Burke v The Commissioner of Income Tax

• Jurisdiction: Jamaica
• Judge: Carey, J.,White, J.A.,Melville J.A.
• Judgment Date: 31 July 1980
• Neutral Citation: JM 1980 CA 41
• Docket Number: Civil Appeal No. 42 of 1977
• Court: Court of Appeal (Jamaica)
• Date: 31 July 1980

Court of Appeal

Melville, J.A.; Carey, J.A.;(Ag), White J.A.;(Ag)

Civil Appeal No. 42 of 1977

Burke

and

The Commissioner of Income Tax

Appearances:

Dr. L.G. Barrett for the appellant.

Mr. H. Hamilton & Mr. L. Brown for the respondent.

Revenue Law - Income Tax — Assessment.

Carey, J.

1 This is a taxpayer's appeal against a judgment of Marsh J. in the Revenue Court dated 28 ^th July 1977 whereby he upheld a decision of the Commissioner of Income Tax refusing claims for depreciation allowances under the Income Tax Act in respect of years of assessment 1967 - 70 inclusive.

2 The facts, which were not disputed in the court below, can be shortly stated. The taxpayer and his wife owned certain premises at 12 Violet Avenue, Mona, St. Andrew. The premises had been acquired in 1965 and from that time until 1971 were let furnished to several tenants. In that year a lease agreement was concluded with U.H.W.I. so that the premises have since been used as a residence for doctors on the staff of that hospital. The taxpayer during the period of the tenancy was responsible for the maintenance and repairs of the premises, collected rental and paid the necessary outgoings. His wife from time to time inspected the premises to effect repairs and to view the state of furniture and grounds. The taxpayer in compiling the chargeable income for the relevant years, claimed an allowance in respect of wear and tear under section 13 (1) (n) of the Income Tax Act on the basis that the parties were crying on the business of renting premises.

3 It was argued on behalf of the taxpayer that the learned judge by holding that where a person is performing the ordinary functions of a landlord, he is by virtue of that fact, not carrying on a business or trade within the meaning of section 13 (1) (n) of the Act, erred in law and that the only reasonable inference from the facts was that the appellant's wife was carrying on a business.

4 The learned judge, who is, of course, very experienced in these matters, came to the conclusion that the formulation as appears in the headnote to Hendriks v. Income Tax Assessment Committee 4 J.L.R. 60 that: “a person performing the ordinary functions of a landlord in respect of premises owned by him is not carrying on a business in respect of those premises so as to be entitled to a deduction for wear and tear under section 9 (3) of Cap. 201 as amended by section 5 of Law 55 of 1939” must be accepted as good law and as an authoritative exposition of the statutory language. Section 13 (1) (n) of the Income Tax Act should be substituted for section 9 (3) of Cap. 201 as amended.

5 Learned counsel for the Commissioner did not seek to support the judgment of the learned judge on this basis however and indeed candidly conceded that the judge had erred in law in holding that he was bound by the Hendriks case. Although no respondent's notice (see Rule 12 (2) of the Court of Appeal Rules 1962) had been filed, the court nevertheless permitted counsel to support the decision on a ground not relied upon by the court below. He argued that on the facts before this court, the taxpayer was doing no more than protecting his investment, and consequently was not carrying on a trade or business to enable the claim for depreciation to be allowed. He also conceded that the Commissioner, as a matter of course, allowed claims for depreciation under the section where the taxpayer let more than one premises. A great number of authorities was cited to demonstrate distinction in tax law between “investment activities” and “business activities.” Although I found these arguments interesting, I regret that I did not consider the cases cited as of assistance resolving this matter. The authorities were clearly appropriate to the context of the U.K. legislation with its mutually exclusive schedules. The Jamaican Statute is altogether different.

6 The issue which falls to be determined may be stated this way: “does a person who owns premises which he lets carry on business?” This is a question of fact, as Marsh J. correctly observed in his judgment, but to which he did not apply his mind because of his mistake of law as to the effect of the conclusion of the decision of former Court of Appeal in Hendriks (Supra).

7 Both counsel have conceded that this court is in as good a position as the court below to make a determination in this regard in view of the fact that there was no challenge of the facts, since costs would be saved, and time as well, if the matter were not remitted for...