De Lima v The Board of Inland Revenue
| Jurisdiction | Trinidad & Tobago |
| Judge | Koylass H,Burke P,Julumsingh A |
| Judgment Date | 15 July 1982 |
| Court | Tax Appeal Board (Trinidad and Tobago) |
| Docket Number | I 87 – I 92 of 1981 |
| Date | 15 July 1982 |
Court Tax Appeal Board
Koylass H, Burke P, Julumsingh A
I 87 – I 92 of 1981
P. Sloane-Seale for appellant
E. John-Charles for respondent
Revenue Law - Appeal vs. additional assessment to income tax and unemployment levy — Whether total assessment should be in relation to claims for set — off of losses for previous years — Meaning of “set — off against income arising” in S. 13 of Income Tax Ordinance.
The appellant, who is the personal representative of Daniel De Lima, deceased (hereinafter referred to as “the taxpayer”), appealed against decisions of the Board of Inland Revenue in respect of additional assessments to income tax and unemployment levy for the years of income 1973, 1974 and 1975 (hereinafter referred to as “the relevant years”). Separate appeals had been filed in respect of income tax and unemployment levy for each of the relevant years. However, the appeals were consolidated by order of the Appeal Board dated the 28th day of October, 1981.
The grounds of appeal in relation to the income tax assessments as under
“(a) STATEMENT of ALLEGATIONS of FACT, the adjusted chargeable income was incorrectly computed from bank statements.
(b) STATEMENT of THE REASONS TO BE ADVANCED IN SUPPORT of APPEAL (1) The amounts of $30,843.93 and $7,450.39 should have also been excluded from the Total Deposits as they were not assessable income (2) Loss on disposal of asset was not allowed on the sum of $15,007.00 (3) The amount of $6,253.00 added ‘ck as net profit return was in fact a net. (4) Allowances for trade losses claimed under section 13 of the Income Tax Ordinance were not granted.”
“(a) STATEMENT of ALLEGATIONS of FACT, The adjusted chargeable income was incorrectly computed.
(b) STATEMENT of THE REASONS TO BE ADVANCED IN SUPPORT of APPEAL (A) The adjusted chargeable income was computed from bank statements that included deposits which were not assessable income, such as (1) $36,200.00 the proceeds from sale of land (2) $18,141.00 for return cheques (3) 120,000.00 being a loan from Yalleton Hotel (1) Allowances for trade losses claimed under section 13 of the Income Tax Ordinance were not granted.”
“(a) STATEMENT of ALLEGATIONS of FACT, the adjusted chargeable income of SS2,392.00 for the purposes of assessing income tax was incorrect.
(b) STATEMENT of THE REASONS TO BE ADVANCED IN SUPPORT of THE APPEAL. The said adjusted additional chargeable income of $52,392.40 was computed from bank statements. However, the sum of $40,575.55 is from the total of deposits for period 4th to 31st December. 1974 which appeared in statement dated 3rd January was inadvertently included in the 1975 account. Returned cheques are in the sum of 119,569.00 and credit was only given $7,748.00 leaving a difference of $11,817.00 which together with the $40,575.55 accounts for the incorrect adjustment of 152,392.40.”
The facts and circumstances which gave rise to the appeals are as follows–
(a) During the relevant years the taxpayer was the proprietor and operator of the New Bergerac Hotel (hereinafter referred to as “the hotel”) and the Bergerac Houses and Apartment Hotel.
(b) In accordance with section 12A (5)(b) of the Income Tax Ordinance (hereinafter referred to as “the Ordinance”), the then Minister of Industry, Commerce, Tourism and External Communications had, on the 6th October, 19f1, issued a certificate to the Board of Inland Revenue to the effect that the taxpayer's application for exemption from tax, under section 12A(1) of the Ordinance, in respect of the New Bergerac Hotel had been approved. The certificate also specified the dates which had been fixed by Cabinet as the dates on which the construction of the hotel was commenced and completed. The certificate reads as follows–
In accordance with the requirements of Section 12A (5) (b) of the Income Tax Ordinance Ch. 33 No. 1, as amended by the Income Tax (Amendment) (No. 2) Ordinance, 1954, (Ordinance No. 30 of 1954) I hereby certify that Cabinet have approved under the provisions of Section 12A (1) (a) of the said Ordinance the application of Mr. Daniel De Lima, proprietor of the New Bergerac Hotel for exemption from income taxi in respect of the said Hotel (New Bergerac Hotel) situate at Bergerac Terrace, Maraval, and have fixed the dates 5th November, 1959 and 14th October, 1960 as the dates of commencement and of completion respectively of the construction of the said Hotel.”
(c) the taxpayer submitted tax returns for the relevant years on 24th June, 1976, 17th July, 1975 and 5th October, 1976 respectively. These returns were accepted and his tax liability was determined on chargeable income as follows:–
Chargeable income — 1973 – $7,113 00 $10:14, 1975 – $4,572.00
(d) Audited balance sheets and accounts of the hotel for the relevant years had been submitted by the taxpayer with his tax returns for those years, but the income arising from the hotel was not included as a source of income, nor was there any claim for set-off of capital expenditure under section 12A(1)(a) of the Ordinance.
(e) Following an examination of the taxpayer's business records and bank accounts in the course of an audit carried out by a Field Auditor, the respondent made certain adjustments which resulted in increased tax and unemployment levy liability based on adjusted figures for chargeable income as follows:–
Adjusted chargeable income — 1973 – $271,517.00, 1974 – $167,915.00, 1975 – $108,737.00
(f) On receipt of copies of the audit reports and tax and levy assessment notices for the relevant years, the taxpayer objected to the assessments on the ground, inter alia, these are chargeable income, as adjusted for each of the relevant years, was incorrect and should be corrected by reference to claims for set-off of losses for previous years, pursuant to section 13 of Ordinance.
(g) The objections were rejected by the respondent on the ground that the taxpayer had failed to show that the assessments were excessive or incorrect.
Earlier in the judgment we have set out the grounds of appeal.
The contentions of the respondent, in support of the assessments were set out in paragraph 14 of the statement of case as follows:
“The respondent will contend that –
(1) the exemption from Income Tax granted under section 12A (1)(a) of the Income Tax Ordinance is for a period of five years commencing with the year of income next after the year of income in which the erection or extension of the hotel in question is completed. That period of exemption expired in 1966. Accordingly, the income from the New Bergerac Hotel for the years of income 1973, 1974 and 19/5 was not exempt from tax.
(ii) from the year of income 1967 to the year of income. 1975 inclusive, the Deceased was entitled under Section 12A (1)(a) of the Ordinance to set off against the income of the New Bergerac Hotel one-fifth of the capital expenditure upon the said Hotel during any five of the said eight years. No such set-off can be allowed in any year of income after the year of income 1973. Further, such set-off cannot be allowed against income from any source other than the New Bergerac Hotel.
(iii) in so setting-off such capital expenditure against the income from the New Bergerac Hotel, the Deceased was not entitled to carry forward any resulting losses so as to set-off such resulting losses against income arising from any source whatever in future years of income. Accordingly, such losses which the Deceased purported to carry forward after deducting Wear and Tear allowance on the capital expenditure upon the New Bergerac Hotel could not be set-off against income for the years of income 1973, 1974 and 1975.
(iv) by virtue of section 12A (2) of the Income Tax Ordinance, the Deceased was not entitled to an allowance for Wear and Tear in respect of the capital expenditure upon the New Bergerac Hotel. The Deceased was...
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