| 21/11/2008 |
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| Board of Special Commissioners - Cases |
| Case No. 8/70 |
Decided: 16 June, 1972 |
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Alienation of income; disclosure of dividends on which tax at source would have been paid; Commissioner's discretionary power vis a vis remission of additional tax imposed in the light of taxpayer's omissions - article 25, now 56, Income Tax Act
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Appellant was employed with company X and his salary was subject to an agreement that stipulated that any services for which salaries or emoluments are earned would be turned over to company Y. Appellant was a shareholder of company Y that had acquired shares in company X. In fact the arrangement regarding appellant's emoluments were meant to "offset the cost of your investment". The relative amount was included in the company's income for tax purposes and, therefore, appellant objected to being charged tax thereon in his personal capacity.
The Board agreed with Revenue's contention that this transaction was merely an application of income that had been initially earned by appellant. It was an alienation of income and, once appellant had retained title to the income, it cannot but be considered as having been earned by him and consequently chargeable to tax. The raison d'etre of the agreement was irrelevant; the fact remains that there existed an agreement of employment and appellant received a remuneration.
Apart from the emolument appellant had failed to include in his Return dividends received from a local company, arguing that tax had already been paid at source. The Board noted, that this notwithstanding, dividends had to be disclosed in terms of law. In the light of these omissions appellant was liable to additional tax charge that may only be remitted at the sole discretion of the Commissioner.
The Board is not competent to deliberate on the Commissioner's discretionary decision except with a view to ascertaining that such discretion had been properly exercised in substance and in form, without the violation of any principle of natural justice. In this particular case it was evident that when deciding whether to remit the additional tax, the Commissioner was not aware of facts which came to light during the course of the case. The Board, therefore, decided to refer the matter back to the Commissioner to be reviewed at his absolute discretion.
An appeal was entered before the Court from this decision (see case no. 92).
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