Murray v Board of Inland Revenue
| Jurisdiction | Trinidad & Tobago |
| Judge | Barnes, J.,Burke, J.,Dean-Maharaj, J. |
| Judgment Date | 01 January 1992 |
| Court | Tax Appeal Board (Trinidad and Tobago) |
| Docket Number | Nos. I 93 - I 94 of 1989 |
| Date | 01 January 1992 |
Tax Appeal Board
Barnes, J.; Burke, J.; Dean-Maharaj, J.
Nos. I 93 - I 94 of 1989
Appellant in person
Miss S. Bachew for respondent
Revenue law - Income tax — Appeal against decision of respondent to disallow expenditure incurred on repairing appellant's property — General principles applied by court to distinguish capital from revenue expenditure — Expenditure found to be of a revenue nature pursuant to s. 10 of Chap 75:01 and not capital expenditure — Appeals allowed.
JUDGMENT of THE COURT: By Notice of Appeal of 15th March, 1989, the appellant disputed a decision by the respondent whereby it sought to disallow an expenditure of $64,711.135 incurred work carried out at the appellant's owner-occupied property at Picton Street, Scarborough, Tobago in the year of income 1985
The contentions of the parties are as set out in paragraphs 13 and 14 of the respondent's statement of case of 10/4/91 (on record) as under –
“13. By Notices of Appeal filed on 15th March, 1989, the appellant appealed to the Tax Appeal Board against the decision of the respondent on the following grounds:
STATEMENT of ALLEGATIONS of FACT
Expenses in relation to owner-occupied property was disallowed.
STATEMENT of THE RFUIVS. 7n. BE ADVANCED IN SUPPORT of APPEAL
(1) Expenses are proper deduction under Income Tax Act, Chapter 75:01.
(2) The expenses are not capital.
14. Respondent will contend
(a) that the “repairs” effected on owner-occupied property during the income year 1985 was in fact work of a capital nature and therefore, not deductible from income earned in the said year.
(b) that as it was entitled to do under section 83(2)(b) the respondent refused to accept the Appellant's return and, assessed him at such amount as to the best of its judgment ought to have been charged.
(c) the respondent maintains that the assessment is valid in law and in fact and should be upheld.”
The issue we are to determine is whether the expenditure was allowable in accordance with section 10 of Chap. 75:01 or was of a capital nature and falls to be disallowed pursuant to 12(c) and/or (d) of chap. 75:01.
The relevant sections read –
“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 - “
“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 –
xxx xxx xxx xxx
(c) any capital withdrawn or any sum employed or intended to be employed as capital;
(d) any capital employed in improvements;”
In order to determine whether the expenditure represented revenue or capital, it is essential first to obtain the facts as to the nature of the work performed for which the expenditure was undertaken..
From the statement of case, the answer of the appellant (on record) and the record generally, it is clear that up to the time of the hearing there was a difference in the versions of the parties as to the work done and to whether or not additions and or improvements had been the outcome of the expenditure.
Paragraphs 4 & S of the statement of case state:–
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“4. On 24 th February, 1987, the appellant attended an interview at the respondent's offices at which said interview he provided the following information –
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(a) The owner-occupied house in question was built in 1934, it is a two storey building standing on eighteen (18) pillars made out of wood and concrete. Due to excavation work done on lands adjacent to this house the structure of the pillars of the said house were weakened.
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(b) The appellant sought professional advice on the weakened pillars. He was advised to demolish the whole structure. Instead he decided to strengthen the foundation of the house.
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(c) The work to “strengthen” the pillars was as follows –
Knocking out twelve (12) pillars and re-enforcing with concrete and steel, a completely new fundation performing concrete work around the building and re-enforcing with steel.
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(d) After the said work was done the building had six (6) pillars, a new foundation and retaining walls.”
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“5. The respondent disallowed the appellant's claim in respect repairs done to owner-occupied property in the sum of x, 711.85 on the basis that the work done on the said house s in the nature of improvements and additions and repairs. The said work was therefore of a capital nature and therefore not deductible from income earned.”
Paragraphs 4 & 5 of the appellant's answer states “
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(4) The appellant does not admit paragraph (4) –
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(a) The dwelling house was occupied by the appellant and his mother(age 93 years), who was bedridden.
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(b) The Annual Rateable value of the property is $936. Inland Revenue officers in Tobago visited the site and made notes.
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(c) The appellant's dwelling house is a concrete structure 42feet by 30 feet containing four (4) bedrooms, one (1) drawing room, one (1) pantry, one (1) kitchen, one (1) Lavatory one (1) bathroom, one (1) Store room down stairs, one (1) verandah. The building was valued for $130,000.00. The appellant will refer to a Valuation dated 2nd January, 1980 by Ernest Lyne, Land Valuator.
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(d) By Letter dated 26th June, 1987, the appellant informed that:
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(a) The Bill of Dilapidations involved the removal of 18 concrete pillars and defective wooden ring-beams. This involved the excavation of an area of the foundation of about 28 feet by 18 feet by four feet to remove the concrete pillars and dampness in the foundation.
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(b) Maintenance work required the appellant to cause the workmen to shore, prop-up or otherwise secure the superstructure of the building from falling down at a cost of $64,711.85. The building was a dangerous structure in the eye of the law. The likelihood of delay can result in injury to persons and property and my Insurance Company would not take the risk of injury to workmen and other persons. The work took place during the 30th October, 1985 to 10th January, 1986 after earth tremours and heavy rains. The defective parts of the superstructure were removed in July, 1986.”
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“5. The appellant denies paragraph (5). The said works were reasonable repairs to a foundation and superstructure that was underpinned by bulldozing on land subjacent and adjacent to the appellant's dwelling house. The cost of the said works were paid out of the appellant's savings and salary. The Appellant will refer to the said letter dated 26th June, 1987.”
The respondent called no evidence and the only witness was the appellant himself. He testified that in 1985, some bulldozing was carried out on adjoining lands with the result that the foundation of his hillside property had been adversely to the extent that the entire property was in danger of collapse, so much so that he had received expert advice that it would be advisable to reconstruct the property.
He had been alerted to the existence of an emergency situation firstly by experiencing a strong smell of acid in the environs of the property, whereupon opinion was sought from one Peter Alexander, a building contractor, with the result that urgent work had to be undertaken immediately on the foundations of the building.
The appellant explained that the property, erected on a hillside, was supported by 34 pillars stabilized by concrete mats, all of the pillars were not of the same height and taller ones on the north west side needed urgent attention.
In general terms, the work had involved the replacement of 18 unreinforced concrete pillars with 6 reinforced with steel involving excavation and shoring up, installation of reinforced concrete ring beams in place of wooden ones, together with reinforced foundation blocks.
The work program had had to be done to the satisfaction of the planning and Health Authorities and so plans had had to be prepared and approved and once the house had been secured, a firm of quantity surveyors had been called in to value the work required to be done. A cost summary prepared by the quantity surveyors was in the sum of $173,267.30 for the related works. An affidavit of Peter Alexander, retired building Contractor was put in dated 15/6/92 (on record) states inter alia graph 7.
“7. The repair work were as follows:
(a) Area of foundation excavated 28 feet by 13 feet.
(b) Replacement of damaged wooden sleepers and damaged concrete pillars with re-inforced concrete structures.
(c) Support work for the rest of the foundation.
(d) Building of bins to keep the soil.
(e) Shoring up of the superstructure.
The contract was a rainy-season contract and labour intensive. If every thing had worked to plan it may have been possible to save the 1963 roof. I kept a Note Book showing records of labour and materials used. The cost of the repairs was $64,711.85. I cannot produce the said Note Book as the same was subsequently destroyed when I was hospitalized with a stroke. I am still under this disability.”
In cross-examination, the...
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