Mc Clean v The Board of Inland Revenue
| Jurisdiction | Trinidad & Tobago |
| Judge | Barnes, S.C. |
| Judgment Date | 01 January 1994 |
| Court | Tax Appeal Board (Trinidad and Tobago) |
| Docket Number | I 80 of 1988 |
| Date | 01 January 1994 |
Tax Appeal Board
Barnes, S.C.; Burke, Mem.; Dean-Maharaj, Mem.
I 80 of 1988
Mrs. Marvo Harper for appellant
Mrs. E. Bridgeman-Volney for respondent.
Revenue law - Income tax — Unemployment levy — Appellant submitted that the sum of $19,700.00 which was disallowed by the respondent as a deductible expense was in fact office expenses incurred by the appellant during the course of the year 1982 in order to maintain his law chambers — Respondent claimed that the sum was not incurred in the production of the taxable income and was rightly disallowed by the respondent — Held that on a balance of probabilities the sum of $19,700.00 was wholly and exclusively incurred in the production of the appellant's income for the year on income 1982 — Section 10 of the Income Tax Act, Chap. 75:01 — Appeal allowed.
This is an appeal against additional assessments to income tax and unemployment levy for the year of income 1982, which had by order of the Court of 31st July, 1991 been initially consolidated with one for the year of income 1980 from the same appellant.
The earlier appeal - I 79 of 1988, having been settled by agreement between the parties, on 19th March, 1993, and given effect to by an order of the court of the same date, that for the year 1982 was heard as a separate matter.
The steps culminating in the appeal by Notice of 1st July, 1988 are set out in paras. 1 - 10 of the respondent's statement of case dated 23rd April, 1993 as follows:–
1. The appellant was employed as a judge of the Industrial Court during the year of income 1982.
2. The appellant submitted a return of income for the said income year in which he declared the following –
Total assessable income
$36,285.80
Total personal reliefs
13,258.48
Chargeable income
23,027.52
Tax on chargeable income
6,311.93
3. The respondent accepted the appellant's return of income but subsequently conducted an audit examination upon the appellant for the said income year.
4. The said audit examination revealed that the appellant was a judge of the Industrial Court during the said income year. The examination also revealed that the appellant retained private law chambers at No. 34 Edward Street, Port of Spain, although he did not engage in any private practice for the subject income year. The respondent further discovered that although the appellant was not in receipt of income from private practice, that he claimed as a deductible expense, office expenses of $19,700.00, against his income as a judge of the Industrial Court. The said claim was disallowed by the respondent.
5. By audit reports dated 31st October, 1985, the respondent informed the appellant of the following adjustments to be made to his income tax return for the year of income 1982 –
Adjustments
Continuing office expenses
$19,700.00
Chargeable income per return
23,027.00
Adjusted chargeable income
42,727.00
Tax on adjusted chargeable income
15,636.20
Tax per return
5,961.00
Increase in tax liability
9,675.20
Levy
464.35
6. Notices of Assessment demanding the taxes assessed were sent to the appellant.
7. The appellant objected to the additional assessments of the respondent by letter dated 12th June, 1986.
8. By letter dated 18th January,$1988, the respondent requested the appellant to attend its office together with inter alia, documentary evidence to support income and expenditure from private practice.
9. The respondent considered the said objection but the appellant failed to produce satisfactory evidence to show that the assessments are excessive or incorrect.
10. The respondent accordingly confirmed the assessments by letter dated 3rd June, 1988.”
The grounds of appeal and the contentions of the respondent are stated at paragraphs 12 and 13 of the statement of case as under –
“12. The grounds of appeal are as follows
(a) Statement of allegations of fact –
(i) There is no tax outstanding for the I year of income 1982.
(ii) The sum of $19,700.00 which was disallowed as a deductible expense was in fact office expenses incurred by the appellant during the course of the year 1982 in order to maintain his Law Chambers which he occupied continuously at No.34 Edward Street, Port of Spain for 1978 until 1987 when he held himself out as a Practicing Barrister-at-Law.
(iii) The Board of Inland Revenue is erroneous in holding that the appellant did not work at all at his private practice as a Barrister-at-Law during the year 1982 and that the appellant ceased to practice and/or maintain a practice.
(b) Statement of the reasons to be advanced in support of appeal –
(i) Certain of the office expenses of the appellant continued notwithstanding his performance of a function as a member of the Industrial Court in the year 1982.
(ii) The Instrument of Appointment by which the appellant performed at the Industrial Court and which was for a limited fixed period did not preclude the appellant maintaining his Law Chambers and doing work that was not inconsistent with his position at the Industrial Court.
(iii) The Board of Inland Revenue failed to determine the objection within twelve (12) months of the of the service notice of objection pursuant to Section 86(8) of the Income Tax Act, Chapter 75:01 which applied at the time of the filing of the said objection on 12th June, 1986 and the objection should accordingly be deemed to leave been determined on 12th June, 1987 in favour of the appellant.
“13. The respondent will contend –
(1) that the income tax return submitted by the appellant did not reflect, his true income during the subject income year.
(2) that as a result of the audit the respondent was 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 and to the best of its judgment, raised additional assessments on the appellant under the provisions of Section 89(1) of the Income Tax Act, Chapter 75:01.
(3) that the appellant's claim for office expenses amounting to $19,700.00 was not incurred in the production of the taxable income and was right fully disallowed by the respondent.
(4) that the respondent determined the objection of the appellant for the subject income year in accordance with the provisions of the Income Tax Act.”
The issue we are to determine is whether a claim by the appellant for expenses is allowable as a deduction for the year of income as being wholly and exclusively earned in the production of the income for the year pursuant to section 10 of the Income Tax Act, Chap. 75:01 as under –
“10. (1) In computing the income of any person for a year of income from any source specified in section 5 for the purpose of ascertaining the chargeable income of a person for that year, there shall be allowed to that person all outgoings and expenses wholly and exclusively incurred during the year of income by that person in the production of the income from that source, so however that xxxx”
At the hearing no other issue was considered.
The appellant testified and for the respondent, Charles Cudjoe and Helena Ferreira, both Acting Field Auditors IV.
The evidence of the appellant was as under:–
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(1) Under the terms of his contract as a Member of the Industrial Court, he was not debarred from practice as a Barrister-at-Law provided that such practice was not at variance with his appointment to the court.
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(2) He had been engaged in practice in the year of income 1982, having had old clients to serve.
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(3) He had actually attended at his chambers on week days and met with clients on such days between 6.30 am to 8.45 a.m. and in the afternoons after court until 6.30 p.m.
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(4) He had recorded no fees for the year but had he collected fees he would have made records of receipts.
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(5) He had shared the Chambers with...
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