GEOMETRY GLOBAL (PVT) LTD

GEOMETRY GLOBAL (PVT) LTD

VS.

COMMISSIONER GENERAL OF INLAND REVENUE

COURT OF APPEAL
DR. FERNANDO, J.
WIJERATNE, J.
CA/TAX/1/2017
TAC/IT/5/2014
JULY 19, AUGUST 9, 2021

Tax Appeals Commission Act-Case stated-Inland Revenue Act, No. 10 of 2006, sections 25(1), 25(1)(k), 26(1) and 26(2)-Difference between "outgoings" and "expenses"-Deduction of travel expenses-Meaning of the word "including''-Statutory interpretation

The appellant had paid a total sum of Rs.8,957,767 to its employees for the use of their personal vehicles for its business purposes. In the calculation of its profits and income for the year 2009/2010, the appellant deducted the said sum as travel expenses in terms of section 25(1)(k) of the Inland Revenue Act. The assessor disallowed the deduction on the basis that the expenses were rental expenses that could not be deducted in terms of the general prohibitions for deduction under section 26(2) of the Act.

The appellant unsuccessfully appealed to the Commissioner General of Inland Revenue and thereafter to the Tax Appeals Commission. The appellant then moved the Tax Appeals Commission to present a case stated for the opinion of the Court of Appeal inter alia on the ground that the travel expenses were deductible notwithstanding the general prohibitions in section 26, as such deductions were specifically provided for in section 25(1)(k). The respondent took up the position that the travel expenses could not be deducted in terms of section 25(1) as they do not constitute an "expense" or an "outgoing" in the production of the profits and income of the appellant and that in any event the specific deductions in sections 25(1)(a) to (w) are subject to the general prohibitions in section 26.

Held :

1. Section 25(1) of the Act sets out the general rule of deduction that permits the deduction of"all outgoings and expenses" incurred by any person in the production of profits or income.

2. The word "expenses" in section 25(1) is limited by the words "incurred in the production of profits or income". However, the word "outgoings" has no such limitation and can include a wide variety of items that do not fall within the meaning of "expenses".

3. Nevertheless, an "expense" and an "outgoing" could be deducted only if it is not prohibited from being deducted by the general limitations set out in section 26 of the Act.

4. The paramount object of statutory interpretation is to discover the intention of the legislature, which should be ascertained from the text of the enactment in question.

5. Sections 25(1)(a) to (w) contain specific deductions to be taken into account in ascertaining the profits or income of any person.

6. The word "includes" or "including" performs different functions: it could enlarge the scope of the definition of a word, or give an exhaustive and restrictive meaning depending on its context, or bring under one nomenclature all transactions that have similar features. Therefore, the correct meaning that should be attributed is dependent on the setting, context and object in which the words are used in any statute, in its entirety, and the purpose of the statute as intended by the legislature.

7. The term "including" in section 25(1) of the Act is extensive and expansive and not restrictive in nature.

8. Section 26(1) does not prohibit the specific deductions permitted in sections 25(1)(a) to (w) unless it is referred to and restricted by section 26(1) or any other provision of the Act.

9. The general prohibition of deduction in section 26(2), read together with section 25(1), does not take away from what has been expressly provided by section 25(1)(k).

Cases referred to :

1. Rodrigo v. Commissioner General of Inland Revenue [2002] 1 Sri LR 384

2. Hayley and Company Ltd v. Commissioner of Inland Revenue 65 NLR 174

3. Patrick Alfred Reynolds v. Commissioner for Income Tax, Trinidad and Tobago 1967

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