3 C.L.R. 1988May10 [A.LOIZOU,P.] INTHEMATTEROFARTICLE146OFTHECONSTITUTION GEORGHIOSKONARISANDOTHERS, Applicants, v. THEREPUBLICOFCYRPUS,THROUGH 1.THECOMMISSIONEROFINCOMETAX, 2.THEDIRECTOROFINLANDREVENUE, Respondents. (CasesNos.380/85,381185,382/85). Partnerships—Apartnercannot beanemployee ofthepartnershipaswell— • His "salary"is,inthecircumstances,ashareintheprofits. 5 Taxation—SpecialContribution—TheSpecialContribution(TemporaryProvisions) Law, 1978 (Law 34178),section 3 and 2(l)—Emoluments— "Salary"ofpartnerfrompartnership—Rightlyconsideredasnotamounting to "emoluments"—The expression "moneypaidinrespect ....ofany office"—Does notcoverthecaseoftheapplicants. Wordsandphrases: "Emolument"insection2
(1)oftheSpecialContribution (TemporaryProvisions)Law,34/
- 10 Wordsandphrases:"Moneypaidinrespect...ofanyoffice" insection 3 of TheSpecialContribution(TemporaryProvisions)Law,34/
- Theapplicantsarepartnersinapartnershipbusiness.Atalltimesmaterialtothisrecoursetheyweredrawing,apartfrom theirshareintheprofits ofthepartnership,"salaries"asremunerationfortheirservices. 15 Thequestionraisedinthisrecourseiswhethersuch"salaries"couldbe subjected tospecialcontribution,astherespondentassertedbymeansof 967 Konaris v.Republic
(1988)thesubjudicedecision. Held,dismissingtherecourses:
(1)Therelevantlegalprovisionissection3ofLaw34/78inconjunction withthedefinition oftheword"emoluments"insection2
(1).
(2)Theapplicantsaspartners,bytheverynatureofthepartnershipare 5 precludedfrom actinginadualcapacity,thatis,thatofpartnerandofemployee.The"salaries"wereinfactshareintheprofits.
(3)Theexpression "moneypaid inrespectofanyoffice" doesnot cover thecaseoftheapplicants.Suchexpression referstoofficers which by their very naturedonothavethemaster/servant relationshipsuchas 10 membersofvariousBoardsorPublicCompanies. Recoursesdismissed. Noorderastocosts. Casesreferredto: Ellisv.JosephEllisandCo.
(1905)1 K.B.
- 15 Recourses. Recourses against the special contribution assessments imposed on applicant. C.Melas withChr.Demetriou, for theapplicants. Y.Lazarou, for the respondents. 20 Cur. adv. vult. A. LOIZOU P. read the following judgment. By the present recourses which were tried together as they present common issuesof law andfact theapplicants seekadeclaration oftheCourt that the special contribution assessments imposed by the respondent Commissioner are null andvoid andof nolegal effect whatsoever. 968 25 3C.L.R. Konarisv.Republic A.LoizouP. Applicant Georghios Konaris filed recourse No. 380/85, againstthe specialcontribution assessments raisedfor thequarters January 1977 to April 1982 and January 1983 to April.
- 5 ApplicantSocratisLartidesfiled recourseNo.381/85,against thespecialcontribution assessmentsraisedforthequartersJanuary 1977,toApril 1982andJanuary 1983toApril
- Andfinally applicant Panayiotis Konarisfiled RecourseNo. 382/85,againstthespecialcontributionassessmentsraisedforthe 10 quarters February 1980toMarch, 1980,January 1981toApril, 1981, January 1982 to April 1982 and January.1983 to April
- AllapplicantsareDirectorsofthepartnership "LarticonSyntheticDetergents Company" andwerereceiving monthly remu15 nerationfortheirservicestothepartnership. 20 25 30 ApplicantsG.KonarisandLartidessubmitted specialcontributionreturnsforthequartersJanuary 1977toMarch,1977,but didnotsumbitsimilarreturnsinrespectoftheotherquarterssubjectmatterofthisrecourse.ApplicantP.Konarisdidnotsubmit anyreturns.TherespondentDirectorissuedspecialcontribution assessments in respect of all quarters which assessments were basedontheshareofprofit of theapplicantsplustheamountof salarydrawnfrom thepartnership"Larticon SyntheticDetergents Company" of which the applicants are partners. Against the aboveassessmentstheapplicants'accountantfiled objectionson thegroundthatthesalariesfromthepartnershipshouldnothave beenassessedtospecialcontribution. TherespondentDirector,havingcarefully considered theapplicants'objections,decidedtoreject themholdingtheviewthat theallegedsalariesdrawnfrom thepartnershipweresubjecttothe provisionsofthe.SpecialContributionLaws,andsuchdecision wascommunicatedtotheapplicantsbyletter withfinalnoticesof special contribution assessmentsfor thequarters subject-matter 969 Λ. Loizou P. Konaris v. Republic
(1988)of theserecourses. It was contended by the applicants thatpart of theincome which theyreceivedfromthepartnershipinthequartersJanuary 1977 toApril 1983 was paidtothemby way of salary for their servicestothefirm andas suchitconstitutes"emoluments"andis 5 therefore exemptfromspecial contributionby virtueof section3 of the Special Contribution(Temporary Provisions) Law 1978, (Law No. 34 of 1978). They argued thatthey arenotprecluded from receivingsuchremunerationfor theirservicestothepartner ship asaccountant,mechanicalengineer,ortechnicalengineer,as jn thecasemaybe,because,thelaw onlymakesadifferentiation be tween sourcesof income. Indeed thelaw does differentiate between sources of income andthesamepersonmay apartfromhissalary haveincome from other sources for which heis boundtopay special contribution.I 15 consider, however, that in the present instance the "Salaries" drawn by theapplicantscamefromnoothersourcebutfromthe shareofeachpartnerof theprofits of thepartnershipandthefact thattheyarereceived intheformof andunderthenameof "Sala ry" does not alter what they really are.That such moneys may 20 have otherwise been expended by theapplicants tothirdparties for providing thepartnershipwith theservicesinquestion,which moneysbeing salariesmayhavebeenexemptfromspecialcontri bution is neitherhereor thereasonthefacts of thepresent case such moneys cannotbeconsidered as salariespaidby the appli cants tothemselves. Theapplicants as partners,by theveryna tureof thepartnershipareprecludedfromactinginadual capaci ty, thatis, that of partnerand of employee. Relevant to this is what was stated in the case of Ellis v. JosephEllis and Co. [1905] 1 K.B. 324 atp. 328: 30 "It seems to me that,when one comes toanalyse an ar rangementof thiskind,namelyonebywhich apartnerhimself works, and receives sums which are called wages, itreally does notcreatearelationof employers andemployed, but is, in truth,amodeof adjusting theamountthatmustbetakento 35 970 3C.L.R. , Konarisv.Republic A.LoizouP. havebeen contributed tothepartnership assetsby a partner whohasmadewhatisreallyacontribution inkind,anddoes notaffect hisrelationtotheotherpartners,whichisthatofcoadventurerandnotemployee.Suchapartnercannotputhimselfinthepositionofnotbeingapartnerwhenheisone,orof beingaworkmanemployed,whenthatpositionwouldinvolve thathewouldbebothemployerandemployee." Therelevantprovisionsof section 3of LawNo.34of 1978, whichareasfollowsdonotassisttheapplicantscase: ™ "Forthequarterbeginning asfrom1stApril 1978and for every subsequent quarter during the period when this Law shallbeinforce,thereshallbeleviedandcollectedacontributionattheratesandinaccordancewiththeprovisionssetforth intheSchedule,ontheincomeof anyperson whichderived 15 from anysourceotherthanemoluments." Theword"emoluments "isdefined in section2
(1)thereofas follows: 20 "remuneration inmoneypaidinanymannerwhatsoeverin respect ofanyoficeorsalariedservices,whereverexercisedor renderedandincludesanyallowance,ofamonetaryorother kind,payable in consideration of such office or services,as well as pensions, but does not include any other retiremet grantorgratuityorany sumspaidbyanapproved Provident Fund." *' 25 Ithasbeenarguedthatintheabovedefinition ofemolumets, theexpression"money paid inrespectof any office" covers 'thecaseoftheapplicants.Ithinknot,for suchexpression refers toofficers which by their very naturedo not have the master/ servantrelatioshipsuchasmembersofvariousBoardsorforinstance, publiccompanies,etc,butcannotpossiblycoverthecase ™ oftheapplicants.Thereforethisargumentfailsalso. 35 Foralltheabovereasonstheserecoursesfail andarehereby dismissed,butinthecircumstancestherewill benoorderasto costs. Recoursesdismissed. Noorderastocosts. 971