(1983)1983 December 23 [Λ. Loizou, J.] IN THE MATTER OF ARTICLE 146 OF THE CONSTITUTION CHRYSOSTOMOS PISSARIDES, Applicant. v. THE REPUBLIC OF CYPRUS, THROUGH
- THE COMMISSIONER OF INCOME TAX,
- THE DIRECTOR OF INLAND REVENUE, Respondents. (Case No. 206/82). Income Tax—Deductible expenses—Capital allowwiccs—"Plant"— Van—Use of, not necessary in the profession of a professional accountant and auditor—Capital allowance in respect thereof properly disallowed—Sections 11(f) and 12
(1)of the Income Tax Laws, 1961—1980—Burden of proof that capital allowance claimed,a deductible expense on applicantwhofailed to discharge it. Ln 1980 the applicant, who was a professional accountant and auditor, bought a van in respect of which he claimed capital allowances in his return of income tax and accounts. The respondent Commissioner, after taking into consideration the nature of the profession of the applicant, was not satisfied that the use and employment of the said van in his profession was necessary and/or to the benefit of the profession, as provided by section 12
(1)of the Income Tax Laws, 1961-1980 and dis allowed the capital allowances claimed by the applicant. Hence this recourse. Applicant maintained that he bought the van in question for the purposes of his profession; that he had exten sive business in all the towns; and that he was using exclusively for his profession the said van for visiting clients and, also, for carrying their account books. Itwas therespondents' opinionthatthenatureof the applicants' profession did not require a van as such a vehicle was required 1190 3 C.L.R. 5 10 15 20 Pissarides v. Republic in the case of a grocer who needed a van for carrying his goods and that the fact that the van qualified as a "plant" within the meaning of section 12
(1)of the Law, did not mean that professional men, such as, doctors, lawyers, or accountants were automatically entitled to the allowances provided for in section 12 of the Law simply because they decided to buy and use such type of motor car in their business and/or profession. Held, that for a payment to qualify as a deductible expense for income tax purposes it must be a payment connected with the trade or business carried on; that the explanation given on behalf of the applicant regarding the use of the vehicle was not accepted by the respondent for valid reasons; that being so, the applicant has failed to discharge the burden of proof which was upon him that the capital allowances claimed by him were deductible under the Law; that on the totality of the circumstances, the sub judicc decision was reasonably open to the respondent Commissioner, it was arrived at after a proper inquiry,was duly reasoned and cannot validly be said that it was the outcome of any misconception of law or fact; that moreover the applicant upon whom the burden of proof lies, has failed to discharge same; accordingly the recourse should fail. Application dismissed. Cases referred to: 25 Republic v. Ekkcshis
(1975)3 C.L.R. 548 at p. 549; Manufacturers Life Insurance Co. v. Republic
(1967)3 C.L.R. 460 at p.
- Recourse. 30 Recourse against the decision of the respondents to disallow the capital allowances claimed by applicant in respect of his Golf Diesel Van under Reg. No. K.Z.964 in the income tax assessment for the year
- L. Papaphilippou, for the applicant. M. P/wtiou, for the respondent. Cur. adv. vult. 35 A. Loizou J. read the following judgment. The applicant is a professional accountant and auditor. In 1980 he bought a Golf Diesel Van under registration No. KZ
- In his 1191 Λ. Loizou J. Pissarides v. Republic
(1983)Return of Income Tax and Accounts submitted for that year, he claimed capital allowances in respect thereof as follows:
(1)Investment allowance at 30% on cost C£981.-
(2)Annual wear andtearallowance at20%oncost 654.C£l,635.- The respondentCommissioner,after taking intoconsideralion the nature of the profession of the applicant, was not satisfied that the use and employment of the said van in his profession was necessary and/ortothebenefit of the profession as provided under section 12
(1)of theIncomeTax Laws, 1961-1980 (herein- 10 after to be referred to as the Law), and after communicating his decision by letter dated the 8th January, 1982, he raised on the25th February, 1982,anassessment disallowing the aforesaid capital allowances claimed by the applicant.. The applicant objected to the said decision by letter dated 15 the 27th February, 1982, and apparently gave oral explanations as well to the effect that the van is used exclusively in his profession for carrying books of accountandfor visitingclients in Nicosia and other towns. The respondent Commissioner was not,however, satisfied that the use and employment of 20 the said van in the applicant's profession was wholly and exclusively necessary in the production of his income, rejected applicant's objection and determined the assessment raised for the.year of assessment 1980. This decision was communicated to the applicant by letter dated 24th April, 1982, Appendix 25 'B' attachedto theOpposition,together with therelevant notice of tax payable which amounts to C£467.885 mils. The applicant maintained that he bought the said van for the purposes of his profession, that he has extensive business in all thetowns andthat hehas oneemployee who helps him in 30 his work; that he uses exclusively for his profession the said van for visiting clients and also carrying their account books; that it has no pillows in therear seat and consequently it could not be used for private use; and that he has another private vehicle under Registration No. EV.325, a Peugeot 1971 for the 35 private needs and the entertainment of his family. The respondent does not dispute the fact that the vehicle 1192 5 3 C.L.R. Pissarfdes v. Republic A. Loizou J. in question can qualify as "plant and machinery" within the meaning of section 12
(1)of the Law. What he really maintains is that the applicant' should have proved to his satisfaction and inevitably now to the satisfaction of the Court, that the 5 use and employment of the said van inthe applicant's profession was wholly and exclusively necessary in the production of his income. Itwasargued that the combined effect ofsections 11
(1)and 13(e) of the Law made it clear that the expenditure must be wholly and exclusively incurred for the production, of the 10 income. The opening part of section 11
(1)provides:"For the purpose of ascertaining the chargeable income of any person, there shall be deducted all outgoings and expenses wholly and exclusively incurred by such person in the production of the income™ ____". 15 and it goes to enumerate a number of instances that can be allowed. Section 13(
- e)provides: 20 "For the purpose of ascertaining the chargeable income of any person no deduction shall be allowed in respect of— (
- e)any disbursements or expenses not being money wholly and exclusively laid out or expended for the purpose of acquiring the income". It has been argued on behalf of the applicant thai the said 25 van is an essential means indispensable in the carrying on of his profession and as such should be entitled to the capital allowances provided for in section 12 (ibid) in the same way as such allowances are granted in respect of any other kind of vehicle or any other item of plant and machinery used in a 30 trade, business, profession, vocation or employment. By ignoring these facts when the sub judice act or decision was taken, the respondents acted under a misconception of fact; such a misconception is a ground to nullify the said act or decision. As stated in the Republic of Cyprus through The Council 35 of Ministers v. Ekkeshis
(1975)3 C.L.R. 548, at p. 549: " a decision may be annulled if an Administrative Court is satisfied that such decision was reached as a result of a factual misconception". 1193 A. Loizou J. Pissarides v. Republic
(1983)It was stressed that the van in question was wholly and exclusively used by the applicant in the production of his income and for no other purpose, in that it was only used for carrying books of account and for visiting clients in Nicosia and other towns. It was the respondents' opinion that the nature of the applicant's profession does not require a van as such a vehicle is required in the case of a grocei who needs a van for carrying his goods and that the fact that the van qualifies as a "plant" does not mean that professional men, such as, doctors, lawyers, 10 or accountants are automatically entitled to the allowances provided for in section 12 of the Law simply because they decided to buy and use such type of motor car in theii business and/or profession. In the case of Manufacturers Life Insurance Co. v. The Republic
(1967)3 C.L.R. 460, at p. 471, L. Loizou, 15 J., had this to say: "It early appears from the above cases that for a payment to qualify as a deductible expense for income tax purposes it must be a payment connected with the trade or business carried on and made in order to enable the tax payer the 20 better to carry on his trade or business for the purpose of earning the income, whether by getting rid of onerous service agreements or for the purpose of maintaining a high standard of business". The explanation given on behalf of the applicant regarding 25 the use of the vehicle was not accepted by the respondent for valid reasons already referred to in this judgment. That being so, the applicant has failed to discharge the burden of proof which was upon him that the capital allowances claimed by him were deductible under the Law. I need not refer to the 30 principles of strict interpretation regarding Taxation Laws and the authorities which learned counsel for the applicant has referred to as having been violated as the statutory provisions governing the issue in this case are clear and unambiguous and as such leave no room for a variety of interpretations in which 35 case the one resulting from their stricter construction should be accepted. On the totality of the circumstances, I have come to the conclusion that the sub judice decision was reasonably open 1194 5 3 C.L.R. Pissarides v. Republic A. Loizou J. to the respondent Commissioner, it was arrived at after a proper inquiry, is duly reasoned and cannot validly be said that it was the outcome of any misconception of law or fact. Moreover the applicant upon whom the burden of proof lies, has failed 5 to discharge same. For all the above reasons the recourse is dismissed, but in the circumstances I make no order as to costs. Recourse dismissed. as to costs. 1195 No order