| 17/5/2012 |
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| Board of Special Commissioners - Cases |
| Case No. 5/74 |
Decided: 31 March, 1975 |
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Questions regarding gain from sale of personal residence is essentially one of fact; this is generally not chargeable to tax unless habitual; accretion of capital - article 5, now 4, Income Tax Act
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The Board had been presented with a number of appeals against the Commissioner's attitude to consider a gain from sale of personal residences as chargeable to tax basing his decision on the blanket provisions of the whole of sub-article 5(1) generally. It, therefore, felt it should clarify the legal position in such cases.
The Board observed that the question whether a particular property has been purchased with an intention of profit-making by resale or as a profit-making undertaking or scheme, is essentially one of fact. Every case, therefore, has to be considered on its own merits. It can safely be said, however, that in general a person who feels compelled to change his residence for any reason whatsoever is not chargeable for any gain he might make in the process. The situation is, of course, different if such change of residence becomes a habit, which might lead to the obvious suspicion that the changes are being made as a result of a profit-making intention and not for any other reason.
The Board noted that the Commissioner in his decision had not specifically quoted sub-article 5(1)(a) as the charging section on which he based his assessment and decision. Rather he had made a reference to article 5(1) and this might convey the idea that he himself might have had his doubts as to whether the case could properly fall under sub-article 5(1)(a), and he preferred to base his decision on article 5(1) generally. This would imply that the case could well come under one of the other charging sub-articles, particularly (f) and (h).
It follows that the price of a sale of property, and much less the excess of sale price over cost price, can never be made to fall under either of these sub-articles. Once an excess of sale over cost price is considered to be not chargeable under sub article 5(1)(a), it is obviously so because it is considered to be an accretion to capital and not of income. An accretion to capital cannot be held to be chargeable under sub-articles (f) and (h) unless a particular capital receipt is specifically and clearly charged under another of the charging sub-articles. This would be an exception to the general rule that income is chargeable to tax while capital receipts are not.
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