J. Wray & Nephew Ltd v Commissioner of GCT
| Jurisdiction | Jamaica |
| Judge | BINGHAM, J.A: , HARRISON, J.A: , WALKER, J.A.: , BINGHAM, J.A.: |
| Judgment Date | 11 April 2003 |
| Neutral Citation | JM 2003 CA 14 |
| Judgment citation (vLex) | [2003] 4 JJC 1102 |
| Date | 11 April 2003 |
| Court | Court of Appeal (Jamaica) |
REVENUE LAW - Tax - Objection to payment of General Consumption Tax - Whether provisions of uniforms for unionized staff qualifies as items required for production of its taxable supplies - General Consumption Tax Act
ORDER:
BINGHAM, J.A.:Appeal dismissed. Order of the court below affirmed. Costs to the respondent to be taxed if not agreed.
I have taken the opportunity of reading in draft the judgments prepared in this appeal by Harrison and Walker, J.J.A. 1 am entirely in agreement with their reasons set out therein and the conclusion reached that this appeal be dismissed with an order for costs.
There is nothing that I could usefully add.
I have read the judgment of Walker, J.A. and I agree with his conclusion. However, I wish to add my comments.
This is an appeal from the judgment of Orr, J. in the Revenue Court on December 12, 1999. The respondent had made an assessment of the appellant for the payment of general consumption tax to which the appellant objected. The respondent made a decision on the objection, as a consequence of which the appeal was filed in the Revenue Court and heard by Orr, J.
The main issue in this appeal is whether or not the provision of uniforms by the appellant for the benefit of its unionised and nonunionised staff qualifies as items required for the production of its taxable supplies. If so, such expenditure attracts the benefit of input tax under the provision of the General Consumption Tax Act ("the Act").
The appellant is a registered taxpayer, carrying on the business of the blending, bottling and distribution of fine rums, spirits and wines. The majority of the employees of the appellant is represented by two unions, with whom the appellant signed agreements that the appellant provide uniforms and lunches for its members, employees of the appellant. The matter of lunches is irrelevant to these proceedings.
The non-unionised staff is also provided with uniforms. All uniforms are supplied to the appellant for its workers, by suppliers. The appellant paid for the cost of these uniforms inclusive of general consumption tax.
As a result of an audit by the taxpayer audit unit of the respondent, the appellant was assessed as liable to pay the sum of $744,602.34 wrongly claimed by the appellant for the period October 1, 1993 to September 30, 1996 as input tax with which it should be credited on the supply of such uniforms to its employees.
Since October 22, 1991 general consumption tax is imposed under the Act on the supply, in Jamaica, on all goods and services provided by a registered taxpayer in the course of a taxable activity by the said taxpayer, by reference to the value of such goods and services (section 3). The rate of such tax is 15% (section 4) and must be calculated and paid over by the taxpayer.
"Input tax" is defined in section 2 of the Act. It reads:
"input tax" in relation to a registered taxpayer means -
(a) tax charged under section 3(1) on the supply of goods and services made to that taxpayer or on the importation into Jamaica of goods and services by that taxpayer being goods and services required wholly or mainly for the purpose of making taxable supplies ..."
"Taxable activity" in the context of this case, means an activity carried on in the form of a business or trade, continuously or regularly involving the supply of goods and services to any other person for a consideration. A "taxable supply" means a supply of goods and services on which general consumption tax is imposed (section 2).
The appellant undoubtedly engaged in the taxable activity being the business of "blending, bottling and distribution of fine rums, spirits and wines". The appellant purchased the uniforms and supplied them to their employees and paid general consumption tax on such expenditure. This latter tax, the appellant claimed, should be classified as input tax, refundable to it, because the uniforms qualified as items:
"... required wholly or mainly for the purpose of making taxable supplies ..."
On the contrary, if the supply of such uniforms is not found to be so required, the said taxpayer is not entitled to the benefit of input tax paid on their acquisition.
Orr, J. found that the appellant was not entitled to the benefit of the input tax. He said, at page 139 of the Record:
"... I hold that the definition of input tax requires that the expenditure must have been required "wholly or mainly for the direct purpose of making taxable supplies, that is, the blending and bottling of fine rums, spirits and wines.
I hold that the supply of uniforms for the appellant's staff though desirable is not required (necessary) wholly or mainly for the purpose of making its taxable supplies. It was not done for the direct purpose of bottling of fine rums etc."
In Mallalieu v Drummond (Inspector of Taxes) [1983] 2 All E.R. 295, their Lordships in the House of Lords considered the question of whether or not the expenditure of a female barrister for the purchase, and for "cleaning and laundering certain items of clothing" which she wore to chambers and court, were deductible as expense "wholly and exclusively ... expended for the purposes of her profession," within the provisions of section 130(a) of the Income and Corporation Taxes Act, 1970. The expenses would be deductible if they were regarded as "... money wholly and exclusively laid out or expended for the purpose of the trade profession or vocation..." Their Lordships held that the money expended was not deductible because it was not "wholly and exclusively" for the purpose (elated to her profession. Lord Brightman on behalf of the majority at page 1103, inter alia said:
" ... she needed to travel to work and clothes to wear at work, and I think it is inescapable that one object, though not a conscious motive was the provision of the clothing that she needed as human being. I reject the notion that the object of a taxpayer is inevitably limited to the particular conscious motive in mind at the moment of expenditure. Of course the motive of which the taxpayer is conscious is of a vital significance, but it is not inevitably the only object which the commissioners are entitled to find to exist. In my opinion the commissioners were not only entitled to reach the conclusion that the taxpayer's object was both to serve the purposes of her profession and also to serve her personal purposes."
Their Lordships rejected the narrow test of the conscious motive of the taxpayer at the time of making the expenditure.
The wording of the statute under consideration in that case, served to confer the tax benefit on the taxpayer only when the expenditure was exclusively for the purpose of her profession. Although that statute differed from the statute in the instant appeal, the decision is helpful in demonstrating the manner in which a court will construe words in the context in which they are used.
In the instant case, the interpretation of the phrase "required wholly or mainly for the purpose of making taxable supplies" is the main issue.
A cardinal principle governing the interpretation of statutes is that words must be given their ordinary and natural meaning, and must be considered in the context in which they are used.
Orr, J.in holding that the appellant did not qualify for the credit of input tax for its expenditure for uniforms, interpreted the word "required" to mean "necessary". With that interpretation I do not disagree.
Prior to the agreement dated February 2, 1994 between the appellant and the union representing the workers and:
"earlier agreements between the appellant and the unions ... making (of) taxable supplies ..."
by the appellant was not in any way impeded nor terminated by the absence of the provision of uniforms for workers. The fact that an employer "desires" the uniform for its staff, does not make it "required" for the purposes in contemplation under the Act. To be " required", it seems to me, it must be seen as essential to the making of "taxable supplies". The uniforms must be items of such a nature that, without them, the appellant would be quite unable to produce the taxable supplies.
The provision of uniforms was for the satisfaction of a secondary purpose, that is, the honouring of the 1994...
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