Commissioner of Income Tax v St. Elmo Hotels Ltd

 
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Revenue Court

Marsh, J.

Appeal No. M.99A 1967

Commissioner of Income Tax
and
St. Elmo Hotels Ltd.
Appearances:

A. Hudson-Phillips for appellant.

R. Mahfood Q.C. and L. Williams for the respondent.

Revenue Law - Income Tax — Appeal — Chargeable Income

Marsh, J.
1

This is an Appeal against a decision of the Income Tax Appeal Board formerly constituted under the Income Tax Law, 1954, and made on the 19th July, 1967; allowing appeals of the respondent against a decision of the appellant dated the 20th July, 1966, in which the respondent's Chargeable Income for the Year of Assessment 1965 had been estimated at $1,000, and a further decision of the appellant dated the 19th December, 1966, increasing that estimate by the sum of $12,912 thereby making altogether a total assessment in the sum of $13,912, on the basis that profits accruing to the respondents from the sale of certain lands been derived from the carrying on of a trade or business.

2

This Appeal was filed in the Supreme Court of Judicature on the 2 nd August 1967, and was pending before that Court on the 1st February 1972 when the Judicature (Revenue Court) Act 1971, which established this Court (i.e. the Revenue Court) came into operation. As a consequence of this, the proceedings fell to be dealt with in accordance with the transitional provisions set out at section 11 of the aforesaid Judicature (Revenue Court) Act 1971, subsection (1) of which reads as follows–

“11.(1) Any appeal, cause or matter which immediately before the prescribed date pending before any prescribed Tribunal, shall, subject to subsection (2), be continued thereafter before the Court.”

3

The “prescribed date” is the 1st February 1972, and the Supreme Court is a “prescribed Tribunal”.

4

Before proceeding further it is necessary to refer to some of the statutory provisions which, under the Income Tax Law 1954 as it existed prior to the 1st February, 1972, governed appeals from decisions of the Income Tax Appeal Board to a Judge in Chambers of the Supreme Court. I refer in particular to section 58(2) and (6) (now repealed) of the aforesaid Law, which, inter alia, provided as follows:

“On appeal to the Judge in Chambers the following provisions shall have effect–

  • (1) …

  • (2) The onus of proving that the assessment complained of is excessive shall be on the objector;

  • (3) …

  • (4) …

  • (5) …

  • (6) The decision of the Judge hearing the Appeal shall be final on any question of fact, but an appeal shall lie on any question of law to the Court of Appeal.”

5

The last mentioned provision, namely subsection (6) of the old section 58, is similar to that appearing at section 10(1) of the Judicature (Revenue Court) Act 1971, which relates to the powers of this Court, and which reads as follows–

“10.(1) A decision of the court shall be final on any question of fact but, save as may be otherwise provided in, or in relation to, any enactment for the time being specified in the First Schedule, an appeal shall lie on any question of law to the Court of Appeal.”

6

One of the enactments mentioned in the First Schedule to the Judicature (Revenue Court) Act 1971 covering appeals to the Revenue Court under the Income Tax Law 1954, is section 51A of that Law, as amended, which repeats the provision mentioned earlier at subsection (2) of the now repealed section 58, namely that “the onus of proving that the assessment complained of is excessive shall be on the objector.”

7

These various provisions when considered against the background of section 11 of the Judicature (Revenue Court) Act 1971, to which reference has already been made, indicate, that as Judge of this court I am in a similar position in relation to Appeals from the Income Tax Appeal Board, as would have been a Judge of the Supreme Court sitting in Chambers, under the now defunct procedure for dealing with Income Tax Appeals. In particular they indicate that decisions of this court, in this type of appeal, are final on all questions of fact and that in any such appeal the onus is on the objector/taxpayer to prove that the relevant assessment is excessive.

8

I have set out the foregoing in some detail because in my judgment an appeal from the Income Tax Appeal Board to a Judge in Chambers of the Supreme Court, under the old procedure (and to this court, under the transitional provisions of section 11 aforesaid) differs in at least one important respect from an ordinary appeal from a subordinate to a superior court. That difference lies in the requirement that in an appeal from the Board to this court, the onus of proving that the assessment is excessive is on the objector/taxpayer whether or not he is the appellant.

9

In short the court in such appeals is unfettered by any findings of fact made by the Income Tax Appeal Board; and if the taxpayer, even where he is not the appellant, fails to establish by sufficient evidence that the original assessment is excessive, it may be upheld; and this, be it noted, even where in a particular case the Appeal Board might have quashed or reduced that assessment.

10

In 1953 in the Court of Appeal for Eastern Africa in the case of “O” et al v. The Commissioner of Income Tax, reported at page 124 of Volume 1 of the East African Tax Cases a similar view was taken of statutory provisions similar to those referred to above, which governed Income Tax Appeals to the High Court in that territory. See for example the Judgment of Biggs J.A. at page 128 of the Report, in which he made reference to the special procedure governing such appeals and the burden of proof placed on the taxpayer.

11

There is also a passing reference to this special income tax appeal procedure, in two judgments of the Jamaican Court of Appeal, namely, Sir Alfred DaCosta v. the Commissioner of Income Tax (Civil Appeal No.38, of 1963) and Livingston & Alexander v. The Assessment Committee (1940) 5 J.L.R. 9. I apprehend however that its true significance and implication may not be generally appreciated, and although the matter is now largely only of historical importance, having regard to the establishment of this Court, I have referred to it because this appeal was argued before me under the practice hitherto prevailing, whereby the evidence in the case was not led afresh, but instead the verbatim notes of the evidence taken before the Appeal Board were simply included as part of the Record; a practice which, though convenient and economical, has nevertheless certain inherent disabilities, which perhaps need not be belaboured at this stage.

12

The situation in this appeal therefore is that no evidence was led before me, and I have been obliged to rely on the aforesaid verbatim notes and 13 exhibits tendered, which Counsel on both sides consider to be an accurate representation of the evidence in the case.

13

From this record of evidence the following history emerges –

  • (1) Sometime towards the end of 1962, Mr. Adolph Brooks conceived the idea of building and operating an apartment hotel within the corporate area.

  • (2) He consulted his father (Mr. J. W. Brooks who was a joint shareholder and director with him in a family company, known as Stellar Manufacturing Limited) and his brother\(Mr. George Brooks who was a builder, owned a building company, and was also a shareholder and director with his father and brother in Stellar Manufacturing Limited, the family company); and succeeded in obtaining their agreement to participate in the project, which was to be effected through the instrumentality of a new Company in which all three would be Shareholders and Directors.

  • (3) Having done so, he set about securing a suitable piece of land upon which to site the proposed hotel, and eventually found such a property on a sub-division at No. 17 Trafalgar Road in the parish of St. Andrew, which was being developed by a Company known as Landsend Limited.

  • (4) The property was approximately 2 acres in size. The selling price was $30,000 and the terms of sale were a deposit of $10,000 on signing the Agreement of Sale and payment of the balance on completion of the sub-division and presentation of title.

  • (5) In anticipation of the formation of the Company, Mr. Brooks paid the deposit of $10,000 to Landsend Limited.

  • (6) He then consulted his Solicitor with a view to formation of the Company which was to take over and execute the project. That was in December 1962.

  • (7) In due course the respondent Company, i.e. St. Elmo Hotels Limited, was incorporated on the 21 st January, 1963, with a share capital of $200 and with Mr. A. Brooks, his father (Mr. J. W. Brooks) and his brother (Mr. George Brooks) as principal shareholders and directors, and with a Memorandum of Association, which in so far as it authorised investments only authorised investments of moneys not immediately required by the company. The company, however, took over the agreement to purchase earlier executed by Mr. Brooks.

  • (8) At or around this time, Mr. Adolph Brooks, who was at all material times the moving, force behind the venture, consulted Messrs. Brennan and Parkinson, a firm of Chartered Accountants...

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