clr/1986/1986_3_2317.pdf

(1986)3 C.L.R. 23] 1 adopted—Wife remained throughout the real owner, her husband playing role of an agent. Taxation—Fictitious transactions—Breadth of discretion of tax authorities to treat transaction according to its true effect. The facts of this case are very similar lo the facts in Panayiotou v. The Republic

(1986)3 C.L.R. 2311. As in that case respondent 2 treated the gift by the seller to her husband as fictitious and disregarded il, when assessing the seller's (applicant's) liability to capital gains tax. The arguments of applicant's counsel were the same as those made in the said case. Held, dismissing the recourse:

(1)It is unnecessary to reproduce the points debated in Panayiotou, supra. The attachment of a copy of the judgment in that case serves the same purpose. 2317 Lagou v. Republic (198Θ)

(2)It is useful to refer to Coates v. Arndale Properties Ltd. [1985] 1 All E.R. 15, as it illuminates the breadth of the power of the tax Authorities to go behind the ap­ parent effect of the transaction and treat it according to its true effect. 5

(3)The applicant remained the true owner with the husband playing the role of an agent, who promp'ly com­ plied with her wishes to implement what she had bar­ gained to do, that is. transfer of the property in the name of the purchasers. 10 Recourse dismissed. No order as to costs. Casts referred to: Panayiotou v. The Republic

(1986)3 C.L.R. 2311; Coates v. Arndale Property Ltd. [1985| 1 All E.R. Ix 15 Recourse. Recourse against the decision of the Director of Inland Revenue whereby he disregarded the gift of the one half share of the property to applicant's husband who joined her on the same day in transferring the property to the 20 purchasers and charged the applicant to capital gains tax on the whole amount of value of the property. D. Papachrysostomou, for the applicant. Y. Lazarou, for the respondents. Cur. adv. vult. PIKIS J. read the following judgment. For reasons similar to those given in the case of Panayiotou v. Republic^ this recourse, too, must he dismissed. The facts are very similar and the legal issues identical. Like the pursuer in the above recourse the applicant in this case also agreed to sell 30 immovable property to third parties and like her, before im­ plementing her agreement, she transferred by way of gift 1

(1986)3 C L R 2311 2318 25 3 C.L.R. Lagou v. Republic Pikis J- half share of the property to her husband who later joined her in transferring the property Ho the purchaser. The Director disregarded the transfer as fictitious for the same reasons,that he rejected a like transfer-by .the appli5 cant lo her husband in .the above recourse. Much the same arguments were raised in this case in support of the sub­ mission that the Director lacked power 'to-disregard the implications of the gift of the property to "the 'husband. Further,-it was submitted that the provisions of the Capi10 tal Gains Tax Law—52/80, .providing for the assessment of the value of the land as -at 27.6.78—that is a date prior to the enactment of the law—are unconstitutional as in­ volving the imposition of retrospective taxation, contrary to the provisions of -Article -24.3 of the Constitution. In 15 Panayiotou, supra, it was decided that neither submission is valid in law and held it was at the least reasonably open to the Director to disregard the transaction as fictitious. It is unnecessary to reproduce the discussion of the points de­ bated and the reasons for my conclusions. The attachment 20 of a copy of the judgment in that case to be read as an inseparable part of the judgment in this case, will serve the same purpose. And it is appended hereto, accordingly. 25 30 35 Counsel raised no argument before me that I 'should de­ part from the conclusions reached and -the decision arrived at in that case. However, I find it useful to refer-by way Of appendix to that judgment to a decision of 'the House of Lords that has come to my notice andilluminates, I believe, the breadth of the power of the tax Authorities to go 'be­ hind the apparent effect of a transaction and treat it for purposes of taxation according to its true effect. The case is that of Coates v. Arndale Properties Lid.i It was decided that the transfer of a lease -of .im­ movable property'from a:meniber-'of .a.group <of^companies ito another,'recorded as *a'trading transaction,'leaving -the member of a "group with a loss accounted for as a-revenue "loss, could <be disregarded as the item was never, sin;point •of-fact, treated"by the Group "as 'anything -other than a I '719851 "1 'All -E:R. Ί 5 . "23!9 Pikis J. Uyou v. Republic

(1986)capital asset that did not change real hands as a result of the transfer. By analogy and by process of the same reasoning the transfer of the property in this case to the husband did not really result in a change of ownership. The applicant remained the true owner with the husband playing the role of an agent who promptly complied with the wishes of the principal, implementing her wishes by doing what she had bargained to do, that is. transfer the property in the name of the purchasers. 5 The recourse fails. The decision of the Director is con- 10 firmed pursuant to the provisions of Article 146.4(a) of the Constitution. There shall be no order as to costs. Recourse dismissed. No order as to costs. 2320