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).

McLarens Lubricants Ltd, No.284, Vauxhall Street, Colombo 02.

APPELLANT CA No. CA/TAX/0053/2019 Tax Appeals Commission No. TAC/IT /078/2016 v.

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 : F. N. Goonewardane for the Appellant.

Chaya Sri Nammuni, SSC for the Respondent.

WRITTEN SUBMISSIONS : 27.01.2022 (by the Appellant)

09.03.2022 (by the Respondent)

ARGUED ON : 14.12.2021 DECIDED ON : 31.03.2022 M. Sampath K. B. Wijeratne J.

Introduction The Appellant, McLarens Lubricants Ltd, is a limited liability company incorporated in Sri Lanka, engaged in the business of importation, manufacture and distribution of lubricants.

The Appellant submitted its return of income for the year of assessment 2011/2012 claiming a tax exemption under Section 13 (b) of the Inland Revenue Act No. 10 of 2006, as amended. (hereinafter referred to as ‘the Inland Revenue Act’ and ‘the Act’)1 The Assessor, by letter dated 5^th November 2014 rejected the return on the ground that the Appellant’s supply of lubricants to foreign ships cannot be treated as an ‘export’ in terms of Section 42 of the Act. Accordingly, the Assessor, by the same letter communicated his reasons for not accepting the return, in terms of Section 163 (3) of the Inland Revenue Act, which also contained an estimated amount of taxable income and the tax payable for the year of assessment 2011/2012, [At page 46 of the appeal brief]

Thereafter, the Notice of Assessment dated 26^th November 2014 was issued to the Appellant.3 The company appealed to the Commissioner General of Inland Revenue (hereinafter referred to as ‘the CGIR’) against the said assessment by way of letter dated 18^th December 2014, in terms of Section 155 of the Inland Revenue Act.

1 at page 41 of the appeal brief

3 Admitted at paragraph 3 of the Appellant’s written submission.

The CGIR heard the appeal and made his determination confirming the assessment and the reasons for the determination were communicated to the Appellant company by letter dated 16^th November 2016, [at page 75 of the appeal brief]

Being aggrieved by the said determination, the Appellant appealed to the Tax Appeals Commission (hereinafter referred to as ‘the TAC’) in terms of Section 7 of the TAC Act No. 23 of 2011, as amended. (hereinafter referred to as ‘the TAC Act’)

The TAC by determination dated 5^th November 2019 confirmed the determination of the Respondent, CGIR, and dismissed the appeal of the Appellant.

The Appellant then moved the TAC to state a case on the following question of law for the opinion of this Court in accordance with Section 11 A of the TAC Act.

1. Whether the sale of lubricants to non-resident ships out of bonded warehouses by the Appellant can be considered as qualified exports within the meaning of Section 51 and/or 42 of the Inland Revenue Act, No. 10 of 2006 (as amended)?

The fact that the lubricants are sold by the Appellant to non-resident ships out of bonded ware houses is not in issue. The matter in issue is whether those supplies constitute an export in terms of Sections 42 (1) and/or Section 51 of the Inland Revenue Act No. 10 of 2006, as amended.

The Law Before adverting to the matter in issue, for clarity, I will re-produce the relevant Sections herein below.

Section 42 (1) of the Inland Revenue Act No. 10 of 2006 reads as follows:

“42 (1) The profits and income, for the year of assessment commencing on April 1, 2006, arising in Sri Lanka to a consignor or consignee, from the export of –

(a) (…);

(b) Any petroleum, gas or petroleum products; or

(c) (...), being goods brought to Sri Lanka on a consignments basis, an