MAVRIDES ν. REPUBLIC
(1989)3A CLR 362 ΠΑΓΚΥΠΡΙΟΣ ΔΙΚΗΓΟΡΙΚΟΣ ΣΥΛΛΟΓΟΣ CyLaw | Αναφορικά μ'εμάς | " target="_top">Επικοινωνία | Όροι χρήσης Έρευνα - Κατάλογος Αποφάσεων - Εμφάνιση Αναφορών (Noteup on) - Αφαίρεση Υπογραμμίσεων
(1989)3A CLR 362 1989 March 21 [STYLIANIDES, J.] IN THE MATTER OF ARTICLE 146 OF THE CONSTITUTION IOANNIS MAVRIDES, Applicant, v. THE REPUBLIC OF CYPRUS, THROUGH THE DIRECTOR OF INLAND REVENUE, Respondents. (Case No. 243/84) Taxation - Assessment and collection of taxes - Interest - "Unjustifiable omission" in section 42
(2)of the Assessment and Collection of Taxes Laws 1978-1979 - Meaning of. Interpretation of statutes - Intention of legislature - Should be gathered from the words used, giving them their ordinary and natural meaning. Words and phrases - "Unjustifiable omission" in section 42
(2)of the Assessment and Collection of Taxes Laws1978-
- The applicant, who derived his income from the exercise of his profession as a doctor, failed to submit returns of income tax for the years of assessment 1979/78, 1979, 1980, 1981 and
- The respondent, exercising his relevant powers, sent notices in writing to the applicant requiring the latter to make the returns of income tax in respect of the aforesaid years. The applicant did not respond. As a result the respondent raised assessments under section 13
(3)of the aforesaid laws. The applicant objected. Following meetings and exchange of views a compromise was reached and as a result the respondent raised the final assessment, but demanded payment ofinterest at 9% per annum as from the 1st day of December in respect of the tax payable for each of the above years as from the 1st day of December of the respective year. By means of this recourse the applicant impugns the decision relating to interest. Held, dismissing the recourse: 1. The intention of the legislature should be gathered by the words used, giving to them their ordinary and natural meaning. Taxing enactments are interpreted strictly and any ambiguity is resolved in the favour of the tax payer. For interest to be payable under section 42
(2)of the aforesaid legislation, there must be an "unjustifiable omission". 2. In this case the applicant failed to submit the necessary returns of income tax as required by law. He even failed to comply with the notices in writing, and, as a result, the respondent invoked his powers under section 13
(3)of the aforesaid legislation. The omission is self evident. At no stage any justification was rendered. To say the least, the sub judice decision was reasonably open to the respondent.
- Nothing in the agreement as regard the amount of the taxable income reached between the applicant and the respondent precluded the latter from demanding payment of interest as aforesaid.
- Once interest becomes payable under section 42
(2)of the said legislation, it runs until full payment of the tax. The interest does not cease to run, when an agreement was reached as to the amount of the tax. The applicant's position that interest ceases to be payable, following final assessment, is untenable. Recourse dismissed. No order as to costs. Cases referred to: Michaelidou v. Republic
(1985)3 C.L.R. 1836, Syrimis and Another v. Republic
(1978)3 C.L.R. 177, Commissioners of Inland Revenue v. Herbert [1913] A.C.
- Recourse. Recourse against the decision of the respondent to impose on applicant interest at the rate of 9% per annum on the tax payable by him for the years of assessment 1979178, 1979, 1980, 1981 and
- P. loannides, for the Applicant. Y. Lazarou, Counsel of the Republic B, for the Respondents. Cur.adv. vult. STYLIANIDES, J. read the following judgment. By means of the present recourse the applicant challenges the validity of the decision of the Director of Inland Revenue (the "Respondent"), whereby interest at the rate of 9% per annum was imposed on the tax payable by the applicant for the years of assessment 1979/78, 1979, 1980, 1981 and
- The salient facts of the case are:- The applicant, a doctor, was abroad and returned to Nicosia in
- He derives his income from the exercise of his profession. He failed to submit returns of income. The Respondent, in exercise of his power under section 5
(2)of the Assessment and Collection of Taxes Law, 1978 (Law No. 4/78), as amended by Laws 23/78 and 4 1/79, (the "Law"), sent Notices in writing to the applicant .- (1st February, 1979, 20th February, 1980, 26th February, 1981, 2nd March, 1982, 1st March, 1983 for the years of assessment 1979/78, 1979, 1980, 1981, 1982, respectively) requiring thereby the applicant, within prescribed time, to render a return of the object of the tax. The applicant did not respond. The Respondent, under section 13
(3)of the Law raised assessments on the various dates as follows:-. Year of Assessment Income Assessed Date on which assessed 1979/78 6, 965 20.5 .80 1979/79 7,163 25.5.80 1980 14,698 25.5.82 1981 13,741 25.5.83 The applicant objected to the assessments raised for the years of assessment 1979/78, 1980 and 1981. On 13th September, 1982, the Respondent, by registered letter, required applicant, under sections 5
(2), 20
(3)arid 30 of the Law, to submit within two months from the receipt of such letter, his returns of income for the years of assessment 1979, 1980 and statement of his assets and liabilities of his personal and professional property in Cyprus and abroad as at 31st December, 1981, in order to enable the examination of his objections to the assessments. Applicant did not comply. On 12th June, 1983, applicant's accountants - Ioannou, Zampelas& Co. submitted a Statement of Assets and Liabilities of applicant as at 31st December, 1982, and computation of income and analysis thereof for the period from the 1st February, 1977 to 31st December,
- Thereafter meetings on the matter took place between the applicant's accountants and the Respondent. In September, 1983, an agreement was reached for the total amount tax payable by the applicant for the aforesaid years of assessment. In consequence thereof, in October, 1983, assessments were raised for the said years. On 25th October, 1983, he objected to the aforesaid assessments. His accountants submitted on 12th December, 1983, revised statement of assets and Liabilities as at 31st December, 1982, and requested reconsideration of the wholematter in the light of the additional information made available thereby to the Respondent. This new Capital Statement and the relevant documents were examined and, ultimately, in the end of January, a new agreement was. reached on the income tax payable. On 2nd March, 1984, in pursuant of this agreement, Assessments and Notices of the tax payable were served on the applicant. The Respondent, thereby, demanded interest at the rate of 9% as from 1st December, 1979, 1st July, 1980, 1st July, 1981, 1st July, 1982 and 1st July, 1983, on the amount of the tax payable for the years of assessment 1979/78, 1979, 1980, 1981 and 1982, respectively, on the ground that the delay in the making of the assessments was due to, the taxpayer's unjustifiable omission. Hence this recourse. The grounds of law on which it is based, as set out in the recourse are:-
- The act and/or decision complained of is in the nature of retrospective taxation in violation of Article 24 of the Constitution.
- The act and/or decision was taken in contravention of the Law.
- It is the. product of excess and/or abuse of power.
- It lacks due reasoning. In Michaelidou v. Republic
(1985)3 C.L.R. 1836, this Court held that the nature of interest clearly takes it out of the ambit of "tax". Interest in these taxing laws is neither tax nor penalty. Therefore, the constitutional provision prohibiting imposition retrospectively of tax is not applicable. In his address, counsel for the applicant did not pursue the issue of constitutionality. He concentrated on the construction and application of section 41 and 42, particularly paragraph 2 ofsection 42 of the Law, and submitted that the Respondent misinterpreted and misapplied this statutory provision. He, further, contended that the agreement as to the amount of tax payable precluded the Respondent from demanding payment of interest. I went through the agreement reached between the applicant and the Respondent It confines itself to the tax payable by the taxpayer. There is nothing indicating that the Respondent waived the collection of interest or even that the question of interest was discussed or raised. There is no document supporting applicant's allegation. This ground is without any merit. The material part of section 42, as amended by Laws 23/78 and 41/79, before its amendment by Law 164/87, which has no bearing on this case, read:- "42.-
(1)Εάν ο φόρος δεν καταβληθή μέχρι της εν τω άρθρον 41 καθοριζομένης ημερομηνίας, ούτος εισπράττεται είτε μετά ποσού ίσου προς πέντε τοις εκατόν επί του ποσού του πληρωτέου φόρου είτε μετά τόκου, από της ημερομηνίας κατά την οποίαν οφείλεται ο φόρος, προς εννέα τοις εκατόν ετησίως, οσάκις ο ούτω πληρωτέος τόκος, υπερβαί-νη το ποσόν το ίσον προς πέντε τοις εκατόν του πληρωτέου φόρου.
(2)Οσάκις η καθυστέρησις εις την διενέργειαν βεβαιώσεως οφείλεται εις αδικαιολόγητον παράλειψιν του φορολογουμένου καταβάλλεται τόκος προς εννέα τοις εκατόν ετησίως από της πρώτης ημέρας του Δεκεμβρίου, του έτους εις το οποίον αναφέρεται η βεβαίωσις, ανεξαρτήτως του έτους εν τω οποίω όντως εγένετο η τοιαύτη βεβαίωσις: Νοείται ότι ο καταβαλλόμενος τόκος εν σχέσει προς οιονδήποτε φορολογικόν έτος το οποίον προηγείται του φορολογικού έτους του αρχομένου την 1ην Ιανουαρίου, 1978, είναι προς έξι τοις εκατόν ετησίως· Νοείται περαιτέρω ότι από του φορολογικού έτους 1979 και εντεύθεν ο εξ 9% ετήσιος τόκος καταβάλλεται από της 1ης Ιουλίου του έτους του αμέσως επομένου του φορολο γικού έτους εις το οποίον αναφέρεται η βεβαίωσις." ("42 -
(1)if the tax is not paid by the date prescribed in section 41, it shall be collected either with a sum equal to five per centum on the amount of the tax payable, or with interest from the date when tax is due at the rate of nine per centum per annum, where the interest so payable exceeds the sum equal to five per centum of the tax payable.
(2)Whenever the delay in making an assessment is due to the taxpayer's unjustifiable omission, interest at the rate of nine per centum per annum shall be payable from the first day of December of the year to which the assessment relates, irrespective of the year in which such assessment was actually made: Provided that the interest payable with regard to any year of assessment preceding the year of assessment beginning on the 1st January, 1978, shall be at the rate of six per centum per annum; Provided further that as from the year of assessment 1979 and thereafter, the annual interest at 9% shall be payable as from the 1st of July of the year next following the year of assessment to which the assessment refers.") Counsel for the applicant argued that, before imposing or demanding interest under sub-section.
(2)of section 42, a finding, duly reasoned, of "unjustifiable omission" should be made by the Respondent; and that in the present case this is missing. Furthermore, there was no unjustifiable omission by the taxpayer. Interest is payable, if at all, during the period of unjustifiable omission and certainly not after the date of assessment to which objection is made by the taxpayer. The period required for determination of the objection should not count to the detriment of the taxpayer by the imposition of interest. The Respondent's discretion for the demand of interest could have only been exercised, if at all, with regard to the period November 1982 to June 1983. Counsel for the Respondent, on the other hand, submitted that every taxpayer has a duty to return his income, irrespectiveof whether or not he was given notice to do so by the Respondent. That sub-section
(2)of section 42 operates when there is an unjustifiable omission. In this case there was unjustifiable omission which caused delay in making the assessments, as the taxpayer did not submit income tax returns, as he was duty bound, and even did not do so after he was required in writing by the Respondent. The period for which interest is payable is from the dates provided in the Law until the tax is paid: and that the word "assessment" in sub-section
(2)means the final assessment and not the initial assessment against which the taxpayer raises objection. It is plain that this case turns on the construction and application of the relevant statutory provisions. The general rule, as in all other statutes, is to gather the intention of the legislature from the words used, giving them their ordinary and natural meaning - (Syrimis and Another v. Republic
(1978)3 C.L.R. 177). It is well settled that taxing enactments are considered strictly and any ambiguity is resolved in favour of the taxpayer - (Commissioners of Inland Revenue v. Herbert) [1913] A.C., 326). For interest to be payable, under sub-section
(2)of section 42, there must be unjustifiable omission. In Michaelidou v. Republic (supra) it was said at p. 1852:- "Omission means a failure to give any notice, make any return, produce or furnish any document or other information required by or under the law. The omission must be unjustifiable. A distinction must be made between unjustifiable and unreasonable. It is upon the Administration to determine, in each particular case, subject to judicial review by this Court, whether an omission is unjustifiable or not. Section 5
(1)of the Law casts a duty on every person chargeable with tax to give notice to the Director by the prescribed date in any year of assessment that he is so chargeable. The applicant did not perform his such duty, neither he was exempted by the proviso to this sub-section. Furthermore, notices in writing, under sub-section
(2), were given to the applicant on the dates aforesaid but he failed to submit returns. The Respondent invoked his powers undersection 13
(3). These objections were raised by the applicant. Omission of the taxpayer in this case is self-evident. At no stage any justification was rendered. It was, to say the least, reasonably open to the Respondent to find that there was an unjustifiable omission. Section 42 should be read as a whole and in conjunction with section 41. The statutory provisions about interest in sub-section
(2)of section 42 of the Law are a measure for the avoidance f loss to the State by an unjustifiable omission of the taxpayer, Causing delay in making an assessment. Sub-section
(2), including the provisos, appoint the dates as from which the tax carries interest. Interest is payable after those dates, until the payment of the tax. The language of the Law is plain, that whenever there is a delay in making an assessment, due to a taxpayer's unjustifiable omission, interest at the prescribed irate is payable as from the date set out in the second proviso, until the payment of the tax. The sub judice decision, as set out in the Notices sent, sufficiently meets the requirements of the Law. It is duty reasoned and the reasoning is further supplemented by the material in the file. For the foregoing reasons, this recourse fails. It is hereby dismissed with no order as to costs. Recourse dismissed. No order as to costs. cylaw.org: Από το ΚΙΝOΠ/CyLii για τον Παγκύπριο Δικηγορικό Σύλλογο