Law v Board of Inland Revenue
| Jurisdiction | Trinidad & Tobago |
| Judge | Koylass, C.,Burke, M.,Julumsingh, M. |
| Judgment Date | 11 June 1983 |
| Court | Tax Appeal Board (Trinidad and Tobago) |
| Docket Number | I 17 of 1980 |
| Date | 11 June 1983 |
Tax Appeal Board
Koylass, C.; Burke, M.; Julumsingh, M.
I 17 of 1980
Shivarattan for appellant
Mrs. M. Robinson — Walters and Miss S. Collymore for respondent
Revenue Law - Income tax — Unemployment levy — Appellant appealed against assessments to income tax and unemployment levy for the year of income 1976 — Whether the amount claimed for repairs $37,758.38 was actually expended on repairs and maintenance of the property — Whether the claim represented a fair estimate of the cost of work done on maintenance — Whether assessment was also not in keeping with provisions of the Income Tax Ordinance — Whether the amount claimed for repairs did not include any amount expended on improvement on the property — Appeal was allowed — Assessments referred back to the respondent for re — assessment by allowing the amount $6,178.48 for repairs.
By notice filed on 8th February, 1980, the appellant appealed against assessments to income tax and unemployment levy for the year of income 1976 as under –
Income Tax
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$10,996.95
Unemployment levy
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$ 803465
These assessments had been made following a tax audit carried out by the respondent in regard to amounts claimed to have been expended on repairs to a property at 6A, Braemar Road, Cascade, owned by the appellant. The appellant had claimed to have expended a total sum of $50,073.43 on repairs and renovations to the property in 1976, of which amount a deduction of $37,758.38 was claimed in his return as repairs.
The grounds of appeal were as under –
“(a) Statement of allegations of fact. The amount claimed for repairs $37,758.38 was actually expended on repairs and maintenance of my property at 6A Braemar Road, St. Anns.
(b) Statement of the reasons to be advanced in support of appeal. The amount claimed for repairs did not include any amount expended on improvement on the property. The claim represented a fair estimate of the cost of work done on maintenance. The assessment is also not in keeping with the provisions of the Income Tax Ordinance.”
In paragraph 14 of the statement of case filed on 19th November, 1982, the respondent's contentions were stated as under –
“(1) That the amount expended by the Respondent was capital employed in improvements.
(2) Alternatively, that if the sums spent are found to expenditure on repairs they are not an allowable deduction in computing the appellant's income as the defects are properly attributable to the period of trading of the appellant's predecessors in title and not to the period of the appellant's ownership.
(3) That some of the expenditure represented expenses of a domestic or private nature.
(4) That none of the amount is an allowable deduction under the Income Tax Ordinance.
(5) That the assessments are justifiable in law and in fact.”
On 1st December, 1982, the appellant filed the following answer:–
“1. The appellant admits paragraphs 1 to 6 inclusive of the Statement of Case.
2. The appellant does not admit paragraph 7 of the Statement of Case and in further answer thereto says that the letter of the 28th day of June, 1978 contained a statement of the alleged additional liability of the appellant to income tax and unemployment levy and was accompanied by an audit report which stated, inter ails., that the sum claimed as repairs was disallowed on the ground that it was of a capital nature.
3. The appellant admits paragraphs 8 to 13 inclusive of the Statement of Case.
4. As regard paragraph 14 of the Statement of Case, the appellant challenges each and every contention of the Respondent as contained therein.
5. The assessments of the Respondent are unjustified both in law and in fact.”
The issue to be determined is whether the sum of $37,758.38, or any part thereof, is deductible as expenses incurred in the earning of income for the year of income 1976, under the Income Tax Ordinance Ch. 33 No. 1 (hereinafter referred to as “the Ordinance”).
The appellant testified on his own behalf. He stated as under –
- He purchased the property at 6A, Braemar Road in late 1975 for $73,700, at which time it was occupied by a tenant, whose lease terminated at the end of March 1976. He received rent for the first three months of 1976 and occupied the house as a residence from late May of that year. 2. Around April 1976 he commenced work on repairs and renovations which continued into March 1977. The sum expended on the work in 1976 was $50,073.43. 3. His analysis of the expenditure to which, he stated, he had applied his mind as an accountant, showed that of the sum of $50,073.43, $37,758.39 represented revenue expenditure on repairs and $12,315.04 capital laid out on improvements. Bills and receipts, which he had used in the preparation of his analysis, were put in evidence as exhibits D.L.1 to D.L. 87. 4. In preparing his analysis he had split the expenditure on certain items equally between capital and revenue. Other sums of expenditure were treated wholly as revenue. 5. He had employed an architect at a fee of $1,000 to prepare drawings in connection with the project. The reason for so doing was to assist him in commissioning a contractor. 6. Ramdass and Campbell, two tax auditors on the staff of the respondent, had visited the property and carried out an inspection during which he had pointed out and explained details of the work that had been done. 7. The work included the following: – (a) Replacement of carpets and two couches. (b) Replacement of built-in wooden cupboards in kitchen and bedrooms, these having been found to be rotten and termite infested. (c) Replacement of rotten and termite infested wooden dcate by aluminum sliding doors. (d) Electrical re-wiring, he having been advised that the system was very old. (e) Rotten and termite infested pitch pine in ceiling of lower floor replaced by Canadian cedar. (f) Painting of entire building. (g) Erection of an outhouse. (h) Covering floor with linoleum. (i) Several other minor items, including plumbing, details of which could not be remembered.
The following relevant facts emerged in cross-examination:–
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(1) A half open porch had been extended by moving back a wall and the uncovered area had been covered with galvanized iron after it had been close boarded and sealed. One wooden door had been replaced by an aluminum sliding door, and another door of the same type was provided on an open side. The floor had been covered with vinyl.
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(2) A walkway of groan mixed concrete had been constructed around the porch.
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(3) The new kitchen cupboards were made of plywood and were laminated.
In this regard, he testified that he did not recall telling the tax auditor that the cupboards had been replaced as they were too small and had been termite infested.
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(4) A new sink had been installed in the kitchen and a row of tiles had been placed above it.
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(5) The bedroom cupboards had been replaced by ready built ones of the same size.
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(6) An open space in the garage area had been walled in and converted into a small bedroom. In this connection, he denied that he had told the tax auditor that the garage had been converted into two rooms.
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(7) A lavatory bowl had been removed from the master bedroom and placed in the servant's quarters, to which an outhouse had been added.
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(8) A ceiling measuring 15' x 15' had been provided in the servant's quarters.
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(9) Inverts at a cost of $144 had been put in to improve drainage.
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(10) The main contractor had charged $14,735.00 to complete certain work, but had not completed same. He was dismissed after being paid $13,850.
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(11) A bath tub had been replaced in the master bedroom.
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(12) Replacement of batch boards and flooring found to have been affected by water rot.
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(13) The electrical work on wiring had included the provision of additional outlets.
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(14) The expenditure on extension of the porch and conversion of the garage area into a room had been incorrectly analysed by the appellant as repairs.
In examination in chief and in cross-examination, the appellant testified as to specific items in respect of details included in his analysis. These will be considered later on in this judgment.
Burleigh Campbell, the tax auditor who testified for the respondent, stated that his testimony was based on a report he had prepared from notes made when he had visited the property with his supervisor, Ramdass, and had recorded explanations provided by the appellant as to the work carried out.
He stated that he had prepared his own analysis from the bills and receipts (exhibits D.L.1 to D.L.87) and that his overall figure for expenditure compared favourably with that of the appellant's. In his view, there was no dispute as to the amount expended, but rather as to whether the expenditure was properly allowable for tax purposes.
His testimony as to details of the work described by the appellant at the time of inspection was in general consistent with that of the appellant with the exception of the following:–
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(1) In addition to being termite infested as testified by the appellant, the cupboards in the kitchen and the bedroom had been too small and insufficient.
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(2) The garage area had been converted into rooms. The appellant had testified that the conversion had provided one bedroom.
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(3) Wall papering was done to bedrooms and ground floors there being none before. The appellant had merely stated that the entire building had been repainted.
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(4) The work on electrical wiring included provision of outlets to accommodate a washing machine, cooker, water heater and additional lights. This relates to the appellant's testimony in cross-examination that he had told the tax auditor that additional outlets had been provided.
In his address, counsel for the appellant, having reviewed the evidence, asked the Court to find...
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