Mahon v Board of Inland Revenue
| Jurisdiction | Trinidad & Tobago |
| Judge | Barnes, J.,Burke, J.,Dean-Maharaj, J. |
| Judgment Date | 11 December 1989 |
| Court | Tax Appeal Board (Trinidad and Tobago) |
| Docket Number | Nos. I 97 and I 98 of 1985 |
| Date | 11 December 1989 |
Tax Appeal Board
Barnes, J.; Burke, J.; Dean-Maharaj, J.
Nos. I 97 and I 98 of 1985
Mr. B. Roopnarine and Mr. V. Prashad for appellant.
Mrs. E. Bridgeman-Volney for respondent.
Revenue law - Income tax — Assessment — Appeal against assessment of chargeable income — Onus on appellant to satisfy court that expenditure for shares was used exclusively for producing income — Onus not discharged — Appeal dismissed.
The issue in this appeal is whether the respondent has properly disallowed a deduction of $34,962. from the chargeable income of the appellant for the year of income 1982 pursuant to section 12(a) of the Income Tax Act, Chap. 75:01, which 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 –
(a) any disbursements or expenses not being moneys wholly and exclusively laid out or expended for the purpose of producing the income;
As seen from the record and documents filed by the respondent, the following are the facts leading up to the Notice of Appeal of 2nd August, 1985:–
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(1) On 30th April, 1983 the appellant submitted a return of income tax in which he declared inter alia income of $62,400 from emoluments and a loss of $34,962 in respect of dividends and other distributions from sources within Trinidad and Tobago. This return was originally accepted by the respondent as a basis of assessment for the year.
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(2) Following a tax audit reports dated 27th February, 1984 the respondent disallowed the amount of $34,962, and reassessed the appellant to income tax and unemployment levy on additional chargeable income, by increasing same from $16,979 to $51,941.
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(3) The adjusted assessment was objected to by the appellant's letter of 6th July, 1984 and the objection was determined by the respondent's letter of 5th July, 1985 in the following terms:–
“I refer to the notice of objection given by you in your letter of 6/7/84 which was received on 6/7/84 applying to me to review and revise the above assessment.
I have reviewed the assessment but wish to inform you of my refusal to amend it as desired by you.
You have failed to produce satisfactory evidence to show that the assessments are excessive or incorrect.
The Board is therefore satisfied that the assessments are justifiable in law and in fact.”
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(4) By Notice of Appeal of 2nd August, 1985, the appellant appealed and alleged in his statement of allegations of fact that:–
“(a) STATEMENT of ALLEGATIONS of FACT
That interest paid on the purchase of shares have been disallowed and not in accordance with normal income tax practice.”
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(3) The contentions of the respondent are as at paragraph 13 of the Statement of Case, which states:–
“13. The respondent will contend –
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(a) that the return submitted by the appellant did not reflect the true income of the appellant for the said year of income
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(b) that as a result of the audit, the respondent is of the opinion that the appellant had been assessed at a lesser amount than that which he ought to have been charged for the said income year. The respondent has on the facts and in the circumstances of the case raised additional assessments on the appellant under the provisions of section 89 of the Income Tax Act
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(c) that the appellant failed to supply to the respondent satisfactory evidence of his claim for interest; that the respondent was not satisfied that the alleged expense was wholly and exclusively incurred in the production of income and that the respondent was accordingly justified is (sic) disallowing the said interest for the income year.”
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The parties are ad idem on the point that the matter to be determined is a question of fact to be decided on the balance of probabilities, and also that Section 8(2) of the Tax Appeal Board Act, Chap. 4:50 the onus of proof is on the appellant.
In these circumstances, it is for the appellant to satisfy the court that the expenditure of $34,962 is properly deductible as an expense wholly and exclusively expended for the purpose of producing the income for the year of income 1982, and that it arose from the purchase of shares by the appellant.
The following persons testified:'–
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(a) for the appellant — Harold A. Mahon, the appellant, and Herbert Lalsingh, Chartered Accountant.
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(b) for the respondent – S. Birbal, tax auditor on the staff of the Board of Inland Revenue.
The following Exhibits were put in as evidence through the appellant Harold A. Mahon:–
H.M. Nos (1) – (6) — six certificates of ownership of ordinary and preference shares of $5.00 each in Trinidad Shipping Company Limited, issued on various dates between 17th November, 1976 and 6th July, 1981. Three certificates in the name of Anne Marie Mahon covered one ordinary share, and 1,807 preference shares.
H.M. No. 7 - a letter dated 18th February, 1987 from the Royal Bank of Trinidad and Tobago Limited of 55 Independence Square, Port of Spain to Harold A. Mahon, certifying a list of all share certificates held by the Bank as collateral security, in respect of ordinary and preference shares of $5.00 each in Trinidad Shipping Company Limited.
H.M. No. 8. — a letter dated 10th August, 1988 from the Royal Bank of Trinidad and Tobago Limited to the Commissioner, Board of Inland Revenue, certifying that interest paid by Harold and Marie Mahon for the year ended December 31, 1982 for the purchase of shared amounted to $34,961.49.
H.M. No. 9. — a letter dated 10th August, 1988 from the Royal Bank of Trinidad and Tobago Limited to the Commissioner, Board of Inland Revenue, certifying that interest paid by Harold and Marie Marion for the year ended December 31, 1981, for the purchase of shares amounted to $31,402.72.
H.M. No. 10. — Share Transfer Certificates in respect of ordinary and preference shares of $5.00 each in Trinidad Shipping Company Limited acquired by Harold A. Mahon and Anne Marie Mahon over the period 6th December, 1972 to 6th July, 1971.
Before undertaking an examination of the relevant evidence, we must mention that in a letter of 26th September. 1983, (folio 7 of record) by which the tax audit had been initiated, the appellant was informed inter alia that the respondent was in the process of examining his Income Tax Return for the income year 1982, and required additional information from him in connection with interest paid/bank charges. In the same letter he was asked to produce bank statements and cancelled cheques and evidence as to the use of funds from the overdraft account.
Both the appellant and Lalsingh testified that they had produced to the respondent the bank statements sought by the respondent with other relevant documents, and in particular that the bank statements had been produced on at least two occasions. Mahon testified that cancelled cheques were never produced as it was his habit to destroy these on reconciling his monthly bank statements.
Birbal's testimony was that at the audit stage he had requested bank statements and cancelled cheques from Lalsingh and this was corroborated by Lalsingh who stated in cross examination that the request followed two previous ones made by other officers which had been complied with. A third attempt to obtain bank statements to comply with Birbal's request had been unsuccessful as it was “too late.”
In his testimony Birbal stressed that he had disallowed the claim as he did not have the supporting evidence – that is bank statements, cancelled cheques and “evidence as to the use of funds from overdraft account,” which he considered to be basic and essential in establishing the nexus between the interest on the overdraft and the purchase of shares, and the...
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