| 17/5/2012 |
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| Board of Special Commissioners - Cases |
| Case No. 2/67 |
Decided: 01 September, 1967 |
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Ex-gratia payments and gifts to employees which are extraneous to their conditions of employment are not taxable - article 5, now 4, Income Tax Act; Interpretation in fiscal matters is to be literal and not analogical
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Appellant pleaded that "an ex gratia assistance towards hospital expenses" afforded to him by his employer should not have been brought to charge.
The Board observed that Revenue were not correct in citing English case law in view of the fact that whereas the Income Tax Act of the U.K. brought to charge any expenses incurred by the employer "for its employees ... of other benefits or facilities of what so ever nature" Maltese legislation was restricted to "quarters, board or residence". In fiscal matters it is a fundamental principle that interpretation is to be literal and not analogical.
The fact that payment to appellant had been effected on an ex-gratia basis meant that he had no right to such payment according to the conditions of employment and it, therefore, constituted a gift by the employer to the employee. The Board quoted from Moorhouse v Dooland that "a voluntary payment may be made in circumstances which show that it is given by way of present or testimonial on grounds personal to the recipient.
The Board held that the voluntary payment is not a profit accruing to the recipient by virtue of his office or employment, but a gift given to him as an individual, paid and received by reason of his personal needs or by reason of his personal qualities or attainments." The ex-gratia payment had been effected to help appellant with his medical expenses and is not to be chargeable to tax.
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