3 C.L.R. 1986 February 5 [TRIANTAFYLLIDES. P-l IN THE MATTER OF ARTICLE 146 OF THE CONSTITUTION ALPAN (TAKIS BROS) FAMAGUSTA LTD.. Applicants, v. THE REPUBLIC OF CYPRUS, THROUGH
- THE MINISTER OF FINANCE,
- THE COMMISSIONER OF INCOME TAX, Respondents. (Case No. 430/
- Special contribution—Assets in Turkish occupied area—Refusal to allow deduction for wear and tear—Failure to consider whether as a matter of proper administration such allowance ought to have been granted, even as a concession— Such failure rendered defective the exercise of the discretion of the respondent Commissioner. Special contribution—Interest paid on special contributions payable by applicants—Not an expenditure wholely and exclusively incurred in the production of income liable to special contribution—Not deductible in computing the special contribution payable by applicants in respect of the period during which such payment was made. Respondent 2 refused to accept for the purpose of computing the Special Contribution payable by the applicants for 1981 a deduction of £194, being interest paid on special contribution payable by the applicants and to grant an allowance for wear and tear under section 12
(2)fa) of the Income Tax Laws, 1961-1981 in respect of assets situated in the area of Cyprus, which is still under Turkish military occupation. 2465 Alpan (Takis Bros) v. Republic
(1986)Hence the present recourse. It must be noted that as it appears from the address of counsel for the respondents. the respondent Commissioner grants, as a matter of con cession, a wear and !ear allowance for income tax pur poses in respect of such assets in the occupied area. "> Held, annulling the sub judice decision in part: (A) There is some force in the contention of applicants' counsel that since the assets of the applicants in the Turkish occupied area are not to be treated as de finitely lost (George Tsimon Ltd. v. The Republic 10
(1980)3 C.L.R. 321, Geo. Pavlides Ltd. v. The Re public
(1980)3 C.L.R. 345 and Toumazis ν The Republic
(1984)3 C.L.R. 36) and since in respect of them a wear and tear allowance is granted for in come tax purposes, there ought not to have been re- 15 fused such an allowance for special contribution pur poses, if it was at all possible to grant it. It appears that ihe respondent Commissioner has not considered as a matter of proper administration whether there should be granted, even as a concession, 20 a wear and tear allowance. This· failure renders de fective the exercise of his discretionary powers. It follows that the sub judice assessments have to be annulled for this reason and to that extent. (B) The claim for deducting the interest paid" on special 25 contribution payable by the applicants was correctly turned down, because such interest is not an expendi ture wholely and exclusively incurred in the pro duction of income liable to special contribution. Sub judice decision annulled in part. No order as to costs. Cases referred to: George Tsimon Ltd., v. The Republic
(1980)3 C.L.R. 321; Geo. Pavlides Ltd. v. The Republic
(1980)3 C.L.R. 345; 2466 30 3 C.L.R. Alpan (Takis Bros) v. Republic Toumazis v. The Republic
(1984)3 C.L.R. 36; The Singer Sewing Machine Company v. Director ofDepartment of Inland Revenue
(1979)3 C.L.R.
- Recourse. 5 Recourse against the manner of computation of the special contribution payable by applicants in respect of the year
- G. Triantafyllides, for the applicants. 10 A. Evangelou, Senior Counsel of the Republic, for the respondents. Cm. adv. vult. TRIANTAFYLLIDES P. read the following judgment. By means of the present recourse the applicants complain, in effect, about the manner of the computation of the special 15 contribution payable by them in respect of
- 20 The applicants contend that the respondent Commissioner of Income Tax should have accepted the deduction of an amount of C£194 which was paid by the applicants as interest on the special contribution payable by them, and, also, that the Commissioner should have granted them a wear and tear allowance, under section 12
(2)(a) of the Income Tax Laws 1961-1981, in respect of assets of theirs situated in the area of Cyprus which is still under Turkish military occupation. 25 As regards the issue of the wear and tear allowance there should be borne in mind that it has been held by our Supreme Court in, inter alia, George Tsimon Ltd. v. The Republic,
(1980)3 C.L.R. 321, Geo. Pavlides Ltd. v. The Republic,
(1980)3 C.L.R. 345 and Toumazis v. The Re30 public,
(1984)3 C.L.R. 36, that assets in the Turkish occupied area of Cyprus cannot be considered as having been lost definitely, in the sense of section 12
(3)(b) of the Income Tax Laws. As it appears from the written address of counsel for 35 the respondents in the present case the respondent Com2467 TrientafyHides p. Alpan (Takis Bros) v. Republic
(1988)missioner of Income Tax grants, by way of concession, a wear and tear allowance, for income tax purposes, in res pect of assets in the Turkish occupied area of Cyprus. Counsel for the respondents has, however, argued that. because when the special contribution legislation was initially enacted .'n October 1974 the assets of the applicants in the Turkish occupied area were not any longer being used in their trade or business, no wear and tear allowance could be claimed in respect of them for special contribu tion purposes. .s Irrespective of whether or "not the above argument οι' counsel for the respondents is correct from the strictly le gal point of view, I do fmd some force in the contention of counsel for the applicants that, since the assets of the .applicants in the Turkish occupied area are not to be 15 treated as hav'ng been lost definitely and since in respect of them a wear and tear allowance is granted for income tax purposes, there ought not to have been refused such an allowance for special contribution purposes if it was at all possible to grant it. " · 20 From the material before me. and particularly from the letter of the respondent Commissioner of Income Tax dated 5th September 1983, it appears that the Commissioner of Income Tax has not duly considered whether as a matter of proper admin'stration and by way of relief to the appli- -5 cants in respect of their assets in the Turkish occupied area there should be granted, even as a concession, a wear and tear allowance in relation to such assets, not only for • income tax purposes but, also, for special contribution pur poses. In my opinion, the failure of the respondent Com- 30 : missioner of Income Tax to cons der this aspect of the matter and to give a reasoned decision in this connection renders defective the· exercise of his relevant discretionary powers with the result that the sub judice assessments for special contribution have to be annulled for this reason 35 and to that extent. As regards the issue of the deductibility of the interest paid on special contribution payable by the applicants I accept as valid lie submission of counsel for the res2468 10 3 C.L.R. Alpan (Takis Bros) v. Republic Triantafyllides P. pondents that this claim of the applxants is not wel1founded, in view of the fact that the interest concerned was not an expcnd:ture wholely and exclusively incurred in the production of the.income in respect of which special contribution is payable: and it ;s to be noted that such interest is deducted for income tax purposes because of the application of the specific legislative provisions in section 8 of the Special Contribut;on (Temporary Provisions) Law, 1978 (Law 34/78), in the light of caselaw such as 77;.*· Sinoer Sewing Machine Company v. The Director of the Department of Inland Revenue.
(1979)3 C.L.R. 507. For all the foregoing reasons this recourse succeeds in part only r.nd the sub jud:ce assessments'are-annulled onK ; n so far as in the computation of the payable by the applicants special contribution there was not included a wear and tear allowance in respect of their assets in the Turkish occupied area: and it is up to the respondent Commiss'on,"" of Income Tax to reconsider afresh the matter. I shaM not mAe any order as to the costs of tlvs iccourse. Suh judice decision pan.'· annulled. No order as to cn\i·,. 2469