Blue Cross of Jamaica v The Commissioner of Income Tax
| Jurisdiction | Jamaica |
| Judge | Marsh, J. |
| Judgment Date | 09 October 1987 |
| Court | Revenue Court (Jamaica) |
| Docket Number | No. 1 of 1986 |
| Date | 09 October 1987 |
Revenue Court
Marsh, J.
No. 1 of 1986
Angela Hudson-Phillips and Tracy Barnes instructed by Dunn Cox and Orrett for the appellant.
William Alder ESQ. For the respondent.
Revenue law - Income tax assessment — Application for exemption from income tax on ground that organisation is a company organised and operated exclusively for charitable, scientific or educational purposes — Appeal allowed.
This is an appeal against decisions made by the respondent for the years of assessment 1982 and 1983. The assessment for 1982 is based on a chargeable income of $2,000,000, but was amended at the beginning of the hearing to read $1,900,100. The assessment for 1983 is based on a chargeable income of $3,000,000.
The appellant is seeking a declaration that it is a corporation organised and operated exclusively for charitable, scientific or educational purposes within the meaning of Section 12 (h) of the Income Tax Act and that, as a consequence, its income is exempt from taxation pursuant to the provisions of the aforesaid Section 12 (h).
The facts upon which the appellant relies are set out in the Notice of Appeal at paragraph 4. In order to save time, I do not propose to read all the details, but they are to be considered as incorporated in this judgment. I will, however, read three paragraphs, namely, (f), (g) and (h)–
(f) “that the appellant was originally incorporated in 1956 under the name of “Federated Health Insurance Association Limited” but by resolution and with the consent of the Registrar of Companies it changed its name in 1976 to “Blue Cross of Jamaica”, and is now incorporated under that name by Certificate dated the 17th day of February, 1976.
(g) by letter dated the 21st day of April, 1964 the respondent in the exercise of his discretion pursuant to the aforementioned Section 12(h), exempted the appellant's income from taxation.
(h) by letter dated the 22nd day of June, 1971 the respondent confirmed the exemption from Income Tax of the appellant's income.”
That indicates clearly that the original status of the appellant was accepted by the respondent as being that of a company organised and operated in terms of Section 12 (h) of the Act. It appears, however, that in the years 1982 and 1983, the respondent changed courses and decided that the appellant was no longer a company which qualified for the relief granted by the Section; and it is that decision against which the appellant now appeals.
The appellant contends that there has been no fundamental change in its operations and it is, and has always been, (at any rate up to and including the Year of Assessment 1983) a company organised and operated exclusively for charitable or scientific or educational purposes.
Before considering the issues of law which arise, it may be necessary to refer briefly to the evidence of Mr. Hylton McIntosh, the General Manager of the appellant company. He stated that the company operated at two different levels. A large part of its operations consists of a contractual arrangement between itself and persons i.e. members of the general public referred to as policyholders, whereby for payment of an annual premium or fee, the policyholder would be entitled to medical care, hospitalisation and supply of drugs, etc. for a cost considerably below that available on the open market. In addition to that, and at a separate if not different level, the company also operates certain schemes which are not directed at policyholders, and under which members of the public who are not policyholders may benefit. For example, there is a student health care scheme under which students have their eyes tested and other basic medical tests are carried out. This applies to about 30 to 40 schools on an annual basis. The cost to the appellant is approximately $120,000 per annum.
Secondly, it also publishes pamphlets relating to the national problem of drug abuse. The evidence is that approximately 120, 000 such pamphlets are published annually at a cost of approximately $160, 000.
Next, there is the publication of an annual health calendar compiled by medical experts and distributed to schools, pharmacies and Doctor's officers at an annual cost of approximately $70,000. The medical experts who assist in compiling this calendar sometimes include a Doctor of Medicin.
Next, the appellant operates what has been described as two screening units and I think Mr. McIntosh said that they are staffed by medically trained persons, medical technologists and sometimes a Doctor. He says they are like mobile clinics and are used island wide on a daily basis. The findings of these clinics are reported on a regular basis to the Ministry of Health. Cost of the units is approximately $300,000: the cost of equipment is another $300,000 and the annual cost of staff for the units is $80,000. Repairs and maintenance of the units is approximately another $220,000 per annum. All its services are provided free to the public on an island wide basis.
Next, the appellant awards two scholarships, one for Pharmacy, and the other for Medical Technology, on a tri-annual basis. The awards are usually made to poor students who have the C.A.S.T. qualifications. No dependant of a policyholder can qualify for these scholarships.
Finally, Mr. McIntosh said that the appellant organises annual Medical Symposiums at an approximate cast of $100, 000 per year. It also gives assistance to the Dental Association of Jamaica, the Cancer Society of Jamaica and the Medical Association of Jamaica.
I think that that is a fair summary of the evidence as to the operations of the appellant.
I now turn to the Memorandum of Association of the appellant which states inter alia, the following at paragraph 4–
“The income and property of the company, whensoever derived, shall be applied solely towards the promotion of the objects of the company as set forth in this Memorandum of Association and no portion thereof shall be paid or transferred directly or indirectly by way of dividend, bonus or otherwise howsoeverby way of profit to the members of the company.
Provided that nothing herein shall prevent the payment in good faith of reasonable and proper remuneration to any officer or servant of the company or to any member of trustee of the company in return for any services actually rendered to the company nor prevent the payment of interest at a rate not exceeding ten per centum per annum on money lent or reasonable or proper rent for premises demised or let by any member of trustee to the company so that no member of the board of trustee of the company shall be appointed to any salaried office of the company.”
and at paragraph 8–
“If upon winding up or dissolution of the company there remains after the satisfaction of all its debts and liabilities, any property whatsoever the same shall not be paid to or distributed among the members of the company, but shall be given or transferred to some other institution or institutions having objects similar to the objects of the company and which prohibit the distribution of its or their income and property among its or their members to an extent at least as great as is imposed on the company under or by virtue of Clause 4 hereof such institution or institutions to be determined by the members of the company at or before the time of dissolution or in default thereof by such judge of the Supreme Court of Judicature of Jamaica as may have or acquire jurisdiction in the matter and if and so far as effect cannot be given to the aforesaid provisions then to some charitable object.”
Against that background, counsel for the appellant apparently with the agreement of counsel for the respondent, approached the issue in the case on the assumption that the large body of English case law dealing with “charitable purposes”, starting with Pemsel's case ( 3 T.C. 53), was the relevant law to be considered herein.
Pemsel's case turned on the meaning of the phrase “charitable purposes” as used in the English Statute 43 Elizabeth Chapter 4 of 1601. In that case Lord MacNaughten had held that, charity was not to be construed in its ordinary meaning but — in its limited legal sense as comprising —
“four principal divisions: trusts for the relief of poverty, trusts for the advancement of education, trusts for the advancement of religion, and trusts for other purposes beneficial to the community not falling under any of the preceding heads.”
That definition as I have said was based on the phrase “charitable purposes” appearing in an English Statute of the year 1601, which must have been introduced in England over fifty years before the arrival of Cromwell's men in Jamaica.
Consequently, as the argument ensued, it struck me that before considering the Pemsel line of cases one should first be satisfied that the Statute of Elizabeth supra, upon which these cases were based, was an English Statute to which Section 41 of the Interpretation Act of Jamaica applied i.e. one which had been received, esteemed, acted upon, etc. in Jamaica prior to 1727. As a result, after some discussion, I requested counsel to see what assistance they could provide the court in that regard; and I pause here to pay tribute to the skill and industry displayed by all concerned in researching the matter. That research suggests that this particular question has never before been considered by a Jamaican Court, neither does it indicate, nor suggest, that there is any clearly defined accurate compilation of English Statutes falling within the aforesaid Section 41 of our Interpretation Act.
I have considered the arguments, submissions and authorities cited to me on this point, and have come to the following conclusions–
- That although Jamaica was not a settled colony, the...
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