The court emphasized the necessity of primary findings of fact in tax appeals for clarity and adherence to established accounting principles.

Siti Norma Yaakob JCA:

This income tax appeal is not about the liability of a taxpayer but is more concerned with the procedure to be followed when the Special Commissioners of Income Tax ("the Special Commissioners") decide to transmit a case to the High Court by way of a case stated under para. 34 of sch. 5 to the Income Tax Act 1967 ("the Act").

Before the Special Commissioners, the appellant had appealed against the 1986-1988 assessments raised by the respondent and at the hearing, the main issue for determination was whether, the method adopted by the respondent in the apportionment of common expenses on fixed assets attributable to the appellant's leasing and non-leasing business, was correct.

Tax is calculated on the adjusted income of a taxpayer. To ascertain the adjusted income, all outgoings and expenses incurred wholly and exclusively in the production of the gross income will have to be deducted from the gross income. See s. 33(1) of the Act. However by virtue of reg. 2 of the Income Tax Leasing Regulations 1986 , income from leasing and nonleasing activities are to be treated separately and distinct from each other and as such the common expenses of one business cannot be set off against the other. It is a simple matter where the expenses are identifiable as being attributable to one or the other activity. Problems do arise when the expenses are common to both activities and in such situations, the common expenses are apportioned between the two activities before they can be deducted from the gross income in order to arrive at the adjusted income. It was the method of apportionment that was the issue before the Special Commissioners with the appellant contending that the respondent's method was wrong and erroneous whilst theirs was right and proper.

The Act does not make any provision as to the method of apportionment but all parties agree that the formula to be used is:

Income of leasing activities x Common expenses

Income of leasing + Income of non-leasing activities activities

But that is as far as the agreement goes as the appellant contend that for the income of their leasing activities only interest can be taken into account and this is in line with the accounting practice where only the interest element of leasing and non-leasing activities is considered as income. The respondent on the other hand maintains that the income of the leasing activities is made up of the gross income ie, principal and interest and clearly the crux of the dispute relates to the composition of the income in the leasing business.

The Special Commissioners accepted the method adopted by the respondent to be correctly made and in line with the provisions of the Act. They accordingly dismissed the appellant's appeal and confirmed the respondent's assessments for the years 1986-1988.

It was to appeal against that deciding order that a notice was filed by the appellant requiring the Special Commissioners to state a case for the opinion of the High Court. That was done but before the High Court could hear the matter on its merits, the appellant filed a notice of motion pursuant to para. 40 of schedule 5 to the Act, seeking an order to have the case stated remitted to the Special Commissioners:

(1) to be redrafted to comply with the direction of the Federal Court in E. v. Comptroller General of Inland Revenue (E's case) or

(2) alternatively, to state a supplementary case to contain

(i) the contentions made by the parties,

(ii) the evidence as led by the parties and

(iii) the findings of the Special Commissioners on the evidence so led.

Clearly the notice of motion was intended to rectify the omissions in the preparation and submission of the case stated. However it was rejected by the High Court on the ground that there was no justification for such a remission as all the omissions complained of are apparent on the face of the case stated. It