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).

Hotel Yapawwa Paradise (Private)

Ltd, Kindom Road, Yapahuwa, Maho.

APPELLANT CA No. CA/TAX/0001/2018 Tax Appeals Commission No. TAC/VAT /003/2015 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 : Riad Ameen for the Appellant.

Amasara Gajadeera S.C., for the Respondent.

WRITTEN SUBMISSIONS : 22.10.2018 & 22.04.2022 (by the Appellant)

22.10.2018 & 21.04.2022 (by the Respondent)

ARGUED ON : 18.01.2022 & 10.02.2022 DECIDED ON : 27.05.2022 M. Sampath K. B. Wijeratne J.

Introduction The Appellant is a limited liability company incorporated in Sri Lanka. Its principal business activities are related to hotel and tourist industry.

The Appellant submitted its Value Added Tax (hereinafter referred to as ‘VAT’) returns for the quarterly periods from 1^st January 2011 to 31^st March 2011 (11030) and the Assessor did not accept the same on the ground that the Appellant has made a taxable supply under the VAT Act No. 14 of 2002, as amended, (hereinafter referred to as ‘the VAT Act’) by disposing a building. Accordingly, an assessment was issued to the Appellant Company. The Appellant appealed to the Commissioner General of Inland Revenue (hereinafter referred to as ‘CGIR’) against the said assessment and the CGIR confirmed the assessment by his determination. Being aggrieved by the said determination, the Appellant appealed to the Tax Appeals Commission (hereinafter referred to as ‘TAC’) in accordance with Section 7 of the TAC Act No. 23 of 2011, as amended (hereinafter referred to ‘the TAC Act’).

The TAC by its determination dated 12^th September 2017, dismissed the appeal and confirmed the CGIR’s determination.

The Appellant then in accordance with Section 7 of the TAC Act moved the TAC to state a case on the following questions of law for the opinion of this Court.

i. Did the Commission contravene the rules of natural justice by failing to give an opportunity to the Appellant to respond to the Respondent’s written submission?

ii. As a matter of Law can a building situated on land be disposed by way of a book entry recorded in the annual accounts of a company?

iii. D id the Commissioner¹ err in law in concluding that there was a disposal of building (situated on law)² based only on an entry in the annual accounts of the appellant in the absence of any other evidence of such disposal?

iv. Was the appellant the owner of the building?

v. Is it only owner of a building who can claim depreciation allowance for the purpose of income tax?

vi. As a matter of Law could the Appellant be treated as the owner of a building only on the basis that the Appellant claimed depreciation allowances for the purpose of income tax?

vii. D id the Commissioner err in law when it concluded that the building has been transferred by the Appellant (in terms) to the Ayurveda, Kurklink Maho (Pvt) Ltd?

viii. Can the making of a book entry in the annual account constitute a supply of a building by the Appellant in terms of the Value Added Tax Act No. 14 of 2002?

ix. In any event, does a disposal of building constitute a supply made in the course of carrying on or carrying out a taxable activity?

x. Was there a taxable supply made by the appellant in relation to a supply of the said building during the Taxable period of 1^st January to 31^st march 2011?

xi. Did the Commissioner err in law in failing to determine the appeal within the time period stipulated by law?

1 Since the word ‘Commissioner’ in questions No. (iii) & (vii) is inappropriate and not in conformity

with the questions suggested by the Appellant (at page 229 of the appeal brief), the said word is

corrected as ‘Co