IN THE COURT OF APPEAL OF THE DEMOCRATIC SOCIALIST REPUBLIC OF SRI LANKA In the matter of an appeal by way of Stated Case on a question of law for the opinion of the Court of Appeal under and in terms of Section 11A of the Tax Appeals Commission Act, No. 23 of 2011 (as amended).

Sri Lanka Insurance Corporation Limited, No. 21, Vauxhall Street, Colombo 02. APPELLANT Case No. CA/TAX/0029/2019 Tax Appeals Commission No.

TAC/VAT/007/2015 Vs.

The Commissioner General of Inland Revenue, Department of Inland Revenue, Sir Chittampalam A. Gardiner Mawatha, Colombo 02.

RESPONDENT BEFORE : Dr. Ruwan Fernando J. &

M. Sampath K.B. Wijeratne J.

COUNSEL : Nihal Fernando, PC. With Dr. Shivaji Felix and Harshula Seneviratne for the Appellant Milinda Gunetilleke, P.C. Additional Solicitor General with R. Gooneratne, State Counsel for the Respondent ARGUED ON : 27.01.2022, 01.04.2022, 20.05.2022, 30.05.202211.11.2022, & 13.12.2022 WRITTEN SUBMISSIONS FILED : 03.02.2023 & 02.03.2021 (by the Appellant)

21.02.2023 & 24.01.2022 (by the Respondent)

DECIDED ON : 03.05.2023 Dr. Ruwan Fernando, J.

Introduction [1] This is an appeal by way of Stated Case against the determination made by the Tax Appeals Commission dated 28.06.2019 confirming the determination made by the Respondent dated 10.04.2015 and dismissing the appeal of the Appellant. The taxable periods related to this Appeal are from January 2010 to December 2010.

Factual Background [2] The Appellant is a Public Limited Liability Company in Sri Lanka and it carried on the business of general insurance and life insurance in Sri Lanka. The business of the Appellant is regulated by the Regulation of Insurance Industry Act, No. 43 of 2000 (as amended). The Appellant submitted monthly VAT returns for the above- mentioned taxable periods from January 2010 to December 2010. The Appellant claimed that it is not liable to pay VAT on the supply of financial services under section 25F of the Value Added Tax Act, No. 14 of 2002 (as amended) on the basis that the value addition on business of life insurance is expressly exempted from VAT on financial services in terms of item (x) (i) of Part II (b) of the First Schedule to the Value Added Tax Act, No. 14 of 2002 (as amended (hereinafter referred to as the VAT Act) and that the business of life insurance is not specifically enumerated in section 25F of the VAT Act so as to constitute a chargeable financial service.

[3] The assessor by letter dated 02.04.2013 refused to accept the returns on the ground that various types of interest income declared in the audited accounts of the Appellant fall under section 25F of the VAT Act and therefore the Appellant is liable to pay VAT on financial services under Chapter IIIA of the VAT Act (Vide-pp. 10-14 of the TAC brief). Accordingly, VAT on the supply of financial services was calculated by the assessor for the taxable periods from 01.01.2010-31.12.2010 and the asssessments were issued.

Appeal to the Respondent and the Tax Appeals Commission [4] The Appellant appealed to the Respondent against the said assessments and the Respondent by its determination dated 10.04.2015 (Vide-page 80 of the TAC brief) confirmed the assessments issued by the assessor. The reasons for the determination are contained at pp.60-75 of the TAC brief).

The decision of the Tax Appeals Commission [5] Being dissatisfied with the said determination of the Respondent, the Appellant appealed to the Tax Appeals Commission and the Tax Appeals Commission by its determination dated 28.06.2019 confirmed the determination of the Respondent and dismissed the appeal. The Tax Appeals Commission (hereinafter referred to as the TAC) held:

1. The assessments issued by the assessor are valid in law, and the assessor having given reasons for non-acceptance of assessments, duly communicated his reasons to the Appellant;

2. The Treasury Bills and Bonds raise Rupee Loans to the Government of Sri Lanka under the Local Treasury Bills Ordinance, No. 8 of 1923 and the Registered Stoc