| 21/5/2012 |
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| Court of Appeal - Decisions in Income Tax Cases |
| Case No: 119 |
Decided: 20 March, 1989 |
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Taxation Of Arrears Of Salary. Payments Received After The Death Of The Taxpayer
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This decision is identical to that in case no. 118. These two cases are essentially a continuation of case no. 108.
Government employees received an award in 1969 adjusting salaries from 1966 onwards. The award was to be paid in three installments not later than 1 April 1970, 1971, and 1972. (In effect, payment was made over a longer period). The Revenue had conceded that payments were to be subject to tax not when received, but in accordance with the year to which they referred. This was subject to the taxpayer's agreement and provided that no amount was left untaxed. The taxpayer in this case died before the last portion of the arrears payment was effected. Ad hoc provisions are contained in the Income Tax Act regarding deceased taxpayers.
The facts are somewhat confused and both the taxpayer's heirs and the Revenue appear to have changed their position during the course of the appeal. While the heirs of the taxpayer lost case no. 108, they won cases nos. 118 and 119, resulting in some arrears not being brought to charge to tax. In essence, these two decisions stated that where the Revenue had accepted (by way of concession) to bring to tax arrears in the year to which they referred rather than in the year in which received, they could not go back on this arrangement solely because the death of the taxpayer had brought into operation ad hoc time limits for the raising of assessments, and the additional assessments bringing to charge the arrears had become statute barred. Secondly, when a taxpayer had died, his personality as such had ceased to exit, and no assessments could therefore be raised on the basis of receipt rather than accruals.
Other points made by the Court included that justice must not only be done, but also be seen to be done. This principle applied in income tax cases too. (To some extent this contradicted a whole sequence of cases). Furthermore, the Court found reason to declare that the principle of "receivability without receipt constitutes no income" was not something enshrined in tax and that it could be over-ridden in particular cases. This point seems now to have been over-taken by article 50A of the Income Tax Act, introduced by article 21 of Act II of 2003, making specific provisions for the taxation of arrears of pension not in the year when received, but in the years of assessment to which they referred.
BSC Case No: 4c/75
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