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(1989)19S9August 10 ISAVVIDKS.J] INTHE MATTF.R ΟΓARTICLE 146Ol·THE CONSTITUTION CHRISTODOULOS MASOURIS. Applicant, THE REPUBLIC ΟΓCYPRUS.THROUGH THE MINISTER 0 ! : TINANCE AND ANOTHER, Respondents (CaseKo 295/SV Taxation — Income Ta\— Titidinginland— Tactors thatmay taken into consideration in determining the issue — The character ot theland purchased,its suite of development andfuturepotential,production ot income, repetition ol transactions of similar nature, duration of ownership of property in question,lact thatland waspurchasedjointly withpersons whosemam occupationhadnothing to do withfarming or cattle breeding, parccllation ot land into building sites, change ol intention lollowmg acquisitionol property 5 Taxation — Interest — The Assessment and Collection of Taxes Laws 10 I97S-79,section 42
(2)— "Unjustifiable omission"— It is afailure to give any notice, make anyreturn, produce or furnish anydocument or offer information requiredby or undertheLaw Taxation — Surcharge— TheAssessment and Collection of Taxes Laws \$ 1978-79, proviso to section 29
(1)— Itcannot operate infavour ot the applicant as the question raisedis not one of a clearlylegalpoint not determined,but it isapoint of mixed Law andfact Taxation — Income Tax— Objection to assessment — TheAssessment 2 0 andCollection ot Taxes Laws I97S-79,section 20— Whethermdealing with anobjection the Commissioner canincreasethe object of thetax 946 3 C.L.R. Masouris v. Republic & Another without raisingan additional assessmentpursuant to theprovisions of section 23— Questiondeterminedinthe positive. 5 10 15 The applicant purchased jointly with others land at Kaimakli of an area of about 64 donums for £1.000in
  1. At the lime ihe land was agricultural land. The co- purchasers were not farmers. The applicant wasa farmer until the invasion byTurkey in
  2. The land was divided into 73 building sites in
  3. Most of such sites werecither sold or donated. The applicant failed to disclosein hisreturns or capital statement all the information regarding all the sales of such building sites. When he was assessed to pay income tax for the years in question, the applicant objected, whereupon theCommissioner,having obtained information as regards sales of buildingsites,increased the object of the tax,because it included therein the profit realised from such sales during the years in question. 20 The Court accepted that the decision that the applicant wasa trader in land and that, ihereforc. the land in question was stock in trade and the profit realised by its sale is subject to income tax. was reasonably open to the respondents. 25 The principles enunciated by the Court, in dismissing this recourse, sufficiently appear in the hereinabove Headnotes. In the course of its judgment the Court referred to in detail to the Case Law relating to the factors thatappearinthefirst ol"thehereinabove Headnotes,whichwere thefactors,that wereinfact taken bytherespondent Commissioner into consideration in arriving at his conclusion. 30 Recourse dismissed. No order as to costs. 35 Casesreferred to: Gcorghiadesv.Republic
(1982)3C.L.R.659, HadjiEraclis andAnother v.Republic
(1984)3 C.L.R.604, ~4 0 Amani Enterprises v.Republic
(1985)3 C.LR. 198, 947 Masouris v.Republic & Another
(1989)Edwards v. BairsiowandHarrison36T.C.207, Sncil v. Rosscr Thomas& Co. Ltd. 44T.C. 343, 5 J.Liolton & SonLtd. v.Parrelly[1953] 34T.C.
  1. Pickfordv.Quirkc[1927] 13 T.C 251, Turnerv. Last [1965]42T.C.
  2. Commissionersof InlandRevenue v. Livingston [19261II T.C.53S. 10 Commissioners of Inland Revenuev.TollProperty Co.Ltd[1952] 34 T.C. 13, Mitchell Bros.v. Tomlinson (Η, M. Inspectorof Taxes), 37T.C.
  3. 15 Taylor v. Good[1973]2AllE.R. 7S5, 20 Michaciidou v. Republic(19S5) 3 C.L.R. IS36, Ioannidcs v. Republic(I9S5)3C.L.R. ISOI. Recourse. Recourse against the income tax assessments, raised on applicantfortheyears1979-
  4. 25 G. Tnantafyllides, fortheApplicant. Y.Lazarou, CounseloftheRepublicB, forthe Respondents. 30 Cur. adv. vult. SAVVIDES, J.read the following judgment. Applicant by 35 the present recoursechallengestheincometaxassessmentsfor the years of assessment 1979
(78)to 1980which were raised and determined by therespondent Commissioner of Income Tax (hereinafter tobecalled"the respondent"). Applicant appliesforthefollowing relief: . 948 40 3 C.L.R. 5 10 15 20 25 30 Masouris v. Republic &Another Savvides. J. "1. Declaration that assessment No.2S02S6-33/84for the year of assessment 1979
(78)and/or the decision of the respondents to impose tax on Applicant amounting to £312.25 and/or any other sum or at all and/or the decision to include in Applicant's taxable income the amount of £1320.- and/or interest on the additional tax demanded from 1.12.79isnull and void and of no effect whatsoever.
  1. Declaration that the assessment No.2S02S6-79/84 for the year of assessment 1979 and/or the decision of the Respondents to impose income tax on Applicant amounting to £1729.90 and/or any sum or at all and/or the decision to include in Applicant's taxable income the amount of £4690.- and/or interest on the additional tax demanded from 1.7.80 is null and void and of no effect whatsoever.
  2. Declaration that the assessment No.2S0286-S0/S4 for the year of assessment 19S0 and/or the decision of the Respondents to impose income tax on Applicant amounting to £67S.10 and/or any sum or at all and/or the decision to include in Applicant's taxable income an amount of £2000.- and/or interest on the additional tax demanded from 1.7.S1 is null and void and of no effect whatsoever.
  3. Declaration that the decision of theRespondents to impose and/or demand an additional 10%surcharge on the amount of the additional tax demanded amounting to £151.60 for theyear 1979and£57.90for theyear_1980and/orany other sum or at all isnull and void and of no effect whatsoever." Applicant was a farmer up to the Turkish invasion in July, 1974,at the area of Kaimakli -Tympou. During the material 35 years he derived income from rents, a pension and as from 1978commission from the sale of meat. Applicant together with two other persons purchased on 24th October, 1951.land at Kaimakli of an area of about 64 40 donums for £1.000.- and in 1956 they divided pan of the said land into73buildingsites.Most ofthebuildingsiteswere either sold or donated during the years 1957 - 19S0 according to 949 Savvides, J. Masouris v. Republic &Another
(1989)information obtained by the respondent from the Lands and Surveys Department. Applicant's tax affairs were examined by the respondent Commissioner of Income Tax on the basis of capital 5 statements as on 3rd March. 1970.and 31st December. 1980, following the objections filed against the assessments, subjectmatter of this recourse. Applicant's taxation consultants were asked by the respondent on various occasions to supply him with information regarding applicant's land dealings but failed 10 to do so. Relevant in this respect are letters dated 28th July, 197S and 23rd August. 19S2, which were addressed to Mr. Phanos Ionides. applicant's consultant, photocopies of which have been attached to the Opposition, marked as Appendices "B"and"C". 15 When the tax affairs of the applicant were last examined by capital statement ason 3rd March. 1970,hewasnot considered asadealer inlandbecauseapplicant didnot discloseall relevant facts to the respondent Commissioner relating to landdealings. 20 In the examination up to the 3rd March. 1970. applicant declared,however,that hehadsoldfourbuildingsitesduringthe years 1967 -6S whereas the respondent later discovered from inquiries made at the Land Registry Office that applicant sold 13building sites in the said years. 25 Applicant's case was discussed between the respondent Commissioner and applicant's taxation consultant on various occasions as to the tax liabilities of the years,subject-matter of this recourse, the assessments on which were under objection 30 on the ground that they were excessive. The result of the discussion was that applicant and the respondent agreed on the amount of the taxable income from sources other than the profit from the sale of building sites lor the years 197S/77 to 19S3includingalsothe yearssubject-matter ofthisrecoursebut 35 no agreement could be reached as to the assessment of the profits from the land dealings for the years 1978, 1979 and 19S0. The said dealings werethe following: (
  1. a)Abuildingsite under registration No.D374 (applicant's 40 share l/3rd) sold in 197Sat£400.- 950 3 C.L.R. Masouris v. Republic &Another Savvidcs, J. (
  2. b)Abuildingsiteunder registration No.D407sold in 1978 for £2.000.5 (
  3. c)Abuildingsiteunder registration No.D430sold in 1979 for £5,000.(
  4. d)Abuildingsiteunder registration No.D363soldin 1980 for £2,000.- 10 Alltheabove buildingsitesarelocated at Kaimakli andwere part ofthosedeveloped in 1956from aplot ofabout 64donums acquired in 1951. The taxable profit, therefore, was arrived at by deducting 15 from the sale proceeds the cost (£210.-) and division expenses (£100.-) for each buildingsite. Therespondent Commissioneraftertakingintoconsideration allfactors pertaining tothe particular transaction concluded that 20 applicant hadembarkedupon anadventureinthenatureof trade and the realized profits from this particular transaction were liable to income tax. As no agreement could be reached the respondent proceededwiththedetermination oftheassessments. subject-matter of this recourse, and communicated to applicant 25 his reasoned decision by letter dated 22nd December. 1984. together with final notices oftax payable dated22nd December, 19S4. Thecontents ofsuch letter readas follows: 30 "I refer to your objections against the assessments of your income for the years of assessment 1978 to 19S3(years of income 1977till 1983) and to the letters of your Consultant on taxation matters Mr.Phanos Ionides.dated 14thand28th November. 19S4and wish to inform you that I decided that you should be assessed as follows: 35 40 (
  5. a)For the years of assessment 1978/77, 1981, I9S2 and 1983 during which your income was derived from commissions from thesale of meat, old age pension and rents you will be assessed on the amounts we have agreed. (
  6. b)For the years of assessments 1979 till 1980 (years of 951 Sawideb. J. Masouris >.Republic &Another
(1989)income 1978till 1980)vouwillbeassessed inaddition to the agreed sums with the profit realized irom the saleof building sites as it appears in the attached statement 2 Iwish to inform you that Ireached the conclusion that you 5 were trading in land lor the following reasons (
  1. a)The fact that three persons (including vourself) joined together in a common enterprise to purchase and register in your names in 1951 a piece of land of an 10 extent of about 66donums at Kaimakli, (b)The said land had ceased to be used lor agricultural purposes but acquired development value as land ripe for di\ision into building sites 15 (
  2. c)In 1956vou jointly divided about 2/3rds ot the said land into 72 building sites and vou used to sell such sites almost everv vear from 1977till 1980 20 (
  3. d)You ha\e purchased and sold other immovable property 3 The reason that you were not assessed with profit from the sales of building sites during the pievious years i.e before 25 1970wasdueto the fact that you omitted togne particulars in connection with the sale of building sites and also of the building sites which remained unsold, in vour capital statement ot 22nd July. 1964. whereas you had proceeded into the division of land and together with your other 30 partners had sold 19buildingsitesbetween the 1st January, 1957andthe22ndJuly. 1964 Alsoinvourcapital statement ason 33 1970.you declared that yousoldonlytourbuilding sites tor the years 1967 and 196S whereas \ou sold jointly with the others 17buildingsites asfrom 22ndJul\. 1964til! 35 3rd March, 1970 4 Concerning your last capital statement you declared that you sold only two building sites in 1979 whereas you have sold jointly or alone 13 building sites duiing the penod 40 3.370 till 31 1280 In addition to the above I wish to observe that you failed to gi\e a reply to my letteis dated 3 C.L.R. Masouris v.Republic &Another Savvides, J. 28th July, 1978 and 23rd August, 1982, whereby I was asking detailed particulars in connection with the division and sale of your building sites for the period 1970to 1980. 5 5. In view of the above I have decided to assess you for the years of taxation 1979/78; 1979and 1980in addition to the agreed sums with the profit realized from the sale of four buildingsites. 10 6. I enclose herewith notices of assessment for the years of assessment 1978/77 till 1983 and if you feel that any injustice isdonetoyouasaresult of myabove decision you may file a recourse with the Supreme Court within 75 days from the date of the assessments. I also enclose notices of 15 assessment for special contribution for the quarters 1/77 till 4/80." On the 26th February, 1985, the respondent informed the applicant that byoversight hefailed to deduct his contributions 20 to Social Insurance and the 107c earned income relief for the income from the sale of building sites and as a result he cancelled the assessments of the 22nd December. 1984. and issued new ones in order to grant the above relieves. 25 Copy of this letter was sent also on the same day to the applicant's consultant ontaxation matters Mr. Phanos Ionides. Obviously such letter had not been received by the applicant prior to the filing of the recourse. 30 Due to the fact that-the present recourse had already been filed, the respondent Commissioner, by a subsequent letter to the applicant dated 3rd May, 1985. with copy to his taxation consultant informed him that he withdraw his letter of 26th February, 19S5,as well as the assessments enclosed therewith. 35 for the reasons stated inhisletter, thecontents of which read as follows: 40 "With reference to my letter of 26th February, 1985, with which I have sent you new amended assessments for the years 1979and 1980(yearsof income 1978and 1980)andin view of the fact that you have filed a recourse in the Supreme Court (No.295/S5) against the assessments whichI 953 Savvides, J. Masouris v.Republic &Another
(1989)hadsent with my previous letter of22nd December, 1984.1 wish to inform you that Ihereby withdraw my letter dated 26th February, 19S5,as well as the assessments sent to you together with such letter so that you will not be obliged to file a new recourse. 5 Concerning the deductions for contribution to social insurance, deduction of old age and the 10% deduction on the profit realized from thesaleof buildingsites,theywillbe granted to you when thefinal assessments willbemadeafter 10 the decision of the Court." A number of legal grounds are set out in the recourse in support of the relief sought. By his written address learned counsel for applicant expounded on hisgrounds which may be 15 grouped as follows: (
  1. a)That the respondent could not demand tax on a figure of profit higher than the figure of profit in the assessments under objection which he had determined without first 20 raisingadditional assessments pursuant tothe provisions of s.23 of the Assessment and Collection ofTaxes Laws, 197S-79,in order toafford thetaxpayer the opportunity to object and defend himself. 25 (b)All acquisitions of immovable property made by the applicant were for investment purposes and. therefore. the respondent was wrong in treating the profit made from the disposal of the building sitesby the applicant in 1979 and 1980 as income derived from an adventure in 30 the nature of trade. (
  2. c)The demand of interest andsurcharge is unjustified. (d)The notices of assessment are also wrong because 35 although the respondent treated the said profit as profit from the exercise of a trade in land he nevertheless did not grant to the applicant earned income relief on the amount of the profit assessed. 40 Expounding further on ground (
  3. a)learned counsel for applicant submitted that the proceedings envisaged under s.20 954 3 C.L.R. Masouris v. Republic &Another Savvides, J. of the relevant laws do not empower the Commissioner of Income Tax at the stage of determination of the objection to demand a higher amount of tax than the tax appearing in the assessments under objection and that if the respondent wished 5 to demand ahigher amount oftaxthanthetax appearing inthe assessments under objection thecorrect procedure wouldbe to raise an additional assessment pursuant to the provisions of s.23inorder togivethetaxpayer theopportunity toobject and defend himself. 10 In support ofground (
  4. b)learned counsel submitted that the income Tax Office had examined the taxability of the profits from the building sites in question on two previous occasions. once inthe case of Mr. I. Kolakkides whowasone of the three 15 joint owners and once in 1972when applicant's tax liability in respect of the years 1965
(64)to 1969(6S) was settled and excluded for income tax purposes the profit made on the ground that the deal was a realization of a capital asset and. therefore, he cannot now. after the lapse of almost thirty years 20 and on substantially the same facts treat the applicant as a trader in land. In dealing with ground (
  1. c)he submitted that the demand of interest on the amount of the additional tax and of a surcharge 25 of 10%iscontrary to lawandto theprinciple of administrative law.because the point whetherthe profit inquestion isliable to income tax or not is purely a legal point and the applicant was not guilty ofeither deliberate omission or fraud ashegenuinely believed that he wasnot liable to pav additional tax. 30Learned counsel for the respondents in answer to the arguments advanced bylearned counsel for applicant in respect of ground (
  2. a)contended that the power of the respondent Commissioner to raise a higher figure upon determination of 35 an objection is derived from the provisions of s.20
(5)of the Assessment and Collection ofTaxes Laws 1978-1979. In dealing with ground (b) learned counsel for the respondents submitted that it was reasonably open to the 40 respondent to treat the profits which the applicant realized from the sale of the four building sites as taxable. He argued that theissueoftaxability ofprofits arisingfrom thesaleofland 955 Savvides, J. Masouris v. Republic &Another
(1989)isaquestion of mixed lawandfact whichhastobedecidedon the evidence before the Court and concluded that there was ample evidence supporting the decision reached by the respondent that the transactions in question were trading transactions. Healsoreferred theCourttoanumberofdecided 5 cases asto the factors which the Commissioner maytake into consideration and which in fact he took into consideration in the present case in reaching his conclusion that the profits underconsideration weretradingreceipts. 10 Suchfactors,counselsubmitted,were: (a)The character of the land purchased, its state of development andfuture potential. 15 (b)Repetition oftransactions. (
  1. c)Duration ofownership. (d)The land was purchased jointly with persons whose 20 occupation had nothing to do with farming or cattle breeding. (e)Thedivision of thelandintobuildingsites. 25 (
  2. t)Any original intention in respect of the purpose of acquisition of this land undoubtedly changed from the timethelandcamewithintheMajor WaterSupplyArea of Nicosia and this is manifested by the fact that the owners went in for asystem of land development with 30 regardtopartoftheproperty,soastotakeadvantageof theopportunity whicharosewiththesupplyofwater. Counsel further submitted that applicant's counsel's contentions about interest and surcharge are untenable. The 35 question as to whetherthedispute was alegal one or not had nothingtodoandiscompletelyirrelevant undertheprovisions ofthelaw.Theimposition ofsuchinterestandtaxwasproperly made under the provisions of s.42
(2)of the Assessment and Collection of Taxes Laws. 1978 - 1979, once there was 40 unjustifiable omission on the part of the applicant to submit any notice ormakeanyreturn asrequiredbylaw. 956 3 C.L.R. Masourib \. Republic &Another Sawides, J. Finally, in dealing with the contention that the respondent Commissioner had examined the issue on two previous occasions as mentioned by counsel for applicant, the respondent denied same and contended that it was erroneous. 5 What happened in tact, counsel submitted, was that the respondent hadexamined theissueonlyoncebefore inthe case ot theapplicant andthe reason that theapplicant wasnot taxed on the profits which he realized before 1970 from the sale ot building sites was due to the tact that he had deliberately 10 omitted to submit particulars regarding the panellation and sale of thesubject property andto declare hisother dealingsin land as mentioned and explained to the applicant by respondent's letter dated 22nd December. 1984 to which reference has already been made and which operated to the 15 benefit of the applicant. The question which poses tor consideration in the present case is whether it was reasonably open to the respondent to treat the profits which the applicant realized trom the sale ot 20 tour building sites astaxable. The issue ot taxability of profits arising from thesale of land has been considered by the Supreme Court in a number ot cases. (See. inter alia. Georghiades v.TheRepublic
(1982)3 25 C.LR 659: HadjiEraclis and Another v. The Republic
(1984)3 C.L.R 604. Amani Enterprises \. The Republic
(1985)3 C.LR 198) What emanates from the abo\e authorities isthat the question isone ot mixed law and fact and also that the Court will not interfere with the findings of the - 30- Commissioner-oWncome Tax it-it wasreasonably-open tohim so to find on theeudence before him. In the present case the various factors whichthe respondent Commissioner took into consideration and which contain 35 evidence on which he relied have already been mentioned in this judgement when dealing with the arguments advanced by counsel tor the respondents. Ishall deal with each one ofthese factors intheorder argued 40 by learned counsel tor the respondents (a) The character ol the land purchased, its state ot 957 Savvides. J. Masouris v. Republic &Another
(1989)development andfuture potential. The land under consideration had ceased to be pure agricultural landinview ofthegradual expansion of Nicosiain that direction which enshrined the property for development 5 potential. In Georghiades v. The Republic (supra) at p.670 the following were emphasized: 'The character of the land purchased,itsstateofdevelopment andfuture potential,aswell 10 as the income it yields at the time of purchase or islikely to yield infuture, isamost consequential factor". Asimilarview wasexpressed in Edwardsv.Bairstowand Harrison 36 T.C.207, namely, that when the subject-matter 15 cannot yieldto its owner any income or personal enjoyment merely by virtue of ownership a commercial transaction is indicated. Theapplicant inthepresent case,accordingtotheevidence 20 in the hands of the respondent, never submitted a return showing that he had any income from the subject property priorto its panellation. In Snell v.Rosser Thomas &Co.Ltd.44 T.C. 343.the 25 taxpayer-adeveloperboughtahouseand53/4rdacresofland. The house produced rent from the tenants but the land produced no income. It washeld that the land was stock-intrade. 30 (b)Repetition of the transaction. From what emanates from a series of decided cases in England the fact that the taxpayer has engaged in repeated transactions of a similar nature is an important factor in 35 decidingwhether ornot tradeiscarriedon. In J. Bolton & Son Ltd. v.Farrelly [1953] 34T.C. 161 where the taxpayer company, which run a passenger boat service,bought alargenumberofboatsfor ashorttimefor the 40 service and resold them after modification, Harman J., agreed that the Commissioner's finding that there was a trade was 95S 3C.L.R. Masouris v.Republic & Another Savvides, J. inevitable. He said the following at p.167: "I have had alotof cases ....but aremerely illustrations about what isnot andwhat is an activity in the nature of trade. A deal done once is probably not, though it may be. Done three or four times it 5 usuallyis". Asimilar view wasexpressed bvRowlatt, J., in Pickford v. Quirke [1927] 13T.C.251atp.263asfollows:"Now ofcourse it isvery well known that one transaction of buying and selling 10 a thing does not make a man atrader, but if it is repeated and becomes systematic, then he becomes a trader and the profits of thetransaction, not taxable so long asthey remain isolated, become taxable as items in a trade asawhole...". 15 In the Pickford case (supra) a taxpayer was one of a syndicate who purchased the shares of a mill company, liquidated the company and sold its assets, at a profit, to another company formed for the purpose. The taxpayer had engaged in four transactions of this nature, each resulting in a 20 profit to him. The Court of Appeal held that although the transactions, considered separately were capital transactions, they together constituted the carrying on of atrade. In the present case the applicant had engaged in repeated 25 transactions of buying and selling immovable property which he had omitted to declare to the respondent Commissioner. During 1963he purchased in three separate transactions, three pieces of land according to evidence in the hands of the respondent Commissioner obtained from the Land Registry 30 Office, under registration Nos.J76,J79and N.13. PlotsJ76and J79 were sold to Marika Christodoulou in 1969 and plot N.13 was sold to Michael Pieri in 197S. (c) Duration of ownership. 35 The relevance of a short period of ownership as an indication oftradingwasstressedbyCross.J.in Turner v.Last [1965]42T.C.517 at pp.522-523 as follows: 40 "Aman maybuysomething, whether itbe land or achattel, forhisown useandenjoyment with noideaofaquick resale, andthen, quite unexpectedly,hemayreceive an offer to buy 959 Savvides, J. Masouris v.Republic & Another
(1989)whichistootemptingto refuse. That isaperfectly possible state of facts: but the fact that there was a quick resale naturally leadsonetoscrutinisetheevidencethat itwasnot envisagedfrom thefirst very carefully."· 5 It wasthesubmission oftherespondents inthisrespectthat thelandunderconsideration wasdividedintobuildingplotsjust after fiveyearsof itsregistration inthenamesoftheapplicant and his partners. This relatively short period between registration andpanellation isinconsistent withtheallegations 10 that the land was purchased solely for farming purposes and tends to support the inference that the applicant wascarrying on atrade. (d)Thelandwaspurchased jointlywithpersonswhosemain 15 occupation had nothing to do with farming or cattle breeding. Thecontention ofthe respondents inthisrespect isthatthe applicant'smain occupation wasthatofabutcherwhereasthat
  1. of his partner Mr. I. Kolakkides was that of a timber and buildingmaterials merchant. .Inthesubmission oflearnedcounselfortherespondentsthis factor strengthens the inference that the land wasacquired as 25 tradingstock andnot for farming purposes. Ifind suchsubmission asoundone. (e)Thepanellation oflandintobuildingsites. 30 The panellation of the land intobuilding sites was another factor which the respondent Commissioner considered significant as indicating a trading transaction. In this respect counsel relied, inter alia, on the dicta in Commissioners of 35 Inland Revenue v. Livingston [1926] 11T.C.
  2. In that case acargo vessel waspurchased as a joint venture bythree individuals whoconverted it into asteam-drifter andsolditat a profit. The fact that they had not engaged in trade was overruled and it was held that such a transaction was in fact 40 carrying on atrade. 960 3 C.L.R. Masouris v. Republic & Another Savvides, J. In this respect counsel for the respondents concededthatthe test is not by any means decisive in cases relating to real property. However, in appropriate instances such as the present one where other elements of trading are present the division of the land into building sites may lead to an inference in support of a finding of trading as in the case of Commissioners of Inland Revenue v. Toll Property Co.Ltd [1952] 34 T.C, 13 were stress was laid on expenditure incurred to enhancethe value of theland. 5 10 (f) Whatever the intention at the time of the acquisition of the property such intention undoubtedly changed once the land came within the Major Water Supply Area of Nicosia. 15 20 Itwas thecontentionof therespondents that,even assuming that the property was acquired with no thought of trading as alleged by applicant, his intention undoubtedly changed from the moment the land came within the Major Water Supply Area of Nicosia andthe applicant went in for a system of land development with regard to part of thesubject matterby selling building sites, so as to take advantage of the opportunities for development which arose with the expansion of the Water Supplv. 25 This contention of counsel for respondents finds support in the cases of Mitchell Bros. v. Tomlinson (Η.M. Inspector of Taxes). 37 T.C.224 and Taylor v. Good [ 1973] 2 All E.R.
  3. 30 As mentioned earlier on the basis of decided cases by this Court the Court does not interfere with a decision of an appropriate authority if such decision is reasonably open to it on the material before it. 35 The position was clearly summarized by the Full Bench in the case of Georghiades (supra) where at pp.668-669 the following were stated: 40 "Unlike the powers vested in the District Court before independence to adjudicate upon a taxation assessment by s.43 Cap.233 - andearlier by virtue of s.39 of Cap.297 (ofthe 961 Savvides, J. Masouris v. Republic &Another
(1989)old edition of the Statute Laws of Cyprus), the Supreme Court has no jurisdiction to go into the merits of the taxation and substitute, where necessary, its own decision. The power of the Supreme Court islimited, as indicated, to the scrutiny of the legality of the action, and to ascertain 5 whether the administration has exceeded the outer limitsof its powers. Provided they confine their action within the ambit of their power, an organ of public administration remains the arbiter of the decision necessary' to give effect to thelaw;andso long asthey make acorrect assessment of 10 the factual background and act in accordance with the notions of sound administration, their decision will not be faulted. In the end. the courts must sustain their decision if it was reasonably open to them. The same approach was sanctioned by the House of Lordswith regard tothe powers 15 vested in the courts in England, to review decision of an administrative nature. In Zamir v. Secretary of State [1980] 1All E.R. 768. they decided that the administrative decision of an immigration officer could be impugned only on twogrounds: (a)Absence of evidence on which hecould 20 reach hisdecision,and(b)wherenoreasonable person inthe position of the immigration officer could reach the decision taken. The approach of thecourt to the validity of ataxing decision is no different from its approach in respect of any other administrative decision liable to review under Article 25 146." On the material before me and bearing in mind all the (actors taken into consideration by the respondent Commissioner Iam satisfied that on theevidence before him it 30 was reasonably open to him to reach the subjudice decision. As to the complaint of the applicant about the interest · imposed on the tax payable 1find such complaint untenable. This issue is governed by s.42
(2)of the Assessment and 35 Collection of Taxes Laws 1978-1979 under which interest is payableincaseswhere thedelay inmakinganassessment isdue to the taxpayer's '"unjustifiable omission", which omission as Stylianides, J., observed in Michaelidou v. The Republic (19S5) 3 C.L.R.1S36 at p.lS52 "means a failure to give any 40 notice, make any return, produce or furnish any document or offer information required byor under the law". 962 3 C.L.R. Masouris v. Republic &Another Savvides, J. Inthepresent casetheapplicant though hehadbeen repeatedly requested to submit particulars regarding his land dealings deliberately failed to doso. 5 The same applies to the complaint concerning the 10% surcharge on the tax payable. Such surcharge is payable under s.29(l) of the relevant laws. The proviso to s.29(l) cannot operate in favour of the applicant asthe question raised isnot one of a clearly legal point not determined, but is a point of 10 mixedlaw and fact. Ialsofind nosubstanceintheallegation oftheapplicant that the respondent had no power upon the determination of the objections raised by the applicant to impose tax higher in 15 amount than that under objection. This matter has been dealt with in the case of Ioannides v.TheRepublic
(1985)3C.L.R. 1801 where the following opinion was expressed at p.1818, to which Isubscribe: 20 25 30 35 "It was argued that the respondent Commissioner in determining an objection hasonly alimited power, either to sustain theobjection or tooverrule itbut not toincrease the chargeable income. This proposition is untenable having regard to the clear provisions of the proviso to sub-section
(5)of s.20 of the Assessment and Collection of Taxes Law. 197S.empowering the Director to determine the amount of the object of the tax of the person objecting at an amount higher than the taxation under objection. This proviso read in the context of the law as a whole empowers the Director to increase the amount of the object of the tax, when there is an objection, without resorting to the provisions of s.23 for additional assessment. Furthermore there must be a finality to the process of the assessment of the tax and the determination ofan objection shouldbethefinal stage in the process of the quantification of tax." Finally, as to the last point raised by learned counsel for applicant that applicant is entitled to earned income relief on theamount oftheprofit assessed,therespondent Commissioner 40 has already conceded according to his letter dated 3rd May, 19S5,thatthe applicant wasentitled to deductionsin respectof his contributions to the Social Insurance Fund. 10% on the 963 Savvides, J. Masouris v.Republic &Another
(1989)profit realized from thesaleofbuildingsitesandhis entitlement due to old age, andthat hewas prepared to deduct the above. The reason, as he mentioned,he didnot doso at the stage was to avoid withdrawing the assessments which were already pending before the Court in the present case and make new 5 assessments which would have necessitated the filing of a new recourse. In view oftheaboveadmission Ifinditunnecessary tomake any pronouncement. Itsuffices tostate that such amount hasto 10 be deducted from the amount of the subjudice assessments. In the result this recourse fails and is hereby dismissed and the subjudice assessments areaffirmed subject to readjustment by the deduction therefrom of: (a) any contributions of the 15 applicant to theSocial Insurance Fund:(b)old age entitlement; (c) 10%on the profit realizedfrom thesaleof the buildingsites in question. I make no order for costs. 20 Orderasabove. 964

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AI explanation based on the official legal text. Indicative, not a substitute for legal advice.