Kenny v Board of Inland Revenue
| Jurisdiction | Trinidad & Tobago |
| Judge | Barnes, J.,Burke, J.,Seemungal, J. |
| Judgment Date | 31 July 1987 |
| Court | Tax Appeal Board (Trinidad and Tobago) |
| Docket Number | Nos. I 94 & I 95 of 1983 |
| Date | 31 July 1987 |
Tax Appeal Board
Barnes, J.; Burke, J.; Seemungal, J.
Nos. I 94 & I 95 of 1983
Mr. M. Castagne for appellant
Mrs. Romoo Haynes for respondent
Revenue law - Income tax — Assessment — Appeal against unemployment levy — Whether sum imputed as chargeable income by respondent arose from a short term capital gain resulting from acquisition and disposal of land — Finding that the profit on the acquisition and disposition of the land was not subject to income tax and unemployment levy as a short term capital gain under s. 5(1)(f) of the Ordinance.
These appeals relate to assessments to income tax and unemployment levy for the year of income 1977. The relevant law is the Income Tax Ordinance Ch.33 No.1 hereinafter referred to as “the Ordinance.” (Since replaced by the Income Tax Act Chap. 75:01.)
The issue we are to determine is whether the sum of $72,112.50, imputed as chargeable income by the respondent, arose from a “short term capital gain” resulting from acquisition and disposal of a parcel of land at Tierra Nueva Estate — Maracas, comprising 17,050 superficial feet shown as lot No. 30 on Deed of Conveyance registered as No. 744 of 1977, which we shall hereinafter refer to as “the Land.” The relevant provision of the Ordinance is section 5(1) of which reads –
“5.(1) Income tax shall, subject to the provisions of this Ordinance, be payable at the rate or rates specified hereafter for each year of income upon the income of any person accruing in or derived from Trinidad and Tobago or elsewhere, and whether received in Trinidad and Tobago or not in respect of –
xxxx xxxxxx xxxxxx
(f) short term capital gains;
In the first Schedule to the Ordinance — Capital gains (supplementary provision rules) it is set out that, “short term capital gains” means chargeable gains accruing on a disposal, of an asset within twelve months of its acquisition.
The facts which we accept from the record and the evidence are as under –
- By an agreement dated 15th January, 2976, (hereinafter referred to as “the Agreement”) the appellant entered into an agreement of sale of land with Samanvale Ltd (the company) for a sum of $46,887.54 deposit of $15,629.16 (folios 10 — 12 of the record). 2. By letter of 25th May 1977, one Mark Edwards made an offer to purchase the land, referred to in the letter as “the property of Kevin to sum of $119,000. The offer was made to one “L.E. Kenny” and was accepted by him and a deposit of $12,000 was paid to him. (folio 13 of the record). 3. By Deed No. 972/77 dated 27th September, 1977 (hereinafter referred to as “the Deeds”) the Company as vendor, the appellant as purchaser and Mark Edwards as Sub Purchasers the land was conveyed to the appellant and from him to Mark Edwards. (folios 14 — 21 of the record) 4. The common seal of the company was affixed on 27th September, 1977, same day on which that of a Company (Leotaud Estates Ltd) was affixed as Trustee of the land. We shall refer hereafter to Leotaud Estate Ltd as “the Trustee”, The Deed was signed by the appellant on 21st October, 1977 and by Mark Edwards on 10th January, 1978.
The appellant testified on his own behalf and for the respondent Viganand Ramnarine, a Field Auditor on the staff of the respondent was called. The evidence of these witnesses corroborated the facts at (1) to (4) above.
The appellant testified that “L.E. Kenny,” who had accepted the offer of Mark Edward was his father and had acted for him in the matter. He also stated that the balance of the purchase price under the agreement had been paid by him in March 1977, but to his knowledge, there had been no conveyance of the land to him at that times nor had he moved into possession of the land up to that time.
In cross examinations the witness stated that though he was unaware of all the legal implications, he had considered the land to be his as from the date of the agreement. He stated that he had done nothing as owner of the land prior to the date of the Deed. He believed that the land had been cleaned; and in re-examinations he stated that the work on cleaning the land had been done on his behalf.
The evidence of Ramnarine revealed that there had not been a real audit of the affairs of the appellant in the sense of an investigation of his affairs generally. He stated that the disputed assessment had been made as a consequence of a larger exercise involving other taxpayers who had acquired and disposed of property. In the instant case he had unearthed the Deed in a search at the Registrar General's office. The terms of the Deed, he considered to have established that the acquisition and disposal of the land by the appellant had been effected on the same day (27/9/77). At the time of the audit, he had seen no other document, not even the agreement. In cross examination, he stated that he had no contact neither personal nor by correspondence with the appellant. He confessed that he had little knowledge of the legal effect of a Deed of Conveyance and reiterated that he had relied on the Deed as a basis for fixing the date of acquisition and disposal of the land by the appellant.
The following Authorities were cited by Mr. Castagne –
Texts
Whiteman & Wheatcroft on Capital Gains Tax 3 rd ed. (1980) paras 6-50 et Seq; pages 134 — 139.
Wheatcroft on Capital Gains Taxes (1967) paras 6 — 13, 6 — 36 et Seq; pages 109, 121 — 129.
J.T. Ferrand, Contract and Conveneience 3rd ed (1980) Chapter V11, especially pages 162 — 166.
Cases
Frederick Lawrence LTD v. Freeman Hardy & Willis LRD (1959) 3 All. E.R. 77 , especially page 83.
RE: Hamilton Snowball's Conveyance [1958] 2 All. E. R. 319
Hilington Estates Co., v. Stonefield estates Limited [1952] Ch. 627.
Gerald Eckel v. Board of Inland Revenue NOS 125 – 126 of 1983 (31st Jul. 1984)
Herman Rodrigues, Joseph Rodrigues v. Board of Inland Revenue S. 3 of 1984 (31st July, 1984).
Legislation
Income Tax Act Chap 75: 02 S.5(f) & First schedule;
Capital Gains (Supplementary Provisions) Rules.
His main submission was that the asset disposed of had been the land and he asked the court to find that it had been acquired on 15/1/76 by virtue of the agreement of that date and had been disposed of more than one year after that date
He referred to the following facts
- Agreement dated 15/2/76 2. Payment, in March 1977 of the balance of the purchase price under the agreement. 3. Agreement of sale to Mark Edwards dated May 1977. 4. Signing of Deed by appellant in October 1977. 5. Payment of balance by Mark Edwards in January 1978.
He informed the court that all the occurrences as at (2) to (5) above had taken place more than one year after the agreement of 15/1/?7; so that his ease depended solely on whether or not the land had been acquired on that date for purpose of the capital gains provisions of the Ordinance.
Mr. Castagne stressed that, in considering the question of acquisition and disposal of the land, one must consider when the beneficial or equitable interest had passed rather than when the legal title was conveyed. The Deed had, he said, fixed the date of the latter and could be said to fix both the date of conveyance to the appellant and from him to Edwards. Before the Deed, he contended, the appellant had never held the legal title to the land. All he had had was the beneficial interest acquired under the agreement.
Mr. Castagne submitted with reference to the definition of “short term capital gain” and “disposal” as under (first Schedule to the Ordinance — Capital gains provision rules)
“Short-term capital gains” means chargeable gains accruing disposal of an asset within twelve months of its acquisition;”
“4.(1) Subject to subparagraph (4) and to the exceptions in this Schedules there is for the purposes of this Schedule a disposal of assets by their owner where the right to any capital sum is derived from assets not withstanding that no asset is acquired by the person paying the capital sum, and this subsection applies in particular to the right to –
(a) xxxxxxxxx xxxxxxxx xxxxxxxxx”
that if the court finds that there has been disposal of an asset by one party at a certain time for purposes of capital gains tax, it must follow that there had been simultaneously an acquisition by another party.
Thus he concluded that if it could be held that the consequence of the agreement was that there had been a disposal by the company in accordance with the rules in the first schedule, then there had been an acquisition by the appellant simultaneously.
Counsel's contention was that under the agreement, the company had acquired a right to the entire capital sum — the purchase price of the land, having received a deposit and derived an entitlement to the balance under its terms.
He referred to certain extracts from Whiteman and Wheatcroft 1st & 3 rd Ed. Capital Gains Tax and observed that the comparable provision in the U.K. Trinidad and Legislation, though somewhat different from the relevant Trinidad and...
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