(1986)1986 July 14 [KOURRIS, J.] IN THE MATTER OF ARTICLE 146 OF THE CONSTITUTION P. S. PARTELLIDES LTD., Applicants, v. THE REPUBLIC OF CYPRUS, THROUGH THE MINISTER OF FINANCE, Respondent. (Case No. 417/85). Income Tax—Compensation for the termination of an agency agreement—The determination of the issue whether such compensation is a capital receipt or a trading profit depends on the facts of each case—No single infallible test —The length of the period for which the agreement would 5 have to run, if it had not been terminated, is a factor of importance in determining the said issue—Failure to carry due inquiry into such a factor is a ground of annulment. Income Tax—Depreciation—"Plant and machinery—Private saloon cars—They are not plant and machinery. 10 Income Tax—Exception or allowances—Burden of proof in establishing such exception or allowances is on the applicant—Entertainment expenses—Allowable, if exclusively attributed to the production of income. Income Tax—Discretion of the Commissioner—Judicial control. 15 The applicant company derives its income from the import and distribution of pharmaceutical drugs. The audited accounts, which the applicant company had submitted to the Commissioner of Income Tax for the years 1978 and 1979, were examined by ihe Commissioner in 20 1982. Bv letter dated 29.9.82 the Commissioner informed 1368 .L.R. P.S. Partellides Ltd. v. Republic the applicant of the amendments he made as regards the relevant computations of its income. The applicants objected, but, as such objection was dismissed, they filed recourse 55/83 to this Court, which was later withdrawn upon an undertaking by the Commissioner that he would reconsider the matter as the sub judice in that recourse decision was not duly reasoned. The Commissioner reconsidered the matter and issued revised assessments which are the subject-matter of this recourse. The items which the Commissioner added back to the accounts, which the applicants had submitted were: (a) Depreciation on the cost of land of two flats amounting to £41 and £67 respectively in the years 1978 and 1979, (b) An amount of £300.- representing entertainment expenses out of a total of £1,206.- on the ground that there was no evidence to show that this expenditure was incurred in the production of applicant's income, (c) An amount of £285.- for depreciation of private cars, (d) An amount of £12,411.- paid to applicant in 1979 as compensation for Ihe termination of the agency agreement between a Swiss Organisation and the applicant, and (e) A sum of £300.for director S. Partellides and a sum of £200.- for director M. Partellidou for the use of the company's cars for private purposes. As regards item (d) the Court found that the business of the applicants was not materially affected by such termination. Held, annulling in part the sub judice decision; (I) Applicants' argument, that the Commissioner had no power to raise new additional taxes with the same reasoning with which the Court declared the taxation as null and void, cannot be accepted because the Court in recourse 55/83 did not annul the sub judice decision, but simply struck it out as the applicants had withdrawn it.
(2)As regards the compensation received by the applicants in respect of the termination of the agency agreement the question is whether such compensation was a capital receipt or a trading profit. The determination of this question depends on the circumstances of each par1369 P.S. Partellides Ltd.. v. Republic
(1986)ttcular case. ''There is no single infallible test in settling· ihe vexed question of whether a receipt is of an income or. capital nature (Dictum of Lord MacDermott in Harry Ferguson (Motors) case, infra, adopted". The*length of the period, which the agreement ot agency has to run at the time of its termination, is a factor of importance in determining the said question (Dicta of Lords Flemming and Moncrieff in- the-Kelsalt Parsons and Co. case, infra» were cited by the Court with approval). 5 As neither the. respondent, nor the applicants-were in 10 a position !o state the duration of the relevant agency agreement and as such duration is of importance in deter mining the-said issue, it follows that the respondent Com missioner failed to cany out a proper inquiry into the matter and, therefore, this part of his decision would be 15 annulled.
(3)Private saloon motor cars cannot be treated*as "plant and machinery" and, therefore, counsel for the applicants rightly abandoned the. relevant complaint of the applicants.
(4)· The burden to prove an exemption or deduction in 20 fiscal laws is on the applicants. Entertainment expenses are allowable, if • they were wholly and exclusively incurred in the production of income (Section-11
(1)and 13(e) ofthe Income ; Tax Laws. 1961-1981). In- this case the appli cants did not-furnish any documentary, evidence. In. the· 25 circumstances this.Court should not interfere with the dis cretion of the respondent.
(5)Once-the. applicants admitted the. use of. the appli cants' cars by their directors, it was up to the discretion ofj the respondent. to determine the extent, of the.^amount to.-be attributed for.-private use and'the Court generally does not-interfere with the.exercise, of such discretion. 30 Sub fudice decision annulled in part. Cases- referred ,to: Gpussoumides- ν-..The Republic
(1966)3 C.L.R. 1; Makrides*v._ The, Republic
(1967). 3 C.L.R.. 147; 1370 35 '3 C.L.R. P.S. Partellides Ltd. v. Republic •Lilian'Georghiades * The Republic
(1982)3 C.L.R. 659: HjiYianws \. The Republic 11966) 3 C.L.R. 338: Kittides \. The Republic tl973> ? C.L.R. 123: Mavronmititts ι\ο. 143:
(1966)3 C.'L.R. 11 \. 77ff Republic IVw rft'/i Bergh\ Lid, \. Clark Ή 19 T. C. 390: \
- Inspecuu or" 7"«.U'M. Cy/jrr/5 W'/HW Co. Lr</. \ The Republic t!965) 3 C.L.R.
- Kelsall Parson* ami Co. \. The Commissioner* of Inland Revenue. 21 T.C 60S: 'Republic \. Minena Cinaht\irr:ad 3 C.L.R. 340: Co. •Harrv Ferguson i.\'!otoi*> 'Ltd \. i. R (.1951) Ν
- 1
- Velik Mclikian and Co lid. 3 C.L.R. 1322: \fanufitc'unr* Lih 3 C.L.R.
- \ Insurant .• * Ltd. ι!^"91 Coni'irssio'ii r\ The Rcrubb.c. κ!°S51 /"':. Republic 11 ll(>~' Rainbow \. Γ/V RepuNU tlo$.n 3 C I R. S4o Recourse. Reeon^e again.st the income t.i\ a>se»nvm and the spec'al contribution raided on applicant-· for the \ear 1°™°. L. Clcnde*. for the applicants. Λ/. Photiou. for the respondent O/r. (j,/r. n//
- KXUJRRIS J. rend «he following judgment. This recourse •is against the assessments for tlie year 1979 (year of income 1978Ϊ ami the year 1970 and -special contribution levied 'for the quarters 1 7S to 4 7 8 and 1 79 to 4 70, which were raised and determined, as shown in the 'Schedule 4371 Kourris J. P.S. Partellides Ltd. v. Republic
(1986)attached to the opposition and marked as Appendix "A". FACTS: The applicant is P. S. Partellides Limited, of Nicosia, a private company of limited liability incorporated on 5.6.1967 and it derives its income from the import and 5 distribution of pharmaceutical drugs. The audited accounts of applicant Company for the years subject matter of 'his recourse, i.e. 197S and 1979. were submitted on 7.8.1979 and 19.12.1980, respectively. The sa'd accounts were examined by the Commissioner of 10 Income Tax in 1982 and who, on 29.9.1982, addressed a letter to applicant's auditor, setting out the amended computations for income tax and special contribution. On 2.10.1982 assessments for the years, subject matter of this recourse, were issued on the basis of the amended compu- 15 tat:ons of 29.9.1982 against which objections were filed on 30.10.1982, on behalf of applicant company by Phanos lonides Ltd., taxation consultants. The Commissioner of Income Tax after considering the case, decided to reject the objections by maintaining the original assessments and "^u informed applicant Company accordingly by letter dated 8.12.1982. Against this dec'sion applicant Company filed Recourse No. 55/83, which on 6.6.1983, was withdrawn by the applicant Company, in view of the undertaking given to 25 the Court by respondent to reconsider and issue a new decision, as the sub judice decision was not duly reasoned. (Vide Appendix "E" attached to the written address of counsel for the respondents). The respondent Comnrssioner proceeded on 22.9.1983 30 in issuing revised assessments for the years, subject matter of the present recourse, full explanations on the adjustments made to the submitted computations having been given in a letter to applicant's auditors and consultants dated 15.9. 1983 attached to the opposition as Appendix "B". The 35 items which were added back on the submitted computations, were as follows: (
- a)Depreciation on the cost of land of two flats amounting to £41.- and £67.- respectively, in the years 1372 3 C.L.R. P.S. Partellides Ltd. v. Republic Kourris J. 1978 and 1979 was disallowed. 5 (
- b)An amount of £300.- representing entertainment of customers out of a total of £1,206 for the year 1978 was not allowed for the reason that no supporting evidence was produced *o show that this expenditure was incurred in the production of applicant's income. (
- c)An amount of £285.- for depreciation saloon cars was disallowed, and oi private (
- d)An amount of £12,411 paid to applicant Company 10 in 1979 by the Swiss Pharmaceutical Organisation "GEIGY" as compensation for the termination of the agency agreement between "GEIGY" and applicants, was treated by the respondent Commissioner as income liable to tax. Against the revised assessments issued on 22.9.1983, 15 Phanos Ionides Ltd., on behalf of applicant Company, objected by letter dated 11.10.1983, attached to the opposition as Appendix "C". The Commissioner of Income Tax having considered the said objections, decided to reject them by maintaining the assessments issued on 22.9.1983. 20 The respondents on 23.2.1985 filed assessments accordingly and informed applicant Company of their duly reasoned decis:on by letter dated 23.2.1985. a photostatic copy of which is attached to the opposition as Appendix "D". Hence, the present recourse. 25 THE LAW: In view of the presumption of legality of administrative acts, the sub iudice assessments should be presumed to be valid unless the applicant succeeds to prove the contrary. In the case of Coussoumides v. The Republic
(1966)3 30 C.L.R. 1, at p. 18, it was established that in a recourse to the Supreme Court under Article 146 of the Constitution it is on the applicant on whom lies the initial burden of proof to satisfy the Court that it should interfere with the subject matter of the recourse. This was followed in 35 the case of Rallis Makrides v. The Republic
(1967)3 C.L.R. 147 at p. 153. In the case of Lilian Georghiades v. The Republic
(1982)3 C.L.R. 659 at pp. 667-669, the Full Bench of the Supreme Court has made it abundantly clear that if the respondents' decision is one which was 1373 Kourris J. PS. Partellides Ltd. v. Republic
(1986)reasonably open ίο them, then this Court will not disturb same. Furthermore, in income tax cases it is expressly stated in the relevant laws that the burden to satisfy the Court that an assessment is excessive, is on the person who attacks same. (See, section 21
(2)of the Assessment and Collection of Taxes Laws, 1978-1979, (Laws 4/78, 23/78 and 41/79)). This Law applies also to special contribu tion cases by virtue of section 6 of Laws 34/78 rind 55/74. 5 Also where, as in the present case, the tax-payer claims 10 a deduction under the provisions of a taxation law. again, he has the burden to prove that he is entitled to such reduction. (See, Andreas Hji Yiaimis v. The Republic
(1966)3 C.L.R. 338 at pp. 350, 351 and Planus Kittides v. The Republic
(1973)3 C.L.R. 123 .at p.
- 15 Preliminary 'legalpoint raised by the applicant Company. Applicants allege that ihe assessments which are the subject matter of this recourse, are void and of no legal effect, 'because the Commissioner of Income Tax had no power to raise new additional taxes with the same reasoning 20 with which the Court declared the taxation as null and void. I am inclined to -agree with ilearned counsel for the res pondents that the Court did not declare the decision in Recourse No. 55/83 null and void and of no legal effect. 25 It appears from Appendix " E " that on 6.6.1983, counsel for the respondents gave an undertaking to !hc Court on 'behalf of the Commissioner of Income Tax that he was willing to re-examine applicant's case and issue a new de cision. As a result, counsel for the applicants withdrew the 30 recourse which was struck out -by the Court without any order as to costs. The Court did not declare the decision or the assessments, the subject matter of that recourse, as null and void, but simply struck out the recourse. The effect of the above record of the Court was that there was 35 no recourse against the respondents' aforesaid decision of .2.10.1982 which was ilegally standing hut there was the undertaking -of the respondent t o reconsider the case and 'issue .a new -decision which, in point of fact, the respondent 1374 3 C.L.R. P.S. Partellides Ltd. v. Republic did on- 22.9.1983, i.e. again within the six provided· by section 23' of the law. 5 10 15 Kourris J. years period The relevant time, to measure the period of six years is the raising of the assessment which was made on 22.9.1983 and not the determination of the objection to the above assessments, i.e. the sub judice decision dated· 23.2.
- (Vide, Appendix " D " to the opposition). Sec Theopliylactos Mavrommatis (No. I) v. The Republic
(1966)3 C.L.R. 143 at pp. 148, 149 dealing with the provisions of section 45 of Cap. 323 which are similar to those of section 32 of the new Law, i.e. Law 24/78 referred to above. I am of the view that even if. the original decision was annulled by the Court, which clearly is not the case, again underthe provisions of para. 5 of Article 146 of the Constitution, in conjunction with section 21
(3)of Law 4/78, the respondent was entitled to re-examine the whole case applying the legal and factual status which existed when the original decision was taken.
(1)Merits of the case. 20 25 30 Counsel for the· applicants contended that the sum of £12,411 paid by the Swiss pharmaceutical firm Geigy for the-termination of the agency, agreement with the applicants was a capital receipt and ought not to be reckoned as forming any part of the profits arising from the carrying on of their trade. In support of his contention he relied on *he case of Van den Berghs Ltd. v. Clark (Ή..Μ. Inspector of Taxes) 19 Tax Cases 390. Counsel for the respondent contended that.the sum of £12,411 paid. as_compensation is in the nature,of trading profit and not of a capital receipt which ought to be in cluded in the compensation, of the applicants', profits or gains for income tax purposes. The question of the dinstiction between a capital re ceipt and.a.trading profitjs.one which;has been the subject35; matter of;many tax cases, in the Courts..in England,, where, statutory, provisions, similar, to. our statutory provisions re ferred, to have,existed.for many years..I^propose, to set out on-.this.point the. judgment ofnhe Court in the case of 1375- Kourris J. P.S. Partellides Ltd. v. Republic
(1986)Cyprus Wines Co. Ltd. v. The Republic
(1965)3 C.L.R., 345 at p. 350: "This distinction is so fine and so technical that it is not always easy, even after exhaustive study of the prolific case law on the subject, to know exactly 5 where to draw the line. How very fine the distinction as may be amply illustrated by the very fact that what may be a capital item in the accounts of one taxpayer might, in the particular circumstances of another bear an income character. I fully share the views 10 expressed by Lord MacDermott, C,J., in the case of Harry Ferguson (Motors) Ltd. v. I.R. Commissioners
(1951)N. I., 115, C.A., when he stated:There is, so far as we are aware, no single, infallible test for settling the vexed question whether 15 a receipt is of an income or capital nature. Each case must depend on its particular facts and what may have weight in one set of circumstances may have little weight in another. Thus, the use of the words 'income' and 'capital* are not necessarily 20 conclusive; what is paid out of profits may not always be income; and what is paid as consideration for a capital asset may, on occasion, be received as income. One has to look to all the relevant circumstances and reach a conclusion according to the 25 general tenor and combined effect'. A test was suggested by Lord Clyde in the case of Burmah Steam Ship Company Ltd. v. I.R. Commissioners, 16 T.C. 67, which was a case in which joint owners of a vessel which they had bought at 30 second hand, placed it with repairers who exceeded the stipulated time of the completion of overhaul. Damages were paid in compromise of a claim in respect of the estimated loss of profit from trading with the ship. The Court of Session held that the appellant's 35 share of the damages was a trading receipt. Lord Clyde suggested the following test in his judgment: (page 71). 'Suppose some one who chartered one of the appellant's vessels breached the charter and exposed 1376 40 C.L.R. 5 10 15 20 P.S. Partellides Ltd. v. Republic Kourris J. himself to a claim of damages at the applicant's instance, there could, 1 imagine, be no doubt that the damages recovered would properly enter the appellant's profit and lossaccount for the year. The reason would be that the breach of the charter was an injury inflicted on the appellant's trading. making (so to speak) a hole in the appellant's profits, and the damages recovered could no* therefore be reasonably or appropriately put by the appellant —in accordance with the principles of sound commercial accounting—to any other purpose than to fill that hole. Suppose, on the other hand, that one of the appellant's vessels was negligently run down and sunk by a vessel belonging to some other shipowner, and the appellant recovered as damages the value of the sunken vessel, I imagine that there could be no doubt that the damages so recovered could not enter the appellant's profit and loss account because the destruction of the vessel would be an injury inflicted, not on the appellant's trading, but on the capital assets of the appellant's trade, making (so to speak) a hole in them, and the damages could therefore—on the same principles as before—only be used to fill that hole'. " 25 Counsel for the applicant has based his argument on the decision of the House of Lords in the case of Van den Berghs and it was urged that the whole structure of the appellants' business was affected by the cancellation of the agency agreement and that the authority of Van den Berghs 30 Ltd. v. Clark (supra) the payment should, therefore, be treated as a capital payment. Counsel for the respondent has submitted that its application to the facts of the present case should result in the conclusion that the sum of £12,411 in question had been received by the applicant as 35 a trading profit. The allegation of counsel for the applicant that the whole structure of the business was affected by the cancellation of the said agency agreement, is contradicted by the oral evidence of Neophytos Neophytou, Senior Assessor 40 A, in the Income Tax Office, who gave evidence as to 1377 Kourris J. P.S. Partellides Ltd. v. Republic
(1986)the sales, gross profit and net income of the applicantCompany and who produced a charter of the said items which is exhibit 1- before the Court. U appears that the sales have not fallen during the year the agency was terminated or the following years, at least to.a considerable extent, and the same-picture appears in the case of gross profits. I accept-, the evidence of the said witness that, the net. profits do not show• the true picture, of the business of a company, because a,company may use.gross, profits in-order to-write off capital gains. In view of the material before. me. I find that appellants' business was not affected or. at least not materially affected by the cancellation of the agency agreement. 5 10 Further, the facts of the Van den Berghs case are distinguishable from the facts of the- case- in hand.. An analysis of the Van den Berghs.case wasj aptly, made in the case of Kelsall Parsons & Co. v. Commissioners of Inland Revenue, 21 Tax Cases, 608 where Lord Moncrief said at:p;.
- as-follows:, "In that caset (referring to the case (Ven den Berghs) an English and a foreign trading company, had entered into a pooling agreement which was to endure for a.period of years. It was proposed, and eventually it was*agreed by joint, consent, to cancel that agreement 25 at a'period when, apart - from: cancellation; it would still" have run for many years; and a payment was made by the foreign to the English company as compensation for the cancellation- of their- rights under the agreement. It was held that the payment received. 30 by the. English company-was to.be. regarded as a capital and not as a revenue payment; but the payment in that case hadbeen made in respect of the cancellation of an agreement directed to result, not in the making, but only in the partition, of trading
- profits. The agreement which had been discharged had been an~agreement-directed, to exclude competition.as between- the English and the foreign trader. Apart from the introduction of_ a conventional scheme effecting stabilisation by. effect'ng distribution,, the pro- 4 0 13787 15- 20 3 C.L;R. 5 10 P.S. Partellides Ltd. v. Republic Kourris J. fits which each of the companies, English and foreign, were to enjoy, whether that agreement had or had not been made, were such profits as would result from their individual exercise of their trade. The only effect of the agreement was, by eliminating competition and restricting liberty, to render the market more favourable to both traders, in the view of the contracting parties, towards the making of trading profits; and. as the agreement was independent of any contract for the direct making of profits, it was held that the payment for its cancellation was to be regarded as capital. With such a case the present case, in my view, has no analogy." With all due respect I adopt whnf Lord 'Moncrieff said 15 and I am also of the view that the facts of the case in hand are not similar to the facts of the Van den Berghs case. 20 25 30 35 The 'leading case in Cyprus on the question whether a payment : s considered -to be a trading profit or a capital profit is the case of The Republic v. Minerva Cinetheatrical Co. Ltd.
(1979)3 C:L:R. 340. The Court at ,p. 349, said as follows: "In Barr, Crombie and Co. Ltd. v. Commissioners of Inland Revenue (supra), -Lord Normand, dealing with the question whether the sum received by the company was a capital payment or a trading receipt, said at pp. 411 -412:'Lord Cave, L. C , in the case of British Insulated and Helsby Cables Ltd. v. Atherton, [1926] A.C205, at p. 213; 10 T.C. 155, at page 192, said: 'But when an expenditure is made, not only once and for all, but with a view to bringing into existence an asset or an advantage for enduring benefit of a trade, I think that there is very good reason (in the absence of special circumstances leading to an opposite conclusion) for treating such an expenditure tis properly attributable not to revenue but to capital.' And, of course, one may equally say ithat an expenditure made once and for all as .payment for abandoning or surrendering an asset 3379 Kourris J. P.S. Partellides Ltd. v. Republic'
(1986)is received by the recipient as a capital and not as a revenue payment, in the absence of any indication to the contrary. In the present case virtually the whole assess of the Appellant Company consisted in this agreement. When the agreement was 5 surrendered or abandoned practically nothing remained of the Company's business. It was forced to reduce its staff and to transfer into other premises. and it really started a new trading life. Its trading existence as practised up to that time had ceased 10 with the Pquidation of the shipping company. The proportions of its profits, to which I have referred. demonstrate that'." A case whose facts are more or less similar to the case in hand is the case of Kelsail Parsons & Co. v. The Com- 15 missioner of Inland Revenue (supra) which was an appeal against a determination of the General Commissioners. who have held that a payment of £1,500 made to the appellants as compensation for termination of an agency agreement should be included in computing the taxable 20 profits for the year in which the payment was made and the appeal was dismissed. The facts of the case were that the appellants were manufacturers' agents for various manufacturers for the sale in Scotland, on a commission basis, of such manufacturers products. One of their agencies 25 was for the sale of the products of George Ellison Ltd. of Birm'ngham. Ellisons requested that the agency agreement should be terminated forthwith and negotiations followed and on the 26th May, 1934 an agreement was reached to the effect that the sum of £1,500.- should be paid as 30 compensation for terminating the agreement on September, 30, 1934, instead of September, 30,
- The effect of this was that the agency agreement continued to operate for all but the last year of its full contemplated life and in respect of this cancellation one year before its contem- 35 plated term the appellant received the £1,500.- by way of compensajion. The agreement in question was for three years and it was terminated at the end of the 2nd year at the instance of the nrincipals. It was held that the parties must have had in view, in fixing this sum of £1,500.-. that 40 by the premature termination of the agreement the appli1380 3 C.L.R. P.S. Partellides Ltd. v. Republic Kourris J. cants would be deprived of the profits which they might expect to earn from the agreement during the year 19341935 and must be regarded at trading profits. 5 10 15 What is important, bearing in mind the facts of our case, is what Lord Flemming said at p.
- He said: "I wish to add that I attach importance to the fact that the agreement had only one year to run at the date of its termination. A different case would have arisen for decision if the agreement had been terminated when it had still, say, a period of ten years to run. A payment made in respect of a loss to be sustained over a period of years may well have a different character from a payment made in respect of a loss to be sustained in the year in which the payment is recovered." Likewise, Lord Moncrieff said at p. 624 as follows: 20 "If, on the other hand, an agreement such as this, though directed towards resulting in the making of trading profits, has an outlook over a period of years, then I agree with Lord Flemming that disturbance of such an agreement, although associated with the dis* turbance of prospect of the making of trading profits may be a disturbance of what should properly be regarded as a capital interest." 25 I have considered very carefully the arguments submitted by counsel on both sides and the authorities respectively cited by them and to the other authorities referred to in the Minerva case (supra) and the authorities cited in the Van den Berghs case (supra). I endorse the views ex30 pressed by Lord MacDermott in the hereinabove quoted passage from his judgment in the Harry Ferguson (Motors) case (supra) to the effect that each case depends on its particular facts and that "there is no single infallible test in settling the vexed question of whether a receipt is of an 35 income or capital nature." Neither the applicant Company nor the respondent were in a position to state to the Court as to the duration of the said agency agreement. The duration of the agreement, 1381 Kourris J. P.S. Partellides Ltd. v. Republic
(1986), as it appears from- the case of Kelsall Parsons & Co: (su pra), is most important, as it is likely to show whether a receipt is a trading or capital receipt. I would say that there has been no proper inquiry by the Commissioner of Income Tax and I would reluctantly annul his decision on this point. 5
(2)Depreciation of private saloon cars. Counsel for the applicant Company ubandoned this point in view of the decision in the case of Mefik Melikian & Co. Ltd. v. Republic
(1985)3 C.L.R. 1322. rightly in 10 my view, because· in this case it was held that private saloon motor cars cannot be treated as "plant and machinery" even if they are solely used for the carrying of goods, i.e. trade purposes.
(3)Entertainment expenses. 15 Entertainment expenses are allowable- as an. expense wholly and exclusively incurred in the production of in come on the basis of the combined effect of section 11
(1)and 13(e) of the Income Tax Laws 1961-1981 as expen diture as in the case of Manufacturers Life Insurance v. The 20 Republic
(1967)3 C.L.R. 460. The applicants claimed £1,206.- as entertainment expenses and the Commissioner of Income Tax did not allow an amount of £300.-. The burden is upon the applicants to prove the exact amount of such expenses by furnishing documentary evidence, 25 which, evidence, does not exist in the present case. (See. Appendix " D " to the opposition, para. 1(c)). As I have already stated, the burden to prove an exemp tion or deduction in fiscal laws is on the applicants. (See. HadjiYiannis and Kittides (supra) and Nina Rainbow v. Republic
(1984)3 C.L.R. 846). The respondent is not obliged to accept whatever amount is presented to him as entertainment. expenses by the tax payer and I think Τ should not interfere with the exercise of his discretion to disallow the sum of £300.-. 1382 30 35 3 C.L.R. P.S. Partellides Ltd. v. Republic Kourris J.
(4)Directors' benefit from the use of the company's cars for private 'purposes. 5 The Commisiscner of Income Tax did not. allow the sum of £-300.- for the Director Savvas Partellides and the sum of £200.- for Mrs. Magda Partellidou for the use of the company's cars for private purposes. Applicants do not deny that the Directors Mr. Savvas Partellides and Mrs. Magda Partellidou used the company's cars for private purposes, but simply allege that such 10 use is very small. I am of the view that once they accept such use. then it is for the respondent's discretion to decide the extent of the amount to be attributed for private use so that to be deducted as expenses of the company's cars and the Court 15 generally does not interfere with the exercise of such discretion, because it relates to the merits of the case. The Court will not substitute its own discretion to that of the administration. In the circumstances, there is no material before me enabling me to interfere with the exercise of 20 the discretion of the Commissioner of Income Tax and I uphold him on this point.
(5)Payment of interest. Counsel for the respondents abandoned his claim th;?t the applicants should pay interest on each year of the 25 assessment, i.e. as on 2.12.1979 and 1.7.1980. He was contend to say that the respondents will be satisfied if the payment of interest commenced as from 1.9.1983, as it was doubtful whether the delay in raising the assessments was due to the unreasonable default of the applicant Com30 nany. 35 For the reasons given above. I am of the opinion that, on the facts of th\s particular case, it was reasonably open to the respondents to reach the decisions they did with regard to the" depreciation for private saloon cars, entertainment expenses and Directors' benefit from the use of the company's cars for private purposes. •1383 Kourris J. P.S. Partellides Ltd. v. Republic
(1986)With regard to the payment of compensation for the termination of the agency agreement, I am of the view that there has been no due inquiry and, therefore, I annul the decision of the Commissioner of Income Tax. Let there be no order as to costs. Sub judice decision partly annulled. No orderas to costs. 1384 5