the Income Tax Ordinance, the profits from which is subject to income tax under section 5 of the Ordinance, and to Unemployment Levy under the provisions of the Unemployment Levy Act, 1970.”
At the hearing, Counsel for the appellant informed the Court that the appellant was not contesting appeals I 26 and I 28 against the assessments to unemployment levy.
The issue for determination in the appeals against assessments to income tax was whether the appellant's wife, Mrs. Rosemary Eckel, had in the years of income 1973 and 1974 derived income from trading in land which was chargeable to income tax under section 5(1) of the Income Tax Ordinance (hereinafter referred to as “the Ordinance”).
The word “trade” is defined in section 2 of the Ordinance as under •
““trade” includes a business, and every trade, manufacture, adventure or concern in the nature of a trade or business;”
Under section 18(1) of the Ordinance, as it stood in the relevant years, the income of a wife was taxable as income of her husband.
The basis for the assessments was as follows —
“(a) By agreement dated 26th September, 1969 the Respell/deist's wife, Rosemary Eckel entered into an agreement with Messrs. Bryden and W. F. Bryden Ltd. for the purchase of six (6) parcels of land referred to in the schedule to the said agreement as fellows:..
(1) 2 acres 2 roods 35 perches
(2) 1 acre 3 roods 29 perches
(3) 1 acre 0 roods 33 perches
(4) 49,425 superficial feet
(5) Driveway 33 feet wide
(6) 2509 sq. feet.
for the purchase price of $160,000.00
(b) By agreement dated 26th September, 1970 the appellants wife entered into another agreement with Gerald Eckel Ltd. in respect of the said parcels of land for the sale to the said Company for the purchase price of $310,000.00. It is alleged that under the terms of the agreement the purchase price was to be paid by the Company by the down payment of $10,000.00 on acceptance of the title to the said lands and the balance of $300,000.00 to be paid on or before 26th September, 1972. It is alleged that the vendor, Mrs. Eckel agreed that portions of the said lands could be sold by the Company upon prior payment to her of an amount calculated at eighty (80) cents per square foot and that she will, at the request of the Company join in the conveyance to the sub — purchasers.
(e) Mrs. Eckel was a director of Gerald Eckel Ltd., the purchaser of the said lands, under the agreement dated 26th September, 1970.
(d) During the years of income 1973 and 1974 Mrs. Eckel, as vendor under the said agreement dated 26th Septem.. her, 1970, and at the request of the purchaser G. Eckel Ltd. conveyed to third parties 60,565 superficial square feet of the said lands and as a result became entitled to receive from the Company the total sue of $70,861.05 and $37,989.90 in accordance with the terms of the agreement dated 26th September, 1976.
(e) The appellant omitted to declare the profits arising from these sales for the years of income 1973 and 1974.”
The respondent had estimated profits from land sales of $34,352.48 And $18,416.99 for 1973 and 1974 respectively, using figures of $0.6028 per sq....
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