WICKREMESINGHE, Appellant, and THE COMMISSIONER OF INCOME TAX , Respondent

153-NLR-NLR-V-48-WICKREMESINGHE-Appellant-and-THE-COMMISSIONER-OF-INCOME-TAX-Respondent.pdf


Wickremeainghe v. The Commissioner of Income Tax.
481
1947Present: Howard CJ. and Windham J.
WICKREMESINGHE, Appellant, and THE COMMISSIONEROF INCOME TAX, Respondent.
S. C. 2—Income Tax, Case Stated.
Income Tax Ordinance—Fee paid to assessee as arbitrator—Casual and non-recurring nature—Profits from employment—Sections 6 (I) (a)-(h)—Notice in writing of case stated—Section 74 (3).
The assessee, who was an ex-Civil Servant and a Government pensionerwas appointed arbitrator by the Colombo Municipal Council in arbitra-tion proceedings connected with the purchase by the Council of theColombo Tramways. For acting as arbitrator he received a fee offifteen thousand rupees.
Held, that this was not profit of a casual and non-recurring natureand was taxable under section 6 (1) (h) of the Income Tax Ordinance.
Semble, that the transaction came within the words “ any employ-ment ” in section 6 (1) (b).
Held, further, that a delay of two days in giving notice of the casestated in terms of section 74 (3) of the Ordinance did not deprive theSupreme Court of jurisdiction to hear the case.
T
HIS was a case stated under section 74 of the Income Tax Ordinanceby the Board of Review.
H. V. Perera, K.C. (with him N. M. de Silva and S. Wijesinha), for theassessee, appellant.—“ Employment ” as used in section 6(1)(b)
connotes a contract of employment, and the existence of an employer.Had it a wider meaning, it would have been used in section 6 (1) (a) alongwith “ trade, business, profession or vocation ”, as in British Income TaxActs before 1922. It is used separately under a different head and so,as in Britain since 1922, has a restricted meaning. In Britain, originallythe word “ Employment ” used to be included under Schedule D of theIncome Tax Acts, which read “ profession, employment or vocationThis was a fairly comprehensive definition of persons working on theirown account. Schedule E applied to offices. By section 18 FinanceAct, 1922, the Legislature transferred “ Employment ” from Schedule Dto Schedule Er As used in Schedule E, “ Employment ” was used in asense analogous to office or post (Davies v. Braithwaite *). It connotesa contract of employment. The Income Tax Ordinance of Ceylon wasenacted in 1932; it must be presumed to adopt the scheme of theEnglish Income Tax Act. Section 6 (1) (a) corresponds to Schedule D andsection 6 (1) (b) to Schedule E. Employment is thus used in narrowersense in section 6 (1)(b), involving master and servant relationship
and existence of Employer. Partridge v. Mallandaine- and other English,cases before 1922 on meaning of “ Employment ”, followed by theBoard, would not be applicable as they deal with employment as used inSchedule D. Section 6 (2)(a) provides a similar indication. The
crucial word is the employer ; it presupposes existence of an employer,which is a pre-requisite of a “profit from any employment”.
[Howard C.J.—What about “ or others” ?].
1 1931 2 K. B. 628.* 2 Tax Cases 180.
18
482
Wickremesinghe v. The Commissioner of Income Tax.
Those two words appear in context of “ the employer or others” ;only wages. &c., derived by a person, already having an employer, fromothers by virtue of his employment—e.g., tips received by a waiter—are included ; “ or others ” was the outcome of an amendment in 1934 ;it catches up payments from other sources received by an employee byvirtue of his employment besides those received from his employer.The late Mr. Wickremesinghe was appointed an arbitrator—a semi-judicial capacity—clearly no master and servant relationship existed orcould exist. The payment he received is not “ profit of any employ-ment ” This payment is further exempt under section 6 (1) (h) as being*' a profit of casual and non-recurring nature ”, This provision is basedon the concept of casual profits of British Income Tax Law : such profitsare of a “ non-recurring ” nature. The examples of casual profitscited by the Board in its decision all show the meaning of that term ;by this criterion, this payment is clearly a casual profit. However,whereas in Great Britain a casual profit is taxable, in Ceylon it is not.The Board failed to realise this distinction and their decision is based ona misconception ; they enumerate examples of similar profits taxablein Britain, and by analogy hold that this payment is taxable in Ceylon.
Commissioner of Income Tax, Madras v. M. Ahmed Badsha Sdheb1states criterion to be adopted. The profit has to be looked at as a wholein relation to the circumstances in which it accrued, in order to decidewhether it is of a casual and non-recurring nature. In his judgment,Leach C.J. impliedly rejects the view taken in In re Chunilal Kalyan Das*In this case Walsh J. interprets “ non-recurring ” as “ non-recurrable”,which are not the same, thereby unwarrantedly restricting the meaning of“ profits of a casual and non-recurring nature ”.
In Thornhill v. Commissioner of Income Tax * Soertsz J. incidentallyreferred to section 6 (1) .(b) and suggested that it contemplates “ wind-falls”. He does not however consider the meaning of section 6 (1) (b)or give an exhaustive definition of it; he merely refers to the commonestclass of cases to which section 6 (1) (b) applies, and does not seek todefine it. The late Mr. Wickremesinghe acted only on this occasionas an arbitrator; he did not function in this capacity in any other matter.The payment received was a casual profit and, in the circumstances, of anon-recurring nature.
H. H. Basnayake, K.C., Acting Attorney-General (with him H. W. R.Weerasooriya, C.C.), for the Commissioner of Income Tax, respondent;—The payment is taxable under both section 6 (1) (b) and section 6 (1) (h).The Ceylon Income Tax Ordinance is based on the New Zealand Act,which contains a classification similar to our section 6. It is unsafe topresume that our Ordinance follows the scheme of the English Act. Theterm “ employment ” is used here in a wider sense and includes the caseof a man working on his own account. Further, in any event, “ orothers ” in section 6 (2) (a) is wide enough to include payments receivedfrom all persons, quite apart from whether an employer exists or not.It is also not of a “ casual and non-recurring nature ” ; the emphasis
' A. I. R. 1944, Madras 63.* A. I. R. 19SS, AUahabad 469.
» (1940) 41 -V. L. R. 313.
HOWARD CJ.—Wickremesinghe v. The Commissioner of Income Tax. 483
is on “nature”. The criterion is the existence of some intrinsiccharacteristic in the profit which renders it casual and non-recurring.This is the ratio decidendi of In re Chunilal Kalyan Das {supra) ; nordoes this case conflict in principle with the subsequent case of Com-missioner of Income Tax, Madras v. M. Ahmed Badsha Saheb (supra)which merely states a general rule that the question whether any profitis of a “casual and non-recurring na+'.re ” or not must be decided on theparticular facts appertaining to it. In England, the fee in questionwould be taxable. See 8 Tax Cases 525.
A preliminary objection exists to the hearing of this appeal. It isonly now that I have been informed of the facts on which this objectionis based. The notice required by section 74 (3) was given to the Com-missioner two days subsequent to the transmission of the case to theSupreme Court. It should have been sent “ at or before the time ”the case was transmitted. See Cosmos v. Commissioner of IncomeTax •; North-Western Blue Line v. Perera ~; Duke of Atholl v. Read V
H. V. Perera, K.C., in reply.—The preliminary objection shouldhave been taken before the hearing, not after its conclusion. Otherwise,the objection must be taken to have been waived. The notice sent tothe Commissioner was within the period of 14 days allowed by section74 (2) for the transmission of the case to the Supreme Court. Section74 (3) must be read with section 74 (2).
In any event section 74 (3) is not a condition precedent to conferringjurisdiction on the Supreme Court to hear this appeal; it is only anincidental provision.
In Cosmos v. Commissioner of Income Tax (supra) there was aninordinate delay. Poyser J. however stated that “ at or before the time ”might possibly give some latitude. See also Ex parte Rosenthal'.
Cur. adv. vult.
October 2, 1947. Howard C.J.—
This application is made by the appellant under section 74 of theIncome Tax Ordinance (Cap. 188) on a point of law by way of case statedby the Board of Review. The appellant is the widow of the late Mr. C. L.Wickremesinghe, who as an ex-member of the Ceylon Civil Service was apensioner of the Government. In the year preceding the year of assess-ment 1944-45, the deceased agreed with the Municipal Council of Colomboto act as the Arbitrator nominated by the Council in arbitration pro-ceedings .connected with the purchase by the Council of the ColomboTramways. For acting as Arbitrator the deceased received the sum ofRs. 15.000 which was included in the assessment to Income Tax made onthe deceased’s income. Despite appeals by the appellant this assess-ment was confirmed by the Commissioner of Income Tax and the Boardof Review.
On behalf of the appellant Mr. H. V. Perera has contended that thesum of Rs. 15,000 did not form part of the deceased’s income or profitschargeable with tax on the ground that it did not come under any of thedescriptions of profits or income in section 6 (1) (a)-(g) of the Ordinance
3 (1934) 2 K. B. 92.
* b. R. (1882) 20 Ch. D. 31S.
139 K. L. R. 4S7.
* (1943) 44 N. L. R. 323.
484 HOWARD C.J.—Wickremesinghe v. The Commissioner of Income Tax.
and that it was excluded from section 6 (1) (h) as being of a casual andnon-recurring nature. The Acting Attorney-General on the other handmaintains that the sum earned by Mr. Wickremesinghe is taxable undereach of paragraphs (1) (a), (1) (b) and (1) (h) of section 6. He reliesmainly on section 6 (1) (h) and argues that it was not a profit of a casualand non-recurring nature. In connection with the expression “ casualand non-recurring ” nature our attention has been invited to variousauthorities. In The Commissioner of Income Tax, Madras v. M. AhmedBadsha Saheb it was held by Leach C.J., that there can be no rule laiddown with regard to what is of a casual and non-curring nature. Eachcase must be decided on its particular facts. In that particular casethe assessee was a merchant dealing in hides and he entered into an agree-ment to act as an arbitrator. This agreement was entirely apart fromhis business and was made with no stipulation for remuneration but as afriend of the family. The task involved more time than anticipated andthough there was no legal obligation the Court decided to grant thearbitrators a reward for their services. In these circumstances the Courtheld that the remuneration was of a casual and non-recurring nature.In the matter of Chunni Lai Kalyan Das' it was held that the adventureof a business man who is enabled, through his business associations,to negotiate a large transaction and thereby to earn a heavy commission,may undoubtedly be in fact non-recurring in the sense that so successfulan adventure would not be likely to occur again. But, on the other hand,it is a class of transaction which might occur to any such business manonce only or half a dozen times again, during .the course of the year.Profits arising from such a transaction are not of a casual or non-recurring nature. In his judgment Walsh J. invited attention to theuse in the exemption of the word “ nature ” rather than “ occurrence ”.If Ihe word occurrence had been used there would have been much to besaid for the contention of the assessee. The use of the word “ nature ”connoted a class of dealing which might occur several times. The word“ nature ” was used independently of the accident of the event happen-ing in fact once only or more often in a fortunate year. Again inThornhill' v. The Commissioner of Income Tax * it was held that incometax is payable on proceeds of the sale of coupons issued under the Teaand Rubber Control Ordinances, At p. 318 Soertsz J. who gave thejudgment stated as follows : —
“ Examined in this way, the • amount in question appears to meto be ‘ profits and income ’ derived from a business, namely, anagricultural undertaking, and assessable to income tax under section6 (1) (a) of the Income Tax Ordinance.
If, however, this view is incorrect and the amount is not assessableunder that sub-section, I am clearly of opinion that it is not a receiptwhich escapes altogether from the Ordinance. I find it impossibleto resist the conclusion that this is a taxable receipt for, as verypertinently observed by the Board * if the appellant’s contention isaccepted, the owner of a 500-acre estate may get it registered, refrainfrom harvesting its produce, receive coupons, derive large sums of
1 A. 1. R. (1944) Madras 63.* A. I. R. (1925) Allahabad 469.
’ (1940) 41 N. L. R. 313.
HOWARD C.J.—Wickremesinghe v. The Commissioner of Income Tax. 485
money thereby, and escape taxation altogether in respect of the-money he receives in connection with his owning and maintaining an.estate I agree with the Board that if it is assumed that this amountdoes not fall within the scope of section 6 (1) (a), it is caught up by the‘residuary’ sub-section (1)(h), for this amount is not something
casual or something in the nature of a windfall. It is something thatwill recur, or, at least, that can be made to recur as long as the Teaand the Rubber Control Ordinances continue in operation ”,
It is conceded by Mr. Perera that the sum earned by Mr. Wickremesinghewould have attracted tax in England although it is of a casual nature.This is clear from the judgment of Rowlatt J. in Ryall v. HoneywillMr. Perera contends, however, that the law in Ceylon in regard to atransaction of this character is by reason of the wording of the IncomeTax Ordinance different from that in England.
In my opinion it is, without departing from the principle formulatedin the Madras case that each case must be decided on its particular facts,difficult to distinguish the present case from Thornhill v. The Com-missioner of Income Tax and the Allahabad case. The employmentof the late Mr. Wickremesinghe as an arbitrator was something thatcould be made to occur again. It was a class of dealing which mightoccur only once, but might occur several times. It did not exhaustitself in one effort. In these circumstances the sum of Rupees 15,000was not a profit of a casual and non-recurring nature.
Although it is unnecessary to decide the point I think the Attorney-General was correct in his contention that the transaction came withinthe words " any employment ” as used in section 6 (1) (b) of theOrdinance. Mr. Perera contends that the word “ employment ” con-notes an engagement by someone else. In this connection the followingpassage from the judgment of Denman J. in Partridge v. Mal'landaine ’is in point: —
“ The words are ‘profession, employment or vocation ’. I do notfeel myself disposed to put so limited a construction upon the word‘ employment ’ as Mr. Graham desires us to put upon it. I do notthink ‘ employment ’ necessarily means a case in which a person is set towork by other means to earn money. A man may employ himself inorder to earn money in such a way as to come within that definition.”
The Acting Attorney-General has also tak^n a technical objection tothe hearing of this application. Under section 74 (3) of the Ordinancethe applicant is required “ at or before the time ” when he transmits thestated case to the Supreme Court, to send the other party notice inwriting of the fact that the case has been stated on his application and shallsupply him with a copy of the stated case. The stated case was trans-mitted to the Supreme Court on January 22, 1947 ; on the same daynotice in writing of such transmission was sent to the Clerk to the Boardof Review, an officer in the Department of Income Tax. On January24, 1947, notice in writing was sent to the Commissioner. The Acting
1 8 Tax Coxes 524.2 2 Tax Cases ISO.
468Mohamed Hussain & Co. v. The Controller of Textiles.
Attorney-General has argued that notice in writing to the Commissioneras provided in section 74 (3) was a “ condition precedent ” to the hearingof this appeal. He referred us to Cosmos v. The Commissioner of IncomeTax'. The head note of this case is as follows : —
“ Where a person, on whose application a case was stated for theopinion of the Supreme Court under section 74 of the Income TaxOrdinance, transmitted the case to the Supreme Court on January 17,1938, and gave notice to the Income Tax Commissioner on March21, 1938—
Held, that the appellant had failed to comply with the requirementof section 74 (3) that the notice should be given at or before the timehe transmits the case to the Supreme Court.”
It will be observed that the delay in giving the required notice to theCommissioner was in that case over two months. In this case it amountsto two days. In his judgment at p. 458, Poyser J. stated that thewords “ at or before the time though they might possibly give somelatitude, certainly do not permit of a delay of some five weeks in comply-ing with the provisions of this sub-section. I do not regard this caseas an authority for the proposition that a delay of a day or two in givingthe notice under section 74 (3) of the Ordinance will deprive the Courtof jurisdiction to hear this application.
For the reasons I have given, I am of opinion the application should bedismissed with costs.
Windham J.—I agree.
Application dismissed.