Mahabir v 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 114 - I 117 of 1986 |
| Date | 01 January 1991 |
Tax Appeal Board
Barnes, J.; Burke, J.; Dean-Maharaj, J.
Nos. I 114 - I 117 of 1986
Mr. B. Roopnarine and Mr. V. Prashad for appellants
Mrs. E. Bridgeman-Volney for respondent
Revenue law - Income tax — Assessment — Chargeable income — Evidence adduced by appellants did not satisfy respondent that the expenses claimed were wholly and exclusively incurred in the production of income from properties — Assessment varied.
These appeals relate to income tax and unemployment levy for the year of income 1978. I 114 and I 115 of 1986 of Jesse Mahabir, a Company Director, are in respect of income tax and unemployment levy respectively. I 116 and I 117 of 1986 concern Gloria Mahabir, the wife of Jesse Mahabir, also a Company Director, and they relate to her income tax and unemployment levy respectively. By order of the Tax Appeal Board, these four appeals we have heard together.
The tax returns of both appellants for year of income 1978 having filed in 1981 were subjected to audit examination by the respondent in 1984. An audit report on Jesse Mahabir was issued on 4th June, 1984 and that Gloria Mahabir on 1st August, 1984, as a consequence of which adjustments were made to the chargeable incomes of the appellants as under
| J. Mahabir | G. Mahabir | |
| Chargeable income returned | $30,072 | $39,287 |
| Adjustments | $47,467 | $17,605 |
| Adjusted Chargeable income | $77,539 | $56,892 |
Both revised assessments were the subject of objections and after consideration of the objections and discussions with the respondent, the assessments were confirmed in each case on 22nd July 1986.
The issues finally emerging in the Notices of Appeal of 19/8/86 of appeal, the statements of the reasons to be advanced in support and the respondent's contentions are set out in separate consolidated statements of case on record, as under:–
Jesse Mahabir - Paragraph 12 & 13 of folio (4) (file I 114 of 1986)
Gloria Mahabir - Paragraph 12 & 13 of folio (3) (file I 116 0f 1986)
At the hearing, an agreement dated 29th April, 1991 in the following terms was filed with the Court on the same day:–
“1. The respondent now accepts joint ownership of the property at No. 23 Alexandra Street, St. Clair. In this regard, the respondent is therefore prepared to allow a 50 - 50 in respect of a claim for expenses incurred on the said property, save for overdraft interest claim. This would therefore result in an allowance to Jesse Mahabir of $4,080.52. The balance of $2,793.26 is now the figure in issue in respect of “mortgage interest” disallowed.
2. The respondent recognises the trust created by the appellant in favour of his two daughters.
3. The respondent had previously allowed the appellant Gloria Mahabir the entire expense claim (save that for mortgage interest) in respect of owner-occupied property. As a result of the adjustment at (1) above, the Respondent will now have to adjust Gloria Mahabir's return by a 50% reduction in this regard.”
In the light of this agreement, the matters on which we are to adjudicate are summarised as under:
1. Whether amounts claimed for deductions in respect of overdraft interest as under were properly disallowed:
(a) $5,586.54 for owner occupied property jointly owned by the appellants at 23 Alexandra Street, St. Clair, Port of Spain.
(b) $18,893.44 for rented property at 38 Abercromby Street, Port of Spain.
2. Whether claims totaling $18,891.66 - $9,445.83 to each of the appellants were properly disallowed pursuant to sec. 12(e) of the Income Tax Act Chap. 75:01, in regard to rented property at 86 Cipero Street, sec. 12(e) reads:–
“12. In ascertaining the chargeable income of any person for any year of income, no deduction shall be allowed from the income in respect of –
(e) any sum recoverable under an insurance contract of indemnity;”
3. Whether profit/loss arising from a rented property at 20 Victoria Avenue is assessable in the hands of the appellant, the respondent having by the agreement of 29.4.91 recognised the existence of a trust created in favour of the appellant's two daughters.
In regard to (3) above, the respondent had at the objection stage disallowed expenses totaling $27,279 against rental income and made an adjustment of $20,097 to the income of Jesse Mahabir
| The following testified – The appellants – | Gloria Mahabir – Jesse Mahabir |
| For the respondent Merlin Sarjeant | – Supervisor of VAT Enforcement Board of Inland Revenue |
| Sherwin Welch | – Acting Field Auditor III VAT Administration Centre Board of Inland Revenue |
Sargeant had been the tax auditor involved with the assessment and Welch had dealt with the matters at the objection stage.
On the matter of onus of proof pursuant to sec. 8(2) of the Tax Board Act Chap. 4:50 the parties are in accord that though the onus whole case is on the appellant, the evidential burden may shift so case is to be decided on a balance of probabilities.
As the hearing proceeded, a recurrent basis of disagreement related to the standard of proof and for this reason, we must consider the oral evidence and the record, as they relate to certain occurrences from the audit stage and through the stage of objection and up to the time of the hearing.
It is important to observe at this stage that much of the evidence of Sargeant and Welch relates to discussions and documents relevant to negotiations at the audit and objection stage with which one Bertram Hadaway, Chartered accountant representing the appellant had been involved. Hadaway was not called and in his absence, the only evidence for the appellants was that of Jesse Mahabir, Gloria Mahabir having made a mere token appearance.
As regards the disputed sums disallowed, as mortgage interest and other expenses, by the respondent, the principal evidence related to a series of documents in the form of receipts or vouchers in support of expenditure and which were conceded by Welch to be prima facie valid receipts.
The evidence of both witnesses for the respondent was that such documents by themselves did not constitute sufficient evidence that the expenditure had been disbursed by the appellant for the purpose of earning income from the properties or at all. They both asserted that the basic documentary evidence was unsatisfactory in that in the absence of bank statements and cancelled cheques, the “receipts” fell short of what was required to enable proper consideration the appellants' claims for deductions. In other words, the evidence adduced not acceptable to satisfy the respondent that the expenses claimed to be incurred had been wholly and exclusively incurred in the production of the income from the properties.
Both witnesses testified that they had informed Hadaway in discussions that the production of bank statements and cancelled cheques was essential to the determination of the appellants' claims. Welch drew attention to two documents, folios 36 and 37 on the record on I 114 of 1986, that requested the production of information related to bank statements and cancelled cheques.
Jesse Mahabir's evidence was that he had operated one current account with the Bank of Commerce Trinidad & Tobago Ltd in Port of Spain. He said that this was a business account, but into which for example he had sometimes deposited his salary. Expenses had been met by cheques, cash withdrawals or cash received and not deposited. As a consequence of all his transactions with the Bank, he asserted that there was overdraft interest incurred in the sum of $24,479.98 which he was able to apportion as having been incurred in amounts of $5,586.54 and $18,893.44 to 23 Alexandra Street and 38 Abercromby Street respectively. In answer to a question from the Court he replied that he had no written record relating to the alleged apportionment. Evidence in regard to overdraft interest was provided in the form of a letter dated Sept. 4th 1979 put in as Exhibit J.M.7 as under:–
“BANK of COMMERCE
TRINIDAD AND TOBAGO LIMITED
INDEPENDENCE SQUARE BRANCH
P.O. BOX 69 PORT of SPAIN
September 4th, 1979
Mr. Mahadeo Mahabir
c/o The Great Northern Ins. Co. Ltd.
29A Edward Street ‘
PORT of SPAIN.
Dear Sir,
We certify that overdraft interest paid on your current account for the year ended December 31, 1978 was twenty four thousand four hundred and seventy nine dollars and ninety eight cents ($24,479.98).
We trust the foregoing meets with your requirements.
Yours truly,
Sgd. G. Best (Miss)
pro Manager”
Jesse Mahabir informed the Court that he was unable to produce bank statements and cancelled cheques as they had been destroyed according to his usual custom of ridding himself of such records after four (4) years, which he believed to be the period required by law under the statute of limitations.
In relation to all of the issues, the matter which is generally relevant is whether from an auditing standpoint or in relation to the standard of evidence required in an appeal, prima facie valid receipts are sufficient to establish the correctness of claims for deductions as expenditure incurred in of income.
The evidence of Jesse...
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