Reynolds v Commissioner of Income Tax

• Jurisdiction: Trinidad & Tobago
• Judge: Wooding, C.J.,Hyatali, J.A.,Phillips J.A
• Judgment Date: 25 March 1964
• Neutral Citation: TT 1964 CA 28
• Docket Number: No. 538 of 1958
• Court: Court of Appeal (Trinidad and Tobago)
• Date: 25 March 1964

Court of Appeal

Wooding, C.J., Hyatali, J.A.; Phillips J.A

No. 538 of 1958

Reynolds

and

Commissioner of Income Tax

Appearances:

Mr. E. Hamel Wells for the appellant

The Solicitor-General and Mr. C. Bernard for the respondent.

Income Tax - Deed of covenant — Wife living with her husband — Disposition by wife out her own income for the benefit of their infant children — whether disposition deductible for tax purposes.

Statute - Interpretation — Income Tax Ordinance Cap.33 No.1 — Interpretation of provisions

Facts: Appellant and his wife lived together and were both in receipt of income from earnings and investments. Wife entered into a deed of covenant whereby she create a trust for the benefit of their children. In making his return appellant deducted from his wife's income the money paid thereout under her deed of covenant. Respondent disallowed it and his decision was upheld on appeal by a judge in chambers. Appellant appealed

Facts: Appellant's wife had entered into a deed of covenant whereby she created a trust for the benefit of their children. Appellant in making his return deducted from his wife's income the money which she had paid thereout under her deed of covenant — Respondent disallowed it and his decision was upheld on appeal by a judge in chambers. Appellant appealed

Held: The whole of the wife's income derived from the sources specified in S5 of the Income Tax Ordinance Cap. 33 No.1 was that of her husband and in the contemplation of the Ordinance he may but she would not dispose of it for the benefit of another — Wife was incapable of having a changeable income and consequently could not involve the provisions of S10 (1) and S12 of the Ordinance to have one ascertained. Payments made and intended for the maintenance, education and benefit of a taxpayer's children are within the prohibitions of S10(1) and S12 of the Ordinance and consequently, are not deductible for tax purposes. Appeal dismissed with costs.

Held: Interpretation must be strict because the Ordinance in question is a taxing Statute. This simply means that in a taxing Act one has to look merely at what is clearly said. No room for intendment. No equity. Nothing to be read on, or implied. One can only look fairly at the language used.

JUDGMENT OF THE COURT:

1 In March 1940 Gilchrist, J., sitting as a judge in chambers, allowed the appeal of Joseph Galvan Kelshall. It was an appeal against the refusal by the Commissioners of Income Tax to allow in diminution of his chargeable intone payments which he had covenanted to make annually to trustees for the benefit of his two sons. There was no appeal against that decision. Ever since then, the revenue authorities have accepted like annual payments by taxpayers as permissible deductions in ascertaining chargeable income. But, in order to contain such deductions within what may be regarded as not inappropriate limits, the legislature passed amending legislation making certain dispositions non-deductible. Two challenges, however, are raised by the instant case. Patrick Arthur Reynolds, to whom I shall hereafter refer as “the taxpayer”, contends that the amending legislation is incompetent to deny him the deductions claimed; the Commissioner retorts by questioning the decision of Gilchrist, J.

2 The facts stated are as follow. The taxpayer and his wife live together and are both in receipt of income from earnings and investments. On 28th December 1956 the wife entered into a deed of covenant the created whereby she created a trust for the benefit of the four children of the marriage. She appointed Alfred Jefferies Prior as trustee and covenanted to pay to him for a period of three years annual sums of $3,500 in respect of the children, to be held by him for their benefit, maintenance and or education until their maturity or marriage whichever should take place sooner. At the date of the deed the children's ages ranged from twelve years to one month. In making his return for the year of assessment ended 31st December 1957 based on income received in the preceding year, the taxpayer showed his wife's income as $18,202 but deducted there from the aggregate sum of $14,000 which she had paid there out under her deed of covenant. The Commissioner disallowed the deduction. The taxpayer objected to the disallowance but on his review the Commissioner confirmed it. He then appealed to a judge in chambers but Blagden, J. dismissed his appeal. Accordingly, he asked for a case to be stated on a question of law and it is that case which is now before this court.

3 The controversy at the bar ranged over a wide area and many interesting and intricate questions were debated before us. We have also read what was almost a treatise by the learned judge. But I trust I shall not be thought disrespectful when I say that, in my view, the issue can be kept within a fairly narrow compass and that I intend to keep them so. Their resolution, in my opinion, depends upon the construction of certain provisions of the Income Tax Ordinance, Ch.33 No. 1, to which I shall hereafter refer as “the Ordinance”: that, it seems, is now generally agreed.

4 Both in concept and in content the Ordinance differs fundamentally from the English Income Tax Acts. And no other statute to which reference has been made or on the interpretation of which my own researches have uncovered authority enacts provisions ‘in pari materia’ with those to be interpreted on this appeal. It is therefore not very practicable in the instant case to rely on cases decided elsewhere save in respect of basic principles of construction. But even these call for little citation of authority: they are already too well known. They require me to discover within its four corners the true intent and meaning of the Ordinance. It must be read as a whole so as to correlate its several parts. Its language when plain must be given its full significance. Resort may be had to special rules of construction if its terms should prove ambiguous, but there should be no such recourse simply to provide a means of entry for the fisc or a hatch of escape for a taxpayer. The imposition of tax being the prerogative of the legislature, the courts must enforce what the legislature decrees. No exaction can be maintained which is not specifically levied, and no avoidance permitted which finds support from sophistry alone. Interpretation must be strict because it is a taxing statute but, as Rowlatt, J. explained in Cape Brandy Syndicate v. Inland Revenue Commissioners [1921] 1 K.B. 64, at p.71, that principle –

“simply means that in a taxing Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used”.

5 Let me then state briefly what from reading the Ordinance as a whole I discern to be the relevant general scheme to which it gives effect. It differentiates between income and chargeable income: income being what comes in from the several sources specified in section 5, and chargeable income being defined in section 2 as what remains of that income after allowing the appropriate allowable deductions. Such deductions fall into one or other of two categories: what I shall call “income-producing expenses” and “personal allowances”. Income-producing expenses are governed by sections 10, 11, 12 and 13 but the material sections for the purpose of this case are sections 10 and 12. Personal allowances are prescribed by sections 14, 15, 16 and 18. The income of a married woman who is living with her husband (hereafter compendiously referred to as “a wife”) is by section 18 deemed for the purpose of the Ordinance to be her husband's income. Consequently (and the same section so provides), her income is chargeable in the name of her husband. She therefore has no chargeable income and is not herself chargeable with tax. Not being chargeable with tax, suction 27 does not require her to make any return of her income: it is her husband who must. The return which he makes and is required by section 36(1) to deliver to the Commissioner is a true and correct return of the whole of his income from every source whatever. By the operation of section 18, therefore, that must include the whole of a wife's income which for the purpose of the Ordinance is deemed to be his. It is he who is assessed to tax as provided by section 39. Section 42 entitles him to object to any such assessment and, if he is dissatisfied with the Commissioner's determination of his objection, section 43 affords him a right of appeal to a judge in chambers and thereafter a right to have the judge state a case on a question of law for the opinion of this court. A wife is given no right either to object or to appeal. She has no say and cannot be heard. Indeed, in the view of the Ordinance, she is by definition in section 2 an “incapacitated person”.

6 Construing its language fairly and without reading in anything which it does not itself express, I am of opinion that whenever the Ordinance speaks of income without any qualitative it means income derived from all or any of the sources specified in section 5. Accordingly, when section 18 deems a wife's income for the purpose of the Ordinance to be her husband's, I hold that what is so deemed is the whole of her income which is so derived, and not merely her chargeable income as the taxpayer has sought to contend. As I have said, she is incapable of having any chargeable income. I disagree, therefore, with the learned judge that it is for the purpose only of its machinery and not at all of its charging sections that the Ordinance deems her income to be his. The language of section 18 is clear and explicit. It says that the deeming is for the purpose of the Ordinance. That language must be given its full significance.

7 Before dealing with the deductions allowable from...