3 C.L.R. 1988November26 •^ — t ...·· *." „ [KOURRIS.J.] INTHE MATTEROF ARTICLE 146 OF THE CONSTITUTION , ' ·*" ' ;XklNrrASTEPHANOUIOANNIDELTD^ , -* · ' -ί * . , , .- .u * . f !! :,.j'.- ; *r .': :. "'' Dv. ... . •ι . v „. \ ., *; ; ,r iM,. Applicants, V. : ι THE REPUBUCOFCYPRUS,THROUGH 1.THEMINISTER OF FINANCE, 2.THECOMMISSIONEROF INCOME ΤΑΧ,Λ Respondents. o- , ·, . ; ,t., l; (CaseNo.94/87). Taxation—income tax—Sale of land—Profit therefrom—When liable to in cometax—Principlesapplicable—Reviewof authorities—The nature of the question. Taxation—Assessments—Judicialcontrol—Principlesapplicable. The applicants area family company incorporated in 1969. Itsshare holders were theparentsandthechildrenof a family. Themainpurpose of thecompany was toacquiretheimmovable propertyof theparents:Thecompanyacquiredsomeimmovable property from thesaidparents in 1973.In 1976 thecompany sold suchproperty.Therespondentstreated theprofit as being liable toincometax and,as aresult,they raised thesub judice assessment. Thesubjudice assessment was impugnedon twogrounds,namely: (a)That itwas raised after theexpiration of 6 years from theyearwhen theprofit was supposed tohavebeen realized. (b)Thattheprofit was wrongly treatedas trading profit. 2295 Akinita Stef.Ioannides v. Republic „
(1988). Held,annullingthesubjudicedecision: 0 ) On the totautyof the materialplacedbefore theCourtittranspired thattheassessmentwds,raUiid'6W31.12.1983,and.therefore,itis notout oftime. WOrrUTITEHOD3HT^ 0dMHJJiTf AHOΛ-ΠΤΑΜ3HTr/H
(2)The taxabilityof profitsfromthe saleoflandisaquestionof mixed 5 law and fact.In.thiscaseineitrierjUie.companynor itspromoters weree^ a&^n^Vmi$i^aia}U Ublearthatinthiscasein sellingthepropertiesinquestionthe companyrealisedaninvest.^n&u^rnenLltwasiKXreasorm^ liabletoincometax. .·/ Subjudicedecisionannulled. HOUOilHT.2U5NYDHOONatoraefiaSiuttosts. .33WAWH HO ίϊ-ΓΠ,ΐνΤΜ ciHT .1 Casesreferredto?AT HM03TH30ίΏΜΟίΖείΜΜΟΟHHT .S 10 Koussoumidesv. TheRepublic
(1966)3CIA. 1; '^Wairi&s'v?¥neRepublic
(1967)3CL*. 146; 15 Agrotisv. ΓΛίCommissionerofIncome Tax, 22CX.R.27; Georghiadesv. TheRepublic
(1980)3OLA. 525; -OKorta?Ji.MoPf πιbtJsiiH^oi'i.i ^nsqmoa v^inus*κ snuiEJtisoilqqi;orfT Ή 3Koqu:q nier/» orfT.χϋπτκ^ c*ϊοnoiblirfoOill hneslnsiaqorfl &XQW yisbJori f Turner.v.U2t/,
(1965)42tX.ed517;[;miainociwiiupan incqinoj odT fcsierisingbmxpcr.*J,'r .vmqmq rouefclozvu*qjhu>c:liο Γ ΰΙ ra.£VQi»f: *'^^^fsti^n^ra^mriim^i τέ/άΰ^1::' ? 20 ?at ™i5ft* Recourse.?moil AJVV αΊοnoiJffdqx? ad)*ifr,bathi *"'W JiJfiriT(E) .basilssn BOOTav£dαiv.'vyn^ K;-JiUcnt;^.'i Recourse againstincome taxassessmentraised on applicants . f ? f l i t o i i C n v ; uϊ η Λ for theyear 1 $ ? ? ^^ ^ ^ " ' ^ * -'·'*-' w 25 r 2296 ~ . . A. cr (&8QI) aiiduqaH ,ν sabiantio! Ssi'-i eiinlsSA .l/shino/I 3 CXJR. AUaha Stef.Ioannidesv. RepubHe V nl -f?i safiQjfi .d*I .JU.O £( W t ) oMu^5V^\T .ν ιΑ'πίιΛΑ i .HS.• P S % f i ^ ^ J ^ f e « u \ t t t o aasoarfJ 2£ίίTxircOsmaiouZ milίο rionsS ilirl srii (<?dd-Vdd as§£q JB ,C£d 3ni-ofii^PJi^ifSSilS^ffP^P^-Hrrj TB3fo yilnfibmidfi if stem -ibIon liiw JTUOO airb nsib'.moriJ OJ nsqo ^idfinozfisi 2£w rtotrfw -fija Ylzzdiqxa zi li 232£0 XBJsrriooni πι <ttomi$£r&V.$(HBi'&8fffηΒ Jfirii nooDaril vlteitoa OJnabiudsift JUHJzwal ifiuvslsi 3rfr aib3J 5 ΟΙ of theyear
- v,dt rbiv/ oonifrioaos n't mdi bsu^us infioiiqqfi arilTO!tozniroO TwifeSsiu 32I£srii01 qu bsd ?Jnabnoq23iarb ,8Y\£ WBJ jnevstei 10 Y^ilftej.applicantsrissthe^comflanyn" ? • IaBtotof'KtimaiA'private limitedxompanyi..wjijch^as;iricorpoiat4 edin
- TheirompanycisiafamilyACompa^ parents andtheirchildren andthemainobject for which thecompany.(}vasiformedvwasrto acquirethefamily piopeity»registered in 15 thejoaroftjofithe^parentSj-MariayandcStephan^^ applicants have acquired from thepromoterof thecompariyiMr;^ Stephanos Ioannides,abuilding site,Registration No.22433 and £c a!fieldjRegistrationritiob2461:2iiniexehange~for another,ifield which thecompanyowned. In 1976 theaforesaid two properties 20 were sold by thecompanyandtherespondentsbeing of theopin ion that it was aigain made in:an[operation;of;business:'i.e..trad ing in landhave assessed applicants topay incometax inrespect q&tfiepiofitiheyjrealized ta ties.Henc^ithepTesemtirccourse.'Toqu bsiTusdnia to «fans! ni bsba-a go sbfifn nssd 2firi J£rb nieg to rrua sd; isritortw to sbsu lo a-zuian 25 THE LAVKruoitf £gnisilssi yd SI/LEVίοinsmiwasito sism ua&w >Supi _ probrafefcT sfffafyitie Court ftfo^dfcdiffmfiafe^^ ject matterof therecourse.This was followed inthecase ofRallis 3ΜΪ 2297 Kourris J. Akinita Stef. Ioannides v. Republic
(1988)Makrides v.TheRepublic
(1967)3C.L.R. 146,atpage 153. In thecaseofLilianGeorghiadesv.TheRepublic.
(1982)3CX.R. 659,atpages667-669,theFullBenchoftheSupremeCourthas madeitabundantly clearthatiftherespondents'decisionisone whichwasreasonably opentothem,thenthisCourtwillnotdi- 5 sturbsame.Furthermore,inincometaxcasesitisexpressly statedintherelevantlawsthattheburdentosatisfy theCourtthatan assessmentisexcessive,isonthepersonwhoattackssame(see Section 21sub-section
(2)of theAssessmentand Collectionof TaxesLaws1978-1979).Thislawappliesalsotothespecialcon- ,Q tributioncasesbyvirtueofSection6ofLaws34/78and55/
- Counselfor theapplicant argued thatinaccordance with the relevantLaw4/78,therespondentshaduptothe31stDecember, 1983,toraiseanassessmentinrespectoftheyear 1977,i.e.they hadaperiodof sixyears.Hewentontosaythattheyfailed todo ,~ soandconsequentlytheassessmentisoutoftime. Thesecondgroundonwhichtheapplicantsbasetheirapplication isthattherespondentswronglytreatedtheapplicantsastradersinland. Theissues,therefore,whichfallfordetermination arethefol- 20 lowing: (a)Whethertheassessmentraisedisoutoftime. (b)Whether theapplicant company canbetreatedashaving tradedinland,orembarkeduponanadventureorconcerninthe natureof trade or whether the sumof gain that hasbeen made 25 wasamereenhancementofvaluebyrealizingasecurity. i " ^) Withregardtothefirst point,totheeffect thattheassessment $jflscd isoutoftimelearned counsel fortheapplicant,reliedon Thefactthatthe,taxpayablewasexpressedin"cents",whichthis monetary expression was not in force on the 31st December, 30 1983,butcameintoforceinJanuary 1984.Also,hesaid,thatthe boxof theright-handtopof theassessment hasthenumber77/ 2298 3 CX.R. Akinita Stef.Ioannidesv.Republic KourrisJ. 84/01/010whichmeanstheassessment wasraisedin 1984and notin
- Counselfortherespondents submitted thatthesubjudiceassessment wasraisedon31stDecember, 1983,andrefers tothe 5 yearofassessment 1977andthatitwasaddressedtotheapplicant byregistered letterdated 31stDecember, 1983.Hesaidthatthe fact that thenumberontheright-handsideof theassessment bearstheyear 1984doesnotmeanthattheassessmentwasraised in 1984.Theassessment wasin fact raised anddispatchedon IQ 31stDecember. 1983, but,fordata-processing purposes by the . computer,forallassessmentsraisedafter the25thofeachmonth there arereferences of thefollowing month. Andthat inthe presentcasethemonthreferred toontheassessment isJanuary 1984»ie.,thenext month following. With regard totheargute ment thattheamountoftheassessmentisexpressed in"cents" andnotin"mils",learnedcounselfortherespondentssaid,that all assessmentsraised after the23rdDecember, 1983, wereexpressedin"cents"forcomputerpurposesasitappearedfromthe attachedcircularNo.380dated 17.12.1983(seeExhibit 1)issued 20 bytherespondentcommissionertoallassessingstaff. " „ Ihaveconsideredtheargumentsofbothcounsel,andinview ofthematerialbeforemeandinparticularofexh. 1,1havebeen satisfied that theassessment was raised anddispatched on the 31stDecember, 1983, i.e.withinsixyearsfrom theendofyear ofassessment concerned. Therefore thesubjudice assessment wasnotraisedoutoftimeandthispointfails. Inowturntothesecondissueconcerned,i.e.whethertheapplicant companycanbetreatedashavingtradedinland,orembarked upon anadventureorconcern inthenatureoftradeor whetherthesumofgainthathasbeenmadewasamereenhancementofvaluebyrealizingasecurity. Thetaxabilityoftheprofits from thesaleofonebuildingsite andanotherpieceofland,anissuesuchasthepresentoneisan issueofmixedlawandfactwhichhastobedecidedinthelightof 2299 Kourris J. Akinita Stef.Ioannides v. Republic
(1988)the particular circumstances of each case. This has been laid d£wninWbaWfif J®WffiW«i«P 'eV^ffioneP^tic)ik^ Tax, 22 C.L.R.27 atpage 30 which adoptsanumber d f ^ i ^ s r p n cases. ? p "oibutduz aril jarii baiiifaduz zinsbriuqaai arilιοίbznuoLo Ji J , i * niS test'ia?lfe 'u-s^a rekB^B?£^xfi^SW^MWeS^ 5 ^ j . '.<;j2'i '..!.' >J j»-'i Liru;:! 'rig to: ' - " J:i".'fi if* '.s ί "-Λ c .ία.ι zc. Jat!i.ii3<-2J sdi i d tu>jm'jr.. "„ob 201Ίω\{atlji-'-a" n o '""}£wcficase"rnSstοέcbn\i&eredaccorftngtoits"facts^the0· ^question'to^be a^rininea"*einjhs the sum of^in-'tHiPhas c i<£ r ;b«r^earrarl^^^ v 'oiis'ifa^gaiimade^hanopefatib'n ofbusinessifrcarryingout11"a^IicWi foi'Pffitiiud(Sn|?,,w β Λ * 3 Λ Ί i u l 1 ,; '- biy a ' f > ' u,°zfl tfie'above testwas'adoptecHn-Agrotis case (supra)andalsoin' t f Itj receht'EriglisJrcases. On thrsame'F>ointassistance'may also be 15 derived from the caseof'Lilian'Georghiades v~:fiteARepublioli
(1980):3 C.L."kr525 atpagS,544-540nd?oTPappefl; undeY*tneir heading: Considerationsrelevant toa*e'termine<whether areceipt ,u u constitutesincome. ύ ' ' ' ' l 0 : ' "*'J r v · " In theAgrotis case (supra),whbse'facts resemble triefacts1of 20 the presentcase Hallinan, C.J.putthe'tesYas follows: whe'thera companyincorporatedunderthecompariie's la\v whicfi'sellscer-tainlandis merely realizing aninvestmerit'or is selling""acurrent assetinthenatureof itsstockandtradesothatanyresultingprof itis notacapital accretionbutis atradingprofit liable toincome 25 tax. Learnedcounsel for the respondents suggestedthattheappli cantstradedinlandandtherefore anyprofit theymade is'taxable. He said thattheCourtindeciding whether therels anadventure or not maylook at,the objects of the companyandthatatlooking - 3Q atthe objects of the applicantcompany tradinginlandis thebasic object of the company. Healso said thatthe Courtshould take intoconsideration theperiod of ownership of the land and if the 2300 3$ * # . Akintta/5teii lo&rmidei iL.KepiiblicA Kourris-<Jtf owne.rs.bipi ofvtbQ^aiwirisofbr-atsigjitplmodtairi^mseMitdsiitir thejlighiiof^uiqia^U^u^y^jcharacieristic jif.a-petsanaut hold1an» 5i?j?«^ihir>i^p€^feSTZi/ii^ (£96^)i4r3iai. €bifi72>-iHcialsojpoirite* out^QhanQthe/^criterioi]^ tra!«a<^ns byAhssameit^^ toniandSPn^alayiJSarf^B^^l UBM: loidHeiSaiditheiapr. plicants S^iaronheith^la^ tiorjitQ tjadeinjlandibinnBoi zonfirtqaiB οί χΐηο ion it blozbed γρώ ^9rii ifoiriw bnal to iolq aril ,gnili32 ιοί baxfij sd wmmo χρή] ,yruiq iif 10 Learnedcounselfor th£;applkGante^ugg^tedjtJiat^ company is a family company ·which was formed by Stephanos IoaimidesiaiidriiisijwifeiiijjilftoSj fa^the purpose)Ofeacquiririg]the propertieglo&^ejpiampjeT^^ pany were nottodeal inland.Ifhis is evident from the memoranU dutntpfjthejcomT^ny ^bjcfcuji4erjparagraph£(a) isistated:.uv ni. ^1 zinuorlqqB srij ierlJ noizuionoo sriirfor»3ioi Tono'tzzimtnoo Jasb -ilo^EIirSut^ttiKStoitftί ^ ρ ^ ι θ λ ο κ λ ή ρ # υ tfii μήματος-τηςί ακινήτου περιουοΐας της ανη>ωύοιΐ9ίξΐςΰ;ηνίΗ;ΓΜαρία:Στ;) Ιωαννίδουκαι/ήτονκ.Στέφανο Ιωαννίδη." 5^ -ΊΟ ΟΠ fbiw l u d ftb3333U2 ίΚΊΟΟϋβΙ 3flj ( 23ΰΠβί2σΐί/3Ίί3 323ffo ill He went on to say that clauses 2(β), (γ) and
(6),ai»;clausesb 20 which empower acompany todeal in land but these clauses are 0£ standajrj&clausgg;}^ inthememorandumof asso ciation of altc^mpanieSiregistered inCyprus. Inthepresent case the applicantexchanged aplotof land with Stephanos Ioannides which they subsequently sold and it is the proceeds of this sale 25 thatare being taxed in thepresentcase.Hesaid,thatif insteadof receiving aplotof landinexchange,applicantshadreceivedfrom Stephanos Ioannides money, that money would not have been taxable because if mat money were taxable applicants ought to have been taxed ontheexchange of properties as well. 2Q I have considered carefully the submissions made by both counsel anditappears thatinthepresentcase theapplicantcom pany which is a family company was formed in orderto acquire immovable property registered in the name of StephanosIoan nides andhis wife. And neithertheapplicantcompany norSte23QUS KourrisJ. Akinita Stef.Ioannides v.Republic
(1988)phanosIoannidesorhiswifeengagedthemselveseverintrading of landthemselves.It isclearthattheapplicants in 1976when theysoldtheparticularpieceoflandwhichtheyreceivedinpart exchangefromStephanosIoannidestheywerenotembarkingin anadventurein thenatureof tradebutweresimplyrealizingan 5 investment. They were liquidating their asset. And since they wouldnothavebeentaxediftheyhadreceivedmoneyfromStephanosIoannidesforthealienationoftheplotoflandandonlyif theyhadsolditnotonlytoStephanosIoannidesbuttoanyother party,theycannotbetaxedforselling,theplotoflandwhichthey 1 0 receivedinpartexchangethreeyearslater. Thisisnotanordinarycaseoftradinginlandwherethereisa purchasewithaviewofsale,thenanactualsaleataprofit Inviewoftheaboveitwasnotreasonablyopentotherespondent commissioner to reach the conclusion that the applicants tradedinland andtherefore, theirdecisiontoraiseontheapplicantstaxisnullandvoid. ^ Inthesecircumstances,therecoursesucceedsbutwithnoorderforcosts. Subjudicedecisionannulled. 20 Noorderastocosts. 2302