(1988)1988December10 [A.LOIZOU,P-l INTHEMATTER OFARTICLE 146OFTHE CONSTITUTION G.AJ>.ESTATES LTD., Applicants, v. THE REPUBLIC OFCYPRUS,THROUGH 1.THEMINISTEROFFINANCE AND/OR THECOMMISSIONER OFINCOMETAX, 2.THEATTORNEY-GENERAL OFTHEREPUBLIC, Respondents. (CaseNo.417184). Taxation—SpecialContribution—Rents—TheSpecial Contribution(Temporary Provisions) Law, 1976, para. 3 ofSchedulethereof, as replaced by Law34178—Thedeductionof25%ongrossrentsandoftheintereston the capitalborrowedfor acquiringthebuilding—Claimfor deductionofactual expensesofrunning theproperty exceedingthesaid25%—Rightlyturned down—Thesaidprovision isnotrepugnanttoorinconsistentwithArt. 23, 24and28oftheConstitution. ConstitutionalLaw—Righttoproperty—ConstitutionArt.23—Para.3 ofthe Scheduleto theSpecial Contribution(TemporaryProvisions)Law, 1976, as replaced byLaw34178, isnotcontrarytoArt.23,becauseitneitherrestrictsnordeprives theapplicantoftherighttoownproperty. Constitutional Law—Taxation—Constitution, Art. 24—Para. 3 of theScheduletotheSpecial Contribution(TemporaryProvisions)Law 1976,as replaced byLaw34178.cannotbe contrarytoArt.24,becauseitisnotataxingprovision,butaprovisiongrantingrelieffromtaxation. ConstitutionalLaw—Equality—Constitution,Art.28-^Para.3oftheSchedule totheSpecialContribution (TemporaryProvisions)Law,1976,asreplaced 2420 3 C.L.R. G.A.P. Estates v. Republic byLaw34178isnotcontrarytoArt.28. ConstitutionalLaw—Equality—Constitution,Art.28—Thelatitudeenjoyedby legislatorinenactingtaxationlaws. 5 ConstitutionalityofStatutes—ExaminationofbyCourts—Principlesapplicable. Thefacts of thiscaseappear sufficiently from thejudgmentof the Court Recoursedismissed. Noorderastocosts. 10 Casesreferredto: s \ \ \ TheBoardofRegistrationofArchitectsandCivilEngineersv.Kyriakides
(1966)3C.L.R.640; Xydiasv.TheRepublic
(1976)3CX.R. 303; NicosiaRaceClubv.TheRepublic
(1984)3C.L.R.799; 15 KissonergaDevelopmentv. TheRepublic
(1982)3C.L.R.
- Recourse. -.' Recourseagainstthespecialcontributionassessmentsimposed on applicant for the quarters ended in the period 1st January, 1978to31stDecember,
- 20 M.Vassiliou,for theapplicant. Y.Lazarou,for therespondent. Cur:adv. vult. 25 A.LOIZOU P.read thefollowingjudgment. By thepresent recoursewhichwastakenoverbymeonthe 16thofMarch1988 from acolleague whohas sinceretired, the applicantcompany whichisaprivatecompanyoflimitedliabilityincorporatedinCy2421 A.Loizou P. G.A.P.Estatesv.Republic
(1988)prusin 1964,seeksadeclarationoftheCourtthatthespecialcontributionassessmentsimposedbytherespondent Commissioner for thequartersendedintheperiod 1stJanuary 1978to31stDecember 1980arenullandvoidandofnolegaleffect whatsoever. Theapplicant Companyderivesitsincomefrom rentsfrom a 5 block of flats in Regaena Street, Nicosia which was acquired from A.Vassilopoulos(R.E.W)Ltdonthe21stMay
- Theapplicant Company submittedauditedaccountsprepared byitsauditorfortheyears1978,1979andl980,togetherwithreturnsofchargeableincomeforincometaxpurposes,butdidnot 10 submitsimilarreturnsinrespectofincomeliabletospecialcontribution. The respondent Commissioner after examination of theaccounts,discussedthepointswhichwereraisedwiththeapplicant Company rsauditorandthecomputationsofchargeableincome 15 for income tax purposes were agreed subject tocertain adjustments.Computationsofchargeableincomeliabletospecial contributionwerealsodiscussedandagreedthatspecialcontribution wasleviabeinrespectof this,inaccordance withtheprovisions ofparagraph3oftheScheduletotheSpecialContribution (Tem- 20 poraryProvisions)Laws 1978to
- Accordingly therespondentDirector,leviedspecialcontributionforthequartersendedintheperiod 1stJanuary 1978to31st December 1980 andNoticesforSpecialContributionleviedwere senttotheapplicantcompanyonthe14thMarch,1984.Theappli- 25 cantCompanyobjected totheseassessmentsbyletterofthe24th April, 1984ontheground thatexpensesincurredintheproductionoftheincomeofapplicantCompanyshouldbeallowedasa deductionincomputingtheincomeliabletospecialcontribution. The respondent Director after acareful consideration of the 30 groundsofobjectionraisedbytheapplicantCompanydecidedto reject itsobjection andproceeded withthedetermination ofthe specialcontribution levied.Hisdecisiontogether withtherele2422 3 C.L.R. 5 10 15 2Q 25 30 G.A.P. Estates v. Republic A.Loizou P. VantNoticesof Special Contribution payable after objection was communicated to the applicant Company by letter of the 28th May, 1984wherein it was stated that the deductions already allowedwerethoseprovidedfor bytheLaw andthatthoseclaimed could not besoallowed, notbeingsoprovided forbytheLaw. HencethepresentrecourseWasfiledwhereby itwassubmitted bytheapplicantCompany thatparagraph 3oftheScheduletothe Special Contribution (Temporary Provisions) Law, 1976 (Law No. 15of 1976)and asreplaced subsequently byLaw No.34of 1978whichprovidesthat incomputing the incomefromrents,a deduction oftwenty fivepercentof such grossincomeisallowed as well as the interest on the capital borrowed for acquiring the building the rent of which is subject to the payment of special contribution isarbitarry and unreasonablein that it excludesthe possibility that the actual expenses of running the properties yielding rent may,in actual fact, asis the case in thepresent instance, be more than the amount of 25% and also that in any event itdoes not provide for relief but is basically a methodof calculation ofthechargeableincomefromrents. It wasfurther contended that suchprovision is unconstitutionalasbeingcontrarytoArticle23inthatitisoppressiveanditinterferes thus with the applicant Company's right of ownership; alsothattheLaw byfixing aflatrateof25% iscontrary toArticle 24beingthusof adestructive natureinthatitpreventsownersof old buildings from effecting the necessary repairs from income fromrentsafter paymentofspecialcontribution. ~ Finally itwasargued that suchprovision iscontrary toArticle 28oftheConstitutioninthatitcontravenestheprincipleofequality,inthatit placesowners of old buildingsin the sameposition asownersof new buildings. Issuesof constitutionality are notnormally determined unless itis absolutely necessary to adecision of thecase andunlessthe constitutionality of a law is specifically challenged. But even then, the Court will not examine or determine such questionsif 2423 A. Loizou P. G.A.P.Estates v. Republic
(1988)put in abstracto.SeeTheBoardofRegistration ofArchitectsand Civil Engineersv. Kyriakides
(1966)3 C.L.R. 640 atpp. 654655; also Xydias v. Republic
(1976)3 C.L.R. 303 where it is stated atp.
- "Inconsidering thequestion ofconstitutionality of astatute 5 we have to be guided by certain well estabished principles governing theexercise ofjudicial controlof legislativeenact ments. A ruleof precautionary natureis thatnoactorlegisla tion willbedeclaredvoidexcept inaveryclearcaseorunless theactis unconstitutionalbeyondallreasonabledoubt." ^ Inthepresent case we mustnot loose sightof thefact thatwe arenotconcernedwith acaseofincometax wheretheimposition of tax ismadeonthechargeable incomeof thetaxpayerwhich is derived atafter deductionsbutwith acaseof specialcontribution where thegrossincome from rents is charged andsimilarly the 15 deductionof 25%is onthegrossamountof such income. There is nothingunconstitutionalaboutthat.Inanyevent even if assum ing thatsuchdeductionataflat rateof25%isinrespectof theex penses of theproperty yielding rent thereis noevidence before methattheactual expenses of thisparticularproperty aremore 20 than 25% of thegross amountof rents. A statementof account hasbeenproducedas anexhibit of theincomeandoutgoings of therespondent Company, but Ifeel thata distinction has to be madebetweem theoutgoings andexpenses of theCompanyitself whichconcernthematterof ascertaining thechargeable incomeof ^5 theCompanyundertheIncomeTaxLaws, andexpenses incurred inrespectof theupkeep of thepropertyitselfwhich is a different matteraltogether. As regards further arguments advancedonbehalf of theappli cant Company Iconsider thatparagraph 3is nota taxin'g provi- ^0 sion as alleged but is a provision giving relief from taxation, therefore,Article 24 has noapplication,buteven if applicable, I would consider thatitis neitherofadestructive norof aprohibi tivenature.See.Xydiasv.Republic (supra)atp.3Ϊ1: 2424 3C.L.R. 5 G.A.P.Estates v.Republic A.LoizouP. "Ihaveconsidered theargumentsofcounsel for applicant, asfar asIhavebeenabletoapprehend them,andImustsay from theoutsetthatIfindnomeritinthem.Themerefactthat thedutypayablebythetaxpayerishigherthanthenetprofit madebyhimfromthebusinessinconnection withwhichthe taxispaid,doesnotrenderthelegislativeenactmentimposing suchtaxofadestructivenature." SimilarlyIconsideredthatArticle23isnotapplicableeither, therebeingnodeprivationorrestriction oftheapplicantCompa10 ny'srighttoownproperty. Finally withregardtoArticle28thereagainisnocontravention, therehavingbeenestablished nodiscrimination asagainst theapplicant Company,aspropertyowner.In anycase,aswas relevantly statedinXydiasv.Republic(supra)atp.
- 15 "Whentaxation lawsareattackedontheground thatthey infringethedoctrineofequalitythelegislativediscretionisperx mittedbythejudiciaryagreatlatitudeinviewofthecomplexityoffiscaladjustment; inotherwords,thepoweroftheState toclassify forpurposesoftaxationisofwiderangeandflexi20 bility. (Matsis v.TheRepublic
(1969)3C.L.R.245atpage 259.)" SeealsothecaseofNicosiaRace Clubv.Republic
(1984)3 C.L.R.799atpp. 813-814. 25 InHM. Seervai 'sConstitutionalLawofIndia(2ndEdition), Vol. 1,itisstatedatp.211 ontheprincipleofequality. 30 "(h)Evenasingleindividualmaybeinaclassbyhimself onaccountof somespecialcircumstancesorreasonsapplicabletohimandnotapplicabletoothers;alawmaybeconstitutional eventhoughitrelatestoasingleindividualwhoisina classbyhimself." Andafurther passagefrom Seervaiatp.222wascitedinthe. 2425 A. Loizou P. G.A.P.Estates v. Republic
(1988)case of KissonergaDevelopmentv. Republic
(1982)3 C.L.R 462 atp.487,acase dealing with theimposition by the Council of Ministersof apercentageof 3%tobeaddedtobillsfor sleep ingaccommodationorentertainmentofclientsofhotelandtourist establishments andplacesof entertainmentwith theexceptionof 5 thoseonmountainresorts: "However, it was held inEastIndiaTobacco Co. v. A.P. 19631SCR404,409
(62)A. Sc 1733thatthewidelatitude givenbyourConstitutiontothelegislature inclassification for taxationwas correctlydescribed inthefollowing words: IQ Ά state does not have to tax everything in order to tax something.Itis allowed topickandchoosedistricts, objects, persons,methodsandeven ratesfor taxationif itdoes sorea sonably ...The (U.S.)Supreme Courthas been practicaland has permittedavery wide latitude in classification for taxa- 15 tion."1 InconclusionIfindthatthedecisionsof therespondent Com missioner toimpose Special Contribution ontheapplicant Com panywas inaccordancewith theprovisions oftheLaw. Forthereasonsstated above thisrecoursefails andis hereby 20 dismissed andthesub-judice decisions areconfirmed. In the cir cumstancestherewillbeno orderastocosts. Recoursedismissed. Noorderas to costs. 2426