clr/1988/1988_3_569.pdf

(1)ThisCourtcannotagreewith thetrialJudgethatsection32applies topersons engaged in aprofession irrespective of thebasis upon which theyareremunerated.Ifaprofessional personisengagedbyanotherincircumstancesestablishing therelationshipofemployerandemployeeandhe ispaid a salary then hecannot possibly enjoy thebenefit of s. 32of the Law. 5

(2)Thequestion whetheraperson iscarryingonaprofession andderives hisincomefrom theexerciseofhisprofession isaquestionoffact.

(3)Thefactsof thiscasedonotestablish therelationshipofemployeremployee. 10 Appealdismissedwithcosts. Casesreferredto: Papadopoullos v. TheRepublic

(1968)3 C.L.R.662; CyprusCement Co.Ltd. v.TheRepublic

(1974)3 C.L.R. 304; 15 Davies v.Braithwite [1931]2K.B.628; Fall v. Hitchen [973] 1 W.L.R.286. Appeal. Appeal against thejudgment of a Judge of the Supreme Court of Cyprus (Pikis, J.) given on the 21st February, 1985 (Revisional Jurisdiction Case No. 458/82)* whereby the income tax assessment raised on the respondent for the years 1980 and 1981 was annulled. 20 A. Evangelou, Senior Councel of the Republic, for the appellant. K. ChrysostomideSy for the respondent. 25 Cur. adv. vult. * (Reported in

(1985)3 CL.R 63). 570 3 C.L.R. Commissioner of Income Tax v. Huebener Kourris J. TRIANTAFYLLIDES P.:The Judgment of the Court will be delivered byMr.JusticeKourris. KOURRIS J: This is an appeal by the Commissioner of Income Tax against theJudgment of one of the Judges of the SupremeCourtsittinginthefirst instance,whereby heannulledthe decision of theappellant Commissioner withregard totheincome tax assessments relating tothe income of therespondent for the years 1980-1981. 10 15 2Q The facts of the case which are not disputed, appear in the JudgmentofthetrialJudgeandareasfollows: "Theapplicant isanengineer inthebeerproduction technology, an expert in the field, as counsel for the respondent acknowledged. Ontherecommendation of theChairman, manufacturers of the sterilization plant imported byKEO wineand beer manufacturesrs, he wasemployed by the latter to advise on the management and maintenance of the plant, as well as help in the training of personnel in its use. His employment lasted for about two years; he was paid a monthly salary of £1,000 plus rent allowance of £150 per month. His wife stayed behind in Germany and looked after thefamily home, visiting Cyprus occasionally toseeher husband. Attheendof hisemployment with KEO,hejoined his family in Germany. Itisanincontrovertiblefact that applicant's stayinCypruswas meant from the beginning to beof limited duration; it ended when hisemployment byKEOcame toanend." 25 -n The Commissionerof IncomeTax taxed theearningsof therespondent for the years 1980 and 1981 under s.5(l)(b) of the IncomeTaxLawasemolumentsderived from acontractofemployment and hedenied him the benefit of section 32 by his letterof 14.8.82,which reads as follows: 35 "(a) Section 32of the law is not applicable in your caseas duringtheabovementioned years you wereresidentin theRepublic.You hadaplaceofabode inCyprusandyou stayedhere for aperiod ofmore than 6monthsineach incomeyear.Inthe circumstances, yourincomeisliable tobetaxed asper scaleof Rates in theSecond Scheduleof theLaw." 571 Kourris J. Commissioner of Income Tax v. Huebener

(1988)ThetrialJudge found thattheCommissionermisconceivedthe effect of s.32andtreateditsapplicationasdependentonthe pro­ visionsof s. 8(u)(i),exemptingfromtaxation non-residents tem­ porarily inCyprus,provided theirstaydoes notexceed 183days. Counselfor theappellantrealized thiserroraswellastheconfu- 5 sionunderwhich theCommissionerlaboured inhisappreciation of theconceptof ordinaryresidents,asencountered ins. 32.But counselfor theappellantinvited theCourttosustain thedecision onproperapplicationof thelaw tothefacts of thecase otherwise undisputed.Relying onthepropositionthatadministrative action ,Q is sustainable irrespective of theunsoundnessof thereasonsgiv­ en insupport of it,if on properapplication of the law the Deci­ sioncanbeupheld. (Miltiades Papadopoullos v. TheRepublic,

(1968)3C.L.R. 662; Cyprus Cement Co. Ltd. v. The Republic,

(1974)3C.L.R. , , 304. Counselfor theappellantsubmitted before thetrialJudge that though applicant may not be ordinarily resident in Cyprus, he cannotenjoy thebenefit of theprovisions of s'.32 of thelaw,be­ cause hewas employed as asalaried person andderived his in- 20 come during employment and notfrom his profession or voca­ tion. The trial Judge, after considering this submission decided againstitandheldthat apersonexercisinganindependentoroth­ erprofession orvocation(ioudipote eleftheriou iallouepangelma- -ς tos)is,unlikeincomeearnersresidentsof thecountrytaxable at a flat rateof 10percentonhisgross income.He said,onany defi­ nition of the word "epangelma", it includes professional persons engaged inaprofessional vocationirrespective of thebasis upon which they areremunerated.Heheld thatapplication of s. 32 is not dependenton thecontractualbasis of theservicesrendered butonthequality of theservices andif of aprofessional kindthe earnerisentitled tothebenefits of s. 32,provided heis not ordi­ narilyresidentinthe Republic. 572 3 C.L.R. Commissioner of Income Tax v. Huebener Kourris J. Itisagainstthisfinding that theCommissioner iscomplaining and this appeal,therefore, turns on the interpretation of s.32 of thelaw. Section 32reads as follows: 5 10 15 20 25 30 "Thegrossincomederivedbyanyindividual notordinarily resident in the Republic from theexercise in the Republicof any profession or vocation, theremuneration of public entertainers not ordinarily resident in the Republic, and the gross receiptsof any theatrical,musical orother groupof publicentertainers from abroad derived from performances in theRepublic (whether suchperformances areconducted for thejoint account of all or some of the members of the group or not) shall becharged totaxattherateof 100milsinthepound." Counsel for theappellant submitted that s.32of thelawisconfined only to individuals, not ordinarily resident in Cyprus, who derivetheirincomefrom theexerciseof aprofession orvocation, but does not apply to individuals who derive their income from employmentexceptpublicentertainers, He argued that s.32 applies toindividuals whoderive theirincomefrom theexerciseof aprofession orvocation butitdoesnot apply to individuals who derive income from employment, in other words, it does not apply to salaried persons, except in the caseofpublicentertainers.Personswhoderive their incomefrom employment aretaxable under s.5(l)(b) unless they areentitled to theexemption under s.8(u)(i) of theLaw which isthesection that applies topeople whoare notresidents of Cyprus and they work for lessthan 8months. Hecontended thatthetrial Courtfailed todraw thedistinction between the sources of income, inother words between income derived from aprofession or vocation and income derived from employment. An individual, he said, who derives his income from employment as in the present case istaxed under s.5(l)(b) of thelawand hedoesnotenjoy thebenefit of s.32of thelaw. 573 Kourris J. Commissioner of Income Tax v. Huebener

(1988)Counsel for therespondent contended that applicant is admittedly notordinarily residentin Cyprus,isexercising a profession, and irrespective of whether heisunder acontract of serviceora contract for sei /ices, he is qualified to enjoy the provisions of s.32 of the law. He went on to say that if we do not uphold the 5 trial Court on thisfinding then therespondent isagainentitled to be taxed under s.32 of thelaw becauseon thefacts ofthe present case he rendered his services under a contract for services in which case there is no relationship of employer and employee, and not under a contract for service. He supported his argument ,Q relying on the cases of Davies v.Braithwite [1931] 2 K.B. 628 and Fallv. Hitchen [1973] 1 W.L.R. 286. He submitted that thereisnofinding astothenatureoftherelationship between KEO and therespondent, the word "employment" used by the learned trial Judge in stating thefacts isade- ,<scriptiveword and refers notonly toacontract of service but also tocontractsfor services.He saidthat theuncontradicted evidence shows clearly that he was exercising an independent profession despite thefact that hewaspaidon amonthly salary basis. It appears from the wording of s.32 that there are three instanceswhereitisapplicable: -n (

1. a)to persons not ordinarily resident in theRepublic whode- ' rive theirincome from theexercise in theRepublicof any profession orvocation; (
2. b)to the remuneration of public entertainers not ordinarily residentintheRepublic;and 25 (
3. c)to the gross receipts of any theatrical, musical or other group of public entertainers from abroad, derived from performances inthe Republic. In the present case we are concerned with (
4. a)above and the 30 question whether aperson iscarryingon aprofession and derives hisincomefromtheexerciseof hisprofession isaquestion of fact. 574 3 C.L.R. . Commissioner of Income Tax v. Huebener Kourris J. Counselfortheappellantlaidstressonthefactthatthelearned trial Judge in stating thefacts said that the appellant wasemployed by KEO establishing, therefore, the relationship of respondentandKEOasoneofemployerandemployee. 5 JQ WedonotthinkthatthelearnedtrialJudgeinusingthewords "employed"and "employment" that hedecided that therelationshipof employer andemployeeexisted between therespondent andKEO,because,hereachedtheconclusion thats.32appliesto personsengaged inaprofession orvocation, irrespective ofthe basisuponwhichtheyareremunerated,provided thattheyarenot ordinarilyresidentintheRepublic. Wepropose tousetheneutral word "engaged"and"engagement"inordertoexaminethenatureoftheengagementoftherespondentbyKEO.Accordingtotheevidenceoftheonlywitness, 15 Angelides,therespondentwasengaged toadviseonthemanagementandmaintenanceofthesterilizationplantofKEOontherecommendation ofthemanufacturersoftheplantimportedbyKEO. Theagreementwastoreceivealumpsumforhisengagementbut on his request KEO used to pay him £1,000 per month. KEO 2Q alsopaid tohimarentallowanceof £150permonth. 25 WearenotinagreementwiththelearnedtrialJudgethattheinterpretation given by s. 32as applying topersonsengaged ina profession irrespectiveofthebasisuponwhichtheyareremunerated.Wethinkthatifaprofessional personisengagedbyanother in circumstancesestablishing therelationship of employerand employee and heispaid asalary then hecannot possibly enjoy thebenefitofs.32ofthelaw. Thecircumstancesof thepresentcase,wheretherespondent wasengagedtoadviseonthemanagementandmaintenanceofthe 3Q sterilization plantontherecommendation ofthemanufacturersof theplanton thepaymentofafixedamount,cannotpossiblyestablish the relationship of empoyer and employee so as tobe taxed unders5

(1)(b)ofthelaw.Weholdthatheisqualified to betaxedunders.32ofthelawanditmakesnodifference ifKE.O 575 Kourris J. Commissioner of Income Tax v. Huebener

(1988)whenfillingtheform for incometaxpurposeshaddeclaredhim asan"employee"becausethisstatementisnotbindingonthe respondent. Inviewoftheabove,theappealisdismissedwithcosts. Appealdismissedwithcosts. 5 576