22nd August 1999
Fine Findings (A look at Sri Lanka Tax Cases - Volume IV). Reviewed by Gaston Perera
The publication of the fourth volume of the Reports of Sri Lanka Tax Cases is timely. The last volume was published 15 years ago. The decisions of the Higher Courts on issues arising from the interpretation of the Revenue Law - the Inland Revenue, the Turnover Tax, Estate Duty and the Stamp Duty Acts - from 1974 onwards were not conveniently accessible. The present volume, therefore, supplies that need. It may not be upto date - only decisions to 1996 are included. It may not be complete either - the Foreword says "nearly all cases" are reported. But with all that, this is a useful addition to the tax literature in the country, even though delayed.
Of course, a volume such as this is not for the general reader, however catholic his tastes. Law reports are not in the same class as Ian Fleming or Jeffrey Archer for popularity ratings. Still the nature of some of the issues that came before Courts could make interesting reading even at a popular level. Is for instance, a political party, a club? Imagine the mind-boggling idea of the JVP as a club! Or that Sri Lanka today is governed by an alliance of clubs called for short, PA. Well the UNP had got away with it. They strenuously argued in 1978 that they were a club - because a club was not liable to the then Wealth Tax. And the Supreme Court agreed with them - vide the United National Party vs. the CGIR, p. 102. Again is a toothbrush a toilet requisite? No, maintained Sohli Captain (Secco Brushes Corporation) vs. Commissioner of Inland Revenue at p. 354.
In the course of the argument it was urged that not everything in a toilet can be classified as "toilet requisites", articles like commodes and bidets for instance. Not the kind of subject matter that normally figures in the staid and learned proceedings of the Supreme Court. Wijetilleke J. disposed of the matter wittily and delicately. "Toilet requisites" he said mean "something needed for the accomplishment of one's toilet". He went on to say that toilet is not confined to "beautifying the face and dressing the hair', you have "to keep the whole body in mind." Therefore he concluded, the "articles....... mentioned above" are also toilet requisites. At the end of it all, it is the delicacy, the wit, the breadth of reading as much as the legal pronouncements that one remembers.
In a third case even fundamental rights, that ubiquitous issue, gets a look in. If one taxpayer receives a tax benefit in violation of the law, can another taxpayer claim the same benefit on the grounds of unequal treatment? This is what the case of C.W. Mackie & Co. Ltd., vs the CGIR at p. 378 is all about. In response to representations made by certain rubber dealers to the then President, the then Commissioner-General, in a cavalier disregard for the law, agreed not to recover turnover taxes from them for a past period. C.W. Mackie & Co. Ltd., however, had settled its own liabilities for this period, paying a tax of Rs 2 million. It now claimed a refund of this tax. Now the essence of the issue here is that there is no provision in the Tunover Tax Act to refund taxes paid, if they were legally due. In fact, it would have been as illegal to refund the taxes of C.W. Mackie & Co. Ltd., as it was to exempt the others.
On being so informed by the succeeding Commissioner-General, C.W. Mackie & Co. Ltd., resorted to fundamental rights action claiming there was "unlawful discrimination" and thereby a violation of their "constitutional right to equal treatment". Apart from the scathing strictures on the first Commissioner-General for "usurping a power which he did not in law possess," the essence of the Court's thinking was that equality is not to be sought illegally. Apart from this rule that flows from this case, it is the pithy expression of it by Sharvananda, C.J. that is most striking. "Article 12 does not guarantee equal violation of the law", he says. The complaint here, he goes on, is "inequality in the matter of illegal treatment". And then the crowning bon mot - "Illegality and equity are not on speaking terms". In the tax world of course, this volume has an importance of a different sort in that some of the decisions reported here are of such lasting significance as to be aptly described as landmark decisions marking a turning point in the interpretation of the law. The case of Ms D.M.S. Fernando vs. Ismail reported at p. 184, generally referred to now as the Ismail case, certainly marks a departure from the way that the Assessor's discretionary powers to reject returns had come to be regarded. Nothing could ever be the same in Revenue after the Ismail case with Assessors racking their brains to formulate adequate reasons for rejecting returns. Nothing could ever be the same on the other side either, for that matter, with lack of reasons becoming a standard ground of appeal. For this case arose in connection with a 1978 amendment to the Revenue Law requiring reasons to be given if a return was rejected.
The new amendment to the law only made explicit what was implicit before. In this context therefore the significance of the Ismail decision today is two-fold. Firstly it enunciates what Courts consider are adequate reason - they must be in writing, they must be communicated "at or about the time" the assessment is sent; they must not be conclusions; they cannot be "chopped and changed", they must enable the formulation of grounds of appeal. Secondly the communication of reasons is mandatory and failure to do so therefore invalidates an assesment. To this extent an Assessor's discretionary powers have now been restricted.
Another landmark decision reported here is that in the case of the Joint Executors of the Estate of the late A.A. Dawoodbhoy vs. the Commissioner-General of Inland Revenue at p. 122. It is concerned with what is an "artificial transaction." One of the powers conferred on an Assessor, perhaps the widest of the many powers conferred on him, is his power to disregard a transaction that reduces tax, if he is of the opinion that it is artificial. These "artificial provisions", as they are called, are the ultimate weapon of the Assessor to counter taxpayer schemes which have no other object but to reduce tax. What is "artificial" has not been defined in the Act. The importance of the Dawoodbhoy case is that it set certain limits to what can be treated as "artificial". The Supreme Court thinking was that a legally valid document cannot be struck down as artificial. Or to put it in starker, more fundamental terms, the primacy of civil laws is unassailable, revenue laws cannot supersede civil laws.
Of course the Revenue Dept. also has had its share of victories. There is the case of Meril J. Fernando vs. H.B. Gunadasa and others (p 317) which examined another of the discretionary powers vested in an Assessor - that of disregarding the time-limit of three years for making an assessment "where in the opinion of the Assessor any fraud, evasion or wilful default" has been committed. What had happened here was that the taxpayer's auditors, a firm of reputed Accountants, had not made the adjustment required in the disposal of fixed assets involving a transaction of Rs 4,179,250 with a tax implication of Rs 300,000. The Assessor discovered this after the prescribed time limit but forming the opinion that evasion was involved here made the assessment although time-barred, using the powers vested in him.
The Court of Appeal and later the Supreme Court upheld this action. In doing so - and this is what is of prime significance - Superior Courts, the highest judicial tribunals in the land, had subjected to critical scrutiny the manner in which the Assessor had discharged his duties and found it entirely satisfactory. Reviewing the basis on which he had formed his opinion that there was evasion, the Court of Appeal concluded he "acted lawfully". He "was justified in forming that opinion," said the Supreme Court.
The editing of these reports has been done by Walter Ladduwahetty. He is eminently qualified to do so. For among his many other qualifications, which are fortunately made known to the reader, is the fact that he is a member of the Board of Review of the Inland Revenue Department, a body intimately associated with tax appeals. The commitment he has brought to his task is seen in the comprehensive digest appended to the volume.
By: Roshan Peiris
The Sri Lanka News Update is a daily bulletin, sent through the Foreign Office to our missions abroad.
Compiled by Ravinath Ariyasinha, Director Publicity and spokesman for the Foreign Ministry, the Sri Lanka News Update has released a special edition on the LTTE assassination of moderate Tamil leader Dr. Neelan Tiruchelvam.
This concise booklet of 24 pages, records both local and international views on the dastardly assassination.
The pathos, the tragedy and the futility of killing a man like Neelan, a lawyer highly recognized by the international community, is brought out in this booklet , with well chosen comments from local and international newspaper editors, outstanding people and organisations.
It is an appropriate tribute to Dr. Tiruchelvam who walked arm-in-arm with destiny having many promises to keep and miles to go to promote and protect Human Rights, Constitutional Reform and the Devolution package, to find a solution to the ethnic crisis.
President Chandrika Kumaratunga joins many other leaders in saying that the "assassination of Dr. Tiruchelvan has created a void that the country would find hard to fill."
President Kumaratunga said, "Dr. Tiruchelvam had won the affection and respect of not only the Tamil speaking peoples but also all the communities in our country ... knowing full well the threats and dangers to his life, he carried on an untiring and inestimable effort through many years to find solutions to the ethnic crisis that we continue to face."
Foreign Minister Lakshman Kadirgamar in his tribute said Dr. Tiruchelvam had over the years made a significant contribution towards the formulation of foreign policy positions and options of the Sri Lankan Government .... can their (LTTE) cause be advanced by eliminating those men and women who carry aloft, wherever they are, the banner of the community's history, culture and achievements"?
The TULF's statement said "the brutal and cruel assassination of Dr. Tiruchelvam has come as a great shock to the party". It added that he was "a moderate who worked with dedication to bring about constitutional reforms through a paradigm shift in the country's constitutional structure consistent with the country's multi-ethnic and multi-lingual character....."
The Bishop of Colombo Rt. Rev. Kenneth Fernando expressed the view that Dr.Tiruchelvam "firmly upheld the rights of all people in our country irrespective of race or religion..."
The Ven. Baddegama Samitha Thera noted that "the assassination of this humble intellectual and refined son of the country is a great loss to our nation".
U.S. President Bill Clinton and First Lady Hillary Rodham Clinton in a message said "a powerful voice for reconciliation in Sri Lanka has been silenced."
The New Indian Express pointed out that Dr. Neelan's assassination "is the last nail but perhaps it is in the LTTE coffin."
These are just a few extracts chosen from among a large number of tributes which the Sri Lanka News Update, has adroitly compiled. It is a fine collection well chosen to show the high standards and the vast knowledge of this compassionate intellectual.
There is also a Tamil translation of the booklet which Ravinath Ariyasinghe said would be sent to "Tamil expatriates around the world." It after all, he said, deals with the Tamil Diaspora.
"Easy English" Published by Arjuna Hulugalle Dictionaries. Reviewed by Karen Benedict
There is a saying in rural England, "There are several ways to swing a cat". So it is when one learns a language. "Easy English" is a fast track method to learn English for a Sinhala speaking student. There is no doubt that speaking and reading in your mother-tongue comes naturally. The "Easy English' method is developed on the techniques of playing to the strength of a Sinhala speaking student. The exertion of reading the English word in the English script needs effort and is therefore avoided. The student is made to read the English word in the Sinhala script. This is so much easier. Vocabulary expansion automatically happens as one works through this book. Confidence in dealing with the language grows.
The 64 pages which one can carry in a shirt pocket, gives you a large number of words and expressions for a sound base to build on.
"Easy English" is a part of a Fast Track to the English language method developed by the publisher. This method is structured to give the student an adequate competency in six months. The books in the Fast Track are:
o Know Words (similar to the Reader's Digest Word Power)
o Simple English - Sinhala Dictionary
o Simple English Dictonary - Extended Version with Sentences
o Words - Phrases
Purists may shudder and disagree with the approach of Easy English, that is learning English through Sinhala, but those of us who have learnt Japanese at the Sasakawa Institute or Pali at school know that we had to use English as the script. We would otherwise have been nonstarters.
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