3C.L.R. 1987 August 29 [A LOIZOU J ) INTHE MATTER OFARTICLE 146 OFTHE CONSTITUTION, SOPHIAΝ KOUPATOU, Applicant, ν THE REPUBLIC OFCYPRUS, THROUGH THE MINISTER OF FINANCE, Respondent (Case No 5 10 1037/85) Capua!gains~ T^eCapitalGainsTaxLaw52/80—Section 4— Therecan be no gam unless there isa disposal— Agreement to sellland made un 31 1 80 rescindedby anew agreement to sellthe same as wellassome otherpartof the sameplot to the sameaswellasto anadditional new purchasermade on 12282—First agreementnever put intoeffect— Nogaindenved therefrom — Respondent nghtfyconcludedthatthe disposalof theland,subject-matter of thefirstagreement,tookplaceon 12282 By an agreementinwriting dated31 180 theapplicantagreed tosellpart of herproperty (a field comprising of 15 donumsand3 evleks), of aYi extent of5donumsand2evlekstoMessrs Ch TsmtidesandΕ EUades On 12 2 82 the applicant entered intoa new agreement with Armonia Estates Ltd and Messrs Tsinbdes and Eliades, whereby the said agreement of 31 180 was cancelledandthelandwas sold toArmonia EstatesLtd 15 As a result the respondent charged the applicant with capital gains tax takingtheviewthattherewas adisposal ofpropertyasat12 2 82,which was subject totax 20 Hencethepresentrecourse Thedisputebetween thepartiesconcernsthe date of disposition of the aforesaid 5 donums and 2 evleks Inthis respect counsel for the applicantsubmitted thattheagreement of 12 2 82 is a mere consequenceof the agreementof31 180 and,insupportof this submission, referred, inter alia, to clause 9* of the agreement of 31 180, arguing that Armonia Estates Ltd were indicated by Messrs Tsinbdes and Eliades in exercise of theirrightunderthesaid clause toindicatea new purchaser 25 Counsel for the respondentargued thattheagreementof 12 2 82 is new and self-subsisting Itspurpose was notto give effect to clause 9 of the first Quotedatρ 979post 975 Koupaton v. Republic
(1987)agreement, butrathertoputan end tosuch agreement, which was never put into effect. Held, dismissingthe recourse:
(1)Inthe light of all thematerial before the Court, theCourtreached theconclusion thattherespondentrightly decided thatthedisposal took place on12.2.82.
(2)Thesubmission thatthegainwas derived from theagreement of31.1.80 is untenable. Indeed, from the wording of section 4 of Law 52/80 it is clear that there can be nogain unless there isa disposal and,as the agreement of 31.1.80 was never put into effect and was later rescinded, there was no disposalasat31.1.
- Recoursedismissed. No orderas tocosts. Recourse. Recourse against the decision of the respondent to charge applicantcapital gains taxamountingto£9,555.60 centaccruing 15 toheronthedisposal of partofafieldsituated atK. Paphos. X.Xenopoulos, for theapplicant. Y. Lazarou, for therespondent. Cur.adv. vult. A. LOIZOUJ. read the following judgment. By the present 20 recourse the applicant seeks a declaration of the Courtthatthe decision of the Director of the Departmentof Inland Revenue contained in his letter dated 30th September, 1985, whereby capital gains tax amounting to £9,555.60 was charged on the applicantinrespect ofthegainsaccruingtoheronthedisposal of 25 partof a heldcomprising of 8donumsand3evleksandsituateat Vrisoudhia in Kato Paphos, is null and void and with nolegal effect. Thefacts of thecase arenotindispute.Theapplicantwho was the registered owner of the whole field under Registration No. 30 3036, Sheet/Plan 51/19 plot 5,comprising of 15donumsand 3 evleks entered intoan agreement inwriting - Appendix Atothe opposition - on the 9th December 1978, to sell 7 donums to Armonia EstatesLtd.,for£91,
- Onthe31stJanuary 1980, she entered intoa second agreement in writing - Appendix Βtothe 35 opposition - whereby she agreed tosellafurther 5donumsand2 976 5 10 3C.L.R. Koupatouv.Republic A.LoliouJ. evleks to Messrs Charalambos Tsintides and Elias Eliades in consideration of onehouse andtwelve flats, tenof which were to bebuiltbythepurchasersonthesaidlandandtwoataplace called Sweet Water (Γλυκύν Νερό). 5 On the 12th February, 1982, the applicant entered intoa new agreement with Armonia Estates Ltd., and Messrs Charalambos Tsintides and Elias Eliades whereby the previous agreement between the applicant and Messrs Tsintides and Eliades was cancelled and the land was sold instead toArmonia Estates Ltd.. 10 together with the remaining 3 donums and 1 evlek in considerationofonehouseandanapartmentbuildingwhich were to be built on the land by Messrs Tsintides and Eliades in consideration of six building plots from Armonia Estates Ltd., Appendix C totheopposition-. 15 AsaresulttheDirectorof InlandRevenuecharged theapplicant with capital gains tax taking theview thaithere was a disposal of property as at 12th February, 1982, comprising of 8 donumsand 3 evlekswhich was subject totax. This imposition of tax was made by virtue of the provisions of 20 sections4and 13oftheCapitalGainsTax,Law 1980 (LawNo. 52 of 1980) which read as follows: 25 «4.Subject totheprovisions ofthisLawandtheexemptions contained therein, on any gains accruing from a disposal of property, there shall be levied and paid a tax at the rate of twenty per centumon such gains.
- The Directormay atany time, whether thedeclaration of adisposal of propertyhas been delivered ornot,assessthe tax payable with regard tothe disposal of property and send to thedisponerthereof a noticeof such assessment.» 30 The dispute between the applicant and the respondent concernsthedateof the disposition of the5 donumsand2 evleks of theimmovable property described above. It is the case for the applicant that the agreement of the 12th February 1982 (Appendix C), is the consequence of the 35 agreement of the31stJanuary 1980 inaccordancewith its Clause 9,which provides: «Upon the signing of this agreement and if asked by the Purchaser theSeller isobliged totransfer andregister thesaid 977 A.Lotion J. Koupatoav. Republic
(1987)property exceptthepartinwhichtheflatsunderitems 1A, IB and 1C and the house will be erected, in the name of the purchaser orany otherperson orcompany hemightindicate. Concurrently with such transfer the purchaser will furnish a guarantee for the construction and delivery of the flats and house given as consideration of a total area of about 800 sq. m. gross to the seller by way of mortgage of the rest of the property in favour of theseller forthesum of £100,
- 5 If the purchaser were to ask the cancellation of the mortgage in order to be able to mortgage same as a first 10 mortgage to a financing Bank, then at the same time he will enter into a second mortgage with the seller for a corresponding sumastheinitialone.Insuchacasethe height of the mortgage loan bythe bank atanytime willnot exceed 70% ofthevalueoftheworkperformed atthecorresponding 15 dates. Omission or refusal of the seller to lift the first mortgage gives to the purchaser the right to ask from the Court by summary proceedings the immediate issue of an order cancelling the first mortgage (first mortgage that exists until 20 that moment).» Itwasargued thatinexerciseoftheirrightsunderthesaidclause thepurchasersindicated totheapplicantthenewpurchaserasitis setoutintheagreementofthe12thFebruary 1982,named therein as Armonia Estates Ltd., and that the applicant signed the latter 25 agreementwithoutmakinganyprofit.Moreovershewasbound to signthesecond agreementbecause ofClause 14ofthefirstoneas she wouldhavebeen consideredasbreachingafundamental term of that agreement. Itisthe submission of the respondent that the subject property 30 wasdisposedbytheagreementofthe 12thFebruary, 1982,which as it is evident from its terms, is a completely new and selfsubsisting agreement theobject and purpose ofwhichwasnot, as isalleged ,to give effect to clause 9 of the agreement of the 31st January 1980, but rather to put an end to such agreement since 35 clause 9 could have been complied with without the need of entering into the agreement of 12th February, 1982, by simply transferring the subject property to Armonia Estates Ltd.The fact thatthepartiesentered intoanewarrangementwhich,apart from being substantially different from the old agreement also 40 introduced a newpartytothecontract, showstheirclearintention 978 3CUR. Koupatouv.Republic A.LohouJ. torescindtheoldagreement,whichwasneverputintoeffect -the landremainedintheownershipoftheapplicantandnobuildings were ever erected by the other party - and so treat same as abandoned or non-existent. That such was indeed the clear 5 intention of the parties is evident from clause 9 of the new agreement which expressly rescinded the agreement of 31st January 1980.The suggestion by the applicant that clause 9 is irrelevantcannotstand.Clause9ofthesecondagreementreads: 10 «9.The contracting partiesshall withdrawfrom theLands Office of Paphos the lodgment of the agreement of sale between the seller and themselves regarding the property subject of the sale simultaneously with the signing of this agreement.» OnthebasisoftheaboveIhavecometotheconclusionthatthe 15 Directorrightlyconcludedthatthedisposaltookplaceonthe12th February
- And also that the suggestion that the gain was derived from the agreement of the 31st January 1980, is untenable. It is clear from the wording of section 4 of the law hereinabove set out that there can be no gain unless there isa 20 disposalandtherewasnodisposal onthe31stJanuary 1980,as theagreementbywhichthesubjectpropertywastobedisposed wasneverputintoeffect andwassubsequently rescindedbythe new agreement which as it isclear from itsterms was the real instrumentthroughwhichthepropertyinquestionwasdisposed. 25 Foralltheabovereasons,Ihavecometotheconclusionthatthe subjudicedecision isinlawcorrectandconsequentlyshouldbe affirmed andthepresentrecourseshouldandisherebydismissed withnoorderastocosts. Recoursedismissed. Noorderastocosts. ^ 979