Trinidad Cement Ltd The Board of Inland Revenue
| Jurisdiction | Trinidad & Tobago |
| Judge | Kelsick, C. |
| Judgment Date | 31 January 1978 |
| Court | Tax Appeal Board (Trinidad and Tobago) |
| Docket Number | I 1–5 of 1973 |
| Date | 31 January 1978 |
Tax Appeal Board
Kelsick, C.; Burke, M.; Julumsingh, M.
I 1–5 of 1973
T. Hosein Q.C. and R. Martineau for appellant.
R. Kong and S. Shivarattan for respondent.
Revenue law - Income tax — Assessment
On 9th January, 1973, five separate Notices of Appeal were filed by the appellant against additional assessments for the years of income 1965, 1966, 1967, 1968 and 1969. Section 45(1) of the Income Tax Ordinance, Ch. 33 No. 1 (“the Ordinance”) under which the assessments were made is as under:–
“45.(1) Subject to the provisions of this section, where it appears to the Board that any person liable to tax has not been assessed, or has been assessed at a less amount than that which ought to have been charged, the Board may, within the year of income or within six years after the expiration thereof, assess such person at such amount or additional amount as according to its judgment ought to have been charged, and the provisions of this Ordinance as to notice of assessment, appeal, and other proceedings under this Ordinance shall apply to such assessment or additional assessment and to the tax charged thereunder.”
These appeals relate to remittances made between the years 1965 to 1969 by the appellant to a Company incorporated in the Bahamas called R.P.C. Foreign Services Ltd. hereinafter referred to as “the Bahamas Co.”. The respondent taxed the appellant on the imputed estimated income earned from these remittances.
The additional assessments, which were dated 3rd December, 1971, were accompanied by a covering letter setting out the bases of these assessments. This is reproduced below:
“TRINIDAD Cement Ltd.
Years of Income 1965–1969
File No. 1/877
I wish to inform you that additional assessments have been made in respect of the above to include amounts estimated to be earned from funds lodged with the R.P.C. Foreign Services Ltd. in the Bahamas.
The additional tax liability is as set out hereunder;
Year of Income 1965
Loss as per re-assessment issued on 1/10/69 — $3,530,735
Estimated additional revenue — $386,703
Revised loss carried forward — $3,144=082
YEARS OF INCOME 1966–1969
1966
Estimated additional revenue — $500,822
Additional loss written off — $254,911
Chargeable Income — $254,911
Tax thereon — $112,160.84
Loss relief originally allowed now recouped — nil
Total — 112,160.84
1967
Estimated additional revenue — $603,897
Additional loss written off — $301,948
Chargeable Income — $301,949
Tax thereon — $132,857.56
Loss relief originally allowed now recouped – nil
Total — $132,857.56
1968
Estimated additional revenue — $824,133
Additional loss written off — $400,971
Chargeable Income — $423,162
Tax thereon — $190,422.90
Loss relief originally allowed now recouped — nil
Total — $190,422.90
1969
Estimated additional revenue — $817,673
Additional loss written off — nil
Chargeable Income — $17,673
Tax thereon — $367,952.85
Loss relief originally allowed now recouped — $504,599.40
Total — $872,552.25
Enclosed are assessments and tax demand notices and a Schedule of losses.
SCHEDULE OF LOSSES
1966
Balance brought forward………………………. $3,144,082
Original amount written off — $755,845
Additional written off ………. $254,911 ………. $990,756
Total ……………………………………………… $2,153,326
1967
Balance brought forward……………………….
Original amount written off — 788,688
Additional written off ………. $301,948 ………. 1,090,636
1968
Balance brought forward………………………. $1,062,690
Original amount written off — 661,719
Additional written off ………. $400,971………. $1,062,690”
The assessments were objected to by letter to the respondent dated 17th December, 1971 and the objections were disallowed.
In the Notices of Appeal the appellant contends that –
-
(1) it earned no revenue nor was it entitled to any revenue in respect of the remittances, the outstanding amounts of which at the end of each year appeared in the balance sheets of the appellant as debts owed to the appellant by the Bahamas Company. These amounts are enumerated below;
-
(2) the remittances were made from time to time to enable the Bahamas Co. to make payments on behalf of the appellant for the cost of goods, services, development, new projects, expansion, normal and emergency maintenance, all of which services were to be performed by the Bahamas Co. outside Trinidad and Tobago;
(The allegations ton this ground were reproduced in paragraph 8 of the respondent's Statement of Case).
-
(3) there was not sufficient basis for the making of the additional assessment;
-
(4) in the alternative, the revenue which could have been earned, but was not in fact earned, is not chargeable to tax under the Income Tax Ordinance, Ch. 33 No. 1 (He might have added also, under the Corporation Tax Acts or the Finance Act, 1966 Part II in respect of the years of income 1966 to 1969).
Separate Statements of Case were filed by the respondent in respect of each appeal on 10th May, 1973, and separate Answers thereto by the appellant on 10th June, 1973. The appeals were consolidated by Order of the Appeal Board dated 16th July, 1973 under rule 11 of the Appeal Board Rules, 1967, hereinafter referred to as “the Rules”.
In paragraphs 9 and 10 of its Statement of Case the respondent contended that:–
“9.(a) The appellant failed to satisfy the respondent that the said sums were remitted for the purposes alleged by the appellant.
(b) The said sums were substantially in excess of requirements for the alleged purposes for which the funds were v provided.
(c) The appellant failed to satisfy the respondent that no income had accrued in respect of the said sums.
(d) Where such income had accrued in respect of the said sums it would be chargeable to tax under the provisions of the Ordinance.
(e) Under the provisions of the Ordinance it is entitled to assess the appellant at such additional amount as according to its judgment ought to have been charged and in so doing has to the best of its judgment determined the amount of the chargeable income earned in respect of the said sums and assessed the appellant accordingly.
(f) There is a sufficient basis for the making of an additional assessment by the respondent on the appellant.
10. In the alternative the respondent will contend that:–.
(i) The remittances amounting to the said sums were effected for the purpose of avoiding taxation.
(ii) The said transfer of funds was not a bona fide commercial transaction and was designed for the purpose of avoiding taxation.
(iii) It was an artificial or fictitious transaction in that the said transfer of funds was not made for the purposes alleged by the appellant as stated in paragraph 8 above, and the respondent has to that extent disregarded the said transaction and has to the best of its judgment estimated the income earned by the appellant in respect of the said sums.
(iv) The said additional assessment is correct in principle and should be upheld.”
In the Answers to the Statement of Case, which repeated the arguments put forward in the Notices of Appeal, the appellant stated that the remittances represented part of the profits of the appellant which were exempt from tax by virtue of the Cement Industry (Development) Ordinance, Ch. 33 No. 17.
The appellant joined issue with the allegations made in paragraphs 9 and 10 of the Statement of Case and urged that the assessments are not justifiable in law and should be discharged.
By application dated 12th July, 1973 the appellant sought an order for particulars of paragraphs 9(e) and 10(iii) of the Statement of Case, stating the nature of the income alleged to be earned and the method of arriving at that income in the best judgment assessment and giving the relevant figures.
The appellant relied on rule 26 of the Rules, the relevant provisions of which are:–
“26(1) …… the Inland Revenue shall –
(a) file in the Registry a statement of case setting out
(i) the material facts upon every point specified in the notice of appeal as a ground of appeal;
(ii) the reasons in support of such assessment ….
(2) The Court may cause the statement of case to be sent back to the Inland Revenue for amplification or amendment, and the Inland Revenue shall within the time specified by the Court
(a) amplify or amend the statement of case and file the same in the Registry.”
The appellant retorted by citing rules 27(1) and 29(1):–
“Rule 27(1) the appellant may, if he thinks fit, file in the Registry an answer admitting any of the material facts set out in the statement or setting forth the material facts as alleged by him.
Rule 29. Subject to section 43D(5) of the Ordinance, where an answer is filed by the appellant, it shall not be competent, on the hearing of the appeal, for the appellant or the Inland Revenue to rely upon any facts or contentions of law not set out in the notice of appeal, statement of case or answer.”
Counsel for the respondent pointed out that the appellant had filed an Answer, the pleadings were closed and it was too late to ask for particulars. Furthermore the appellant had pleaded to the allegations of which he was seeking particulars. It had, in paragraph 4(c) of the Answer, admitted that the respondent had notified it of the basis of the additional assessment in a statement, contained in a letter dated December 8th, 1970, namely that interest at the market rate was payable by the Bahamas Co. and chargeable to tax in Trinidad. That letter was not produced either at the hearing of the application or of the appeal.
Both counsels cited Ruling No. 1 of this Court in Roytrin Nominees Ltd. et al v. B.I.R. (Nos. I 19 to 24 of 1968), which was delivered on 30th December, 1970.
The Chairman declined to exercise his discretion to send back the Statement of Case to the respondent for amplification
The additional assessments were made by the...
To continue reading
Request your trial