Sampath v The Board of Inland Revenue

JurisdictionTrinidad & Tobago
JudgeBarnes, C.,MAHARAJ
Judgment Date29 January 1996
CourtTax Appeal Board (Trinidad and Tobago)
Docket NumberNos. I 33 - I 34 of 1989
Date29 January 1996

Tax Appeal Board

Barnes, C.; Dean-Maharaj, Mem.

Nos. I 33 - I 34 of 1989

The Board of Inland Revenue

Ms. Lesley Ann Lucky Samaroo for appellant.

Mrs. E. Hridgeman-Volney and Mrs. C. Gopaul for respondent.

Revenue law - Income tax — Undisclosed income — Appellant argued that the respondent erred in including the sum of $43,000.00 as undisclosed income of the appellant as same as attributable to a loan from a third person to the appellant as evidenced by documents — Respondents contended that the appellant did not satisfy it as to the source of funds utilized to purchase a motor vehicle — Whether the $43,000 was provided out of the appellant's business, or as the appellant claimed — Finding that on a balance of probabilities the amount of $43,000 came from outside the appellant's business and should be executed in computing the chargeable profit of the business — Appeals allowed.

Barnes, C.

With the consent of the parties these appeals are to be heard by the Chairman and one member of the Tax Appeal Board.


These are appeals against assessments to income tax and unemployment levy in the amounts of $22,542.80 and $1,711.90 respectively for the year of income 1980. The Appeals were consolidated by Order dated 5/2/91. By Order dated 10th April, 1992, the court substituted the current appellant for the appellant named in the Notices of Appeal in view of his demise.


For the year of income 1980 the appellant had carried on business in hardware and lumber at Eastern Main Road, Mt. Hope. His chargeable income as declared in his income tax return was $2,045.00. By letters of 14/8/85 and 24/7/86 the respondent had informed the appellant that his income tax returns for the years 1979


1982 inclusive were under examination.


As a result of the audit examination the respondent adjusted the appellant's chargeable income to a figure of $153,107.00, and issued Notices of Assessment dated 29th December, 1986.


By letter of objection dated 12th January, 1987, and received by the respondent the following day, the appellant objected to the assessments. By letter dated 11th January, 1989, supported by an audit report of the same date, the respondent adjusted the appellant's chargeable income downwards to a figure of $54,238.00. The appellant's Notices of Appeal were filed on 26th January, 1989.


The appellant's grounds of appeal and the respondent's contentions are as stated at paragraphs 12 and 13 of the statement of case, as under:

Grounds of appeal of appellant
  • “12. (i) The respondent failed to accept that the sum of $5,382.00 incurred in respect of interest and bank charges were validly incurred in respect of the appellant's said business and evidenced e by the appellant's bank statements.

  • (ii) The respondent erred in including in the appellant's chargeable income the said sum of $5,382.00.

  • (iii) The respondent erred in including the sum of $43,000.00 as undisclosed income of the appellant as same is attributable to a loan from a third person to the appellant as evidenced by documents.”

Contention of the respondent

“13. The respondent will contend the following:

  • (i) that for the year of income 1980, the return submitted by the appellant did not reflect his true and correct income.

  • (ii) that the appellant did not satisfy the respondent as to source of funds utilized to purchase motor vehicle PAD 788.

  • (iii) that as a result of the audit examination carried upon the appellant, the respondent discovered that the appellant's claim with respect to interest and Bank charges were overstated by the sum of $5,382 and attributed the said amount as additional income.”

Grounds of appeal of appellant
Contention of the respondent

At the hearing the appellant conceded the balance of the claim of $5,382 for lack of evidence, the sum of $340.00 being allowed by the respondent, leaving in dispute only the claim for $43,000 to be excluded from taxable income.


The issue we are to determine is whether the disputed sum of on $43,000.00, alleged representing the balance of the purchase price of motor vehicle PAD 788, was provided out of the appellant's business, or as the appellant claimed by his son.


Anthony Sampath, the appellant's only son testified for the appellant that in 1980 he was employed with the appellant's business as manager of the lumber yard. He was one of two children of his parents. In 1980 his sister was not involved in the business, and in that year he was twenty-five years old, and had been in his father's business for four years.


In 1980 he had purchased a motor car, Mazda 626, registration number PAD 788 for $54,000.00. The vehicle was actually received by the appellant in July, 1980. He had negotiated the financing in his own name, as his father had declined to do so. His father wanted him to negotiate a loan as part of his training and to so in his own name, and further to establish with the bank creditworthiness for himself. He had purchased the motor car in the name of the appellant, and in 1980 the said motor car formed part of the assets of the appellant's business.


He further testified that even though he was the manager of the lumber yard he was involved in every aspect of the business, as it was his father's intention that he, the only son, would eventually take over the business.


As regards the financing of the purchase of the motor car, PAD 788, the witness stated that he had raised the finance partly through sale of his old motor car, PW 4011, which was his own though registered in his father's name, as it was allotted to him. He had sold PW 4011 in May, 1980 for $11,000.00. We here


observe that at the hearing the parties accepted that the $11,000.00 was applied to the purchase of PAD 788, and that sum was no longer in dispute.


The rest of the financing of $54,000.00, that is $43,000.00 and had come from his aunt, and from the Royal Bank, San Juan branch. Negotiations with the Royal Hank had taken place prior to April, 1980, and he had received approval on 1st April, 1980, as shown in folio 11 of the record, reproduced hereunder:

“The Royal Bank of Trinidad and Tobago Limited

31 Eastern Main Road, San Juan, Trinidad, W.I.

July 27, 1988

Mr. Anthony Sampath

7 First Avenue,

Mount Lambert

Dear Sir,

As requested by you, we hereby confirm that credit facilities of $36,000, principal $24,000 with interest of $12,000 was granted to you on April 1, 1980.

Your truly,

Signed: S.J. Totesau

Haqq (Mrs.)

R.C.S. Officer “


In his testimony, the witness Anthony Sampath stated that his aunt, one Constance Roopchand, had loaned him $19,000.00. He described his aunt as a very close family member. She had overheard his father saying that he would leave everything to his son, Anthony. With regard to the financing of the new motor car, his aunt had offered to make money available to him as a loan and he was expected to repay the loan. He had attempted to repay her, but she had said that it was a gift to him and refused the repayment. He said that in 1980 she was the principal of the Valsayn Teachers College.


He explained to the court that the reason why he had taken a loan from his aunt was to enable him to make a down payment on the vehicle with the motor car dealer, as that was necessary to secure a new car. He pointed out that in 1980 demand for new motor cars was greater than supply. For that reason, one had to make a deposit which he had done, and he had done so in his name in April, 1980.


He further explained that he did not use the Royal Bank credit facility until July 1980, when he had to pay the balance and take delivery of the car. He said that the Royal Bank had been repaid and the source of funds was his father's business.


In cross-examination, he stated that the loan of $19,000.00 was made to him by a bank draft, payable to him, and he had made it payable to the motor car dealer. He said that a copy of the bank draft was not available, and explained that it was a loan and not an overdraft facility.


He also stated in cross-examination that he did not have an account with the Royal Bank, it was the first time he was dealing with that bank. He had used the $24,000.00 to purchase the motor car PAD 788 by making use of the Royal Bank facility in July, 1980 when he had taken delivery of the car and that was long after the Royal Bank had granted the credit facility on April 1, 1980. He confirmed that his earlier motor car PW 4011 was sold in May, 1980, he having negotiated a sale of the vehicle for the sum of $11,000.00, and we here note that this is not in dispute.


The witness also said that the vehicle was booked in his name and the receipt for the down payment was in his name. The purchase of the vehicle and the receipt for the purchase amount were in the name of his father. He had paid the motor car dealer Southern Sales by bank draft, but did not have a copy of the draft. The balance of $11,000.00 had been paid to Southern Sales by cheque.


As regards the repayment to Royal Bank, the witness said in cross-examination that the loan was granted for five years. Repayment was made monthly and had commenced in August, 1980 and three years later, on sale of the subject motor car PAD 788, the balance was paid off. He had no evidence other than the letter from Royal Bank at folio 11 of the record, reproduced earlier, to show that he had utilized the facility, such as bank statements. He had requested copies of the bank statements from the bank sometime ago, but the Bank had told him that it had to be researched. He had not made a request for a copy of the bank draft.


In cross-examination, the witness was asked whether he had viewed the amount involved as a loan from him to his father. He said that there was no formal document, and he regarded it as an informal loan. He explained that there was an understanding between his father and...

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