POLYCROME ELECTRICAL INDUSTRIES (PVT) LTD

POLYCROME ELECTRICAL INDUSTRIES (PVT) LTD

Vs.

COMMISSIONER GENERAL OF INLAND REVENUE

COURT OF APPEAL
DR. FERNANDO, J.
WIJERATNE, J.
CA/TAX/49/2019
TAC/IT/65/2016
FEBRUARY 2, 2021

Tax Appeals Commission Act, section 11A-Case stated-Inland Revenue Act, No. 10 of 2006, section 59B, 165-Meaning of "undertaking''-Validity of an acknowledgement of appeal-Intention of Parliament-Express or implied delegation of power-Acting under authorisation-Time bar objection

The appellant, a company engaged in the business of manufacturing electrical accessories and importing and selling electrical accessories, submitted its returns for the year of assessment 2011/2012 and claimed a concessionary rate of 10% on the turnover from the manufacturing activity on the ground that the profits and income from such manufacturing undertaking did not exceed Rs. 300 million and ought to be taxable at the rate of 10% specified in the Fifth Schedule in terms of section 59B of the Inland Revenue Act, No. 10 of 2006, as amended by the Inland Revenue (Amendment) Act, No. 22 of 2011. The total turnover of the appellant for the year of assessment 2011/2012 comprised the manufacturing activity and import and sale activity.

The assessor denied the 10% concessionary tax rate claimed by the appellant inter alia on the ground that there is no provision in section 59B of the Act to distinguish each business activity as a separate undertaking, and the turnover of all the business activities of the appellant as one undertaking exceeds the threshold limit of Rs. 300 million referred to in section 59B(2)(a).

The appellant appealed to the respondent against the assessment and the respondent by its determination confirmed the assessment issued by the assessor. Being dissatisfied with the said determination, the appellant appealed to the Tax Appeals Commission which dismissed the appeal.

The appellant moved the Tax Appeal Commission to state a case on two questions of law for the opinion of the Court of Appeal.

Held:

1. The Commissioner General of Inland Revenue as the head of a department is not expected to personally discharge all the duties entrusted to him and may, in general, act through duly authorised officers of his department where the relevant power, duty or function is of an administrative nature or routine.

2. The acknowledgement being signed by the assessor instead of the Commissioner General is the exercise of an administrative function rather than the assessor performing any discretionary power. Thus, the absence of any reference in the acknowledgement letter that the assessor signed the acknowledgement for and on behalf of the Commissioner General will not make the acknowledgement of the appeal invalid.

3. There is a clear distinction between the determination of the appeal and communication of the appeal; they are two different things or steps at different stages. The former is the determination of the confirmation, reduction, increase or annulment of the assessment of the respondent and the latter is the formal intimation to the appellant of the fact that such a determination has been made. The date of the determination could not be taken as the date of the communication, as communication presupposes determination of a thing to be communicated to the appellant.

4. Section 59B(2) cannot be formed by splitting up the turnover of each business activity of an undertaking when the words used in the section refer to the turnover of the "undertaking" and not the turnover of "any single business activity" falling within the "undertaking".

5. In the present case, the appellant carries on two business activities under one undertaking and the aggregate income of the appellant from the manufacturing activity and the sale of imported goods exceeds Rs. 300 million. Thus, the appellant is not entitled to claim the concessionary rate of 10% as s

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