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).

Samson Rajarata Tiles (Pvt) Ltd, No. 110, Kumaran Rathnam Road, Colombo 2.

APPELLANT CA No. CA/TAX/0014/2015 Tax Appeals Commission No. TAC/IT/027/2014 v.

Commissioner General of Inland Revenue, Department of Inland Revenue, Sir Chittampalam A, Gardiner Mawatha, Colombo 2.

RESPONDENT BEFORE : Dr. Ruwan Fernando J. &

M. Sampath K. B. Wijeratne J.

COUNSEL : Riad Ameen with Rumesh Perera for the Appellant.

Manohara Jayasinghe, DSG with Amasara Gajadeera, SSC for the Respondent.

WRITTEN SUBMISSIONS : 03.10.2018 (by the Appellant)

01.10.2018 (by the Respondent)

ARGUED ON : 17.05.2022 & 09.06.2022 DECIDED ON : 24.11.2022 M. Sampath K. B. Wijeratne J.

Introduction The Appellant is a limited liability company incorporated in Sri Lanka, engaged in the business of manufacture an export of roofing and floor tiles. The Appellant submitted its return of income for the year of assessment 2009/2010¹ and the Assessor rejected the same by his letter dated 6^th August 2012, [At p. 31 of the appeal brief.], issued in terms of Section 163 of the Inland Revenue Act No. 10 of 2006, as amended, (hereinafter referred to as ‘the IR Act’) on the grounds stated therein. Thereafter, the Assessor, proceeded to issue a Notice of Assessment, [At p. 43 of the appeal brief.]

Being aggrieved by the said assessment, the Appellant company appealed to the Commissioner General of Inland Revenue (hereinafter referred to as ‘the CGIR’). The CGIR heard the appeal and made his determination on the 17^th October 2014, [At p. 11 of the appeal brief.], reducing the interest expenses, house rent, freight expenses, Value Added Tax expenses (hereinafter referred to as ‘VAT’) and allowing the claim to deduct input advance, in full. But did not allow the claim to deduct meals expenses. The reasons given by the CGIR for not allowing the claims in whole or in part were the lack of documentary evidence to prove the expenses. Meals expenses were also disallowed on the same basis⁵ The aggrieved Appellant appealed to the Tax Appeals Commission (hereinafter referred to as ‘the TAC’) against the determination of the CGIR.

1 At pp 23 to 26 of the appeal brief.

The TAC made its determination on the 6^th August 2015 confirming the determination of the CGIR, subject to the following variations; allowed the deduction of Rs. 836,065.00 VAT expenses but disallowed interest expenses of Rs. 9,594,519.00 and meals expenses of Rs. 3,446,008.00. The TAC reduced the amount of interest expenses as the Appellant's representative limited the claim to that amount, [Vide p. 3 of the TAC determination.]

Being aggrieved by the said determination of the TAC, the Appellant moved the TAC to state a case to this Court on the following five questions of law for the opinion of this Court.

The five questions of law read as follows;

1. Did the Commission err in law in arriving at a conclusion of fact that the loan given to the appellant by the sister company, Samson Rubber Industries (Pvt.) Ltd. was not reflected in the accounts of the lender, without any evidence in support of the said conclusion of fact?

2. Did the commission err in law in disregarding the debit notes marked D6, D6(1), D6(2) and D6(3) issued by the lender and D5A which is the relevant ledger folio of the lender which shows that the loan is reflected in the accounts of the lender?

3. In regard to meal expenses amounting to Rs. 3,446,008/-, did the commission err in law when it assumed that the Appellant should have provided material in support of the expense as required by section 106(13) of the Inland Revenue Act, No. 10 of 2006, whereas the section 106(13) does not have such requirement at all and whereas it merely refers to the discretion of an Assessor to call for documents specified i