YOUNG MEN'S BUDDHIST ASSOCIATION

YOUNG MEN'S BUDDHIST ASSOCIATION

Vs.

COMMISSIONER GENERAL OF INLAND REVENUE

COURT OF APPEAL
DE SILVA, J.
WENGAPPULI, J.
CA/TAX/25/2014
TAC/OLD/IT/007
SEPTEMBER 18, DECEMBER 3, 2018

Tax Appeals Commission Act, No. 23 of 2011, section 11A-lnland Revenue Act, No. 38 of 2000, sections 8(d)(i)(a), 186-lnland Revenue Act, No. 10 of 2006, sections 7(e)(i)(a), 25, 217-Are all corporations considered companies?-Charitable organisations-Are profits and rental income exempt from tax?-Business income-Business profits for charitable purposes

The income tax returns submitted by the appellant were rejected as the appellant had treated the profits and income received as rent exempt from income tax. The assessor issued assessments for the relevant periods. The appellant appealed to the respondent Commissioner General of Inland Revenue without success. The appellant then appealed to the Tax Appeals Commission (TAC) which confirmed the determination of the respondent subject to the qualification that the rent income of the appellant should be subject to tax at a rate of 10%. The appellant moved the TAC to refer a case stated to the Court of Appeal. The argument of the appellant is based on the premise that having been incorporated by the Young Men's Buddhist Association, Colombo, Ordinance, No. 11 of

1927, the appellant is a corporation and therefore a company within the statutory definition.

Held:

1. The corporations known to our law are those created under general statutes, such as the Companies Ordinance, and those created by special statutes by which corporate status is granted to particular individuals or bodies of persons. Hence while all companies are corporations, all corporations are not companies. The appellant is not a company within the statutory definition merely because it is a corporation.

2. Both sections 186 of the Inland Revenue Act, No. 38 of 2000, and section 217 of the Inland Revenue Act, No. 10 of 2006, use the word "means" to firstly limit the meaning of the word "company" to "any company incorporated or registered under any law in force in Sri Lanka". Thereafter it uses the word "includes" to denote that the meaning of "company" is enlarged by adding a species which does not naturally belong to it, namely "public corporation". The word "public corporation" is defined in section 217 of the Inland Revenue Act, No. 10 of 2006. The appellant is not a public corporation within this meaning.

3. Whilst a company can be incorporated in Sri Lanka under an enactment other than the Companies Act, No. 7 of 2007, the appellant is not a company and is only a corporation.

4. The provision of facilities to the lessees by renting out buildings was not in furtherance of the primary objects for which the appellant was established and hence the profits from the provision of these services are liable to income tax.

5. The appellant claims to be a charitable institution for the purpose of determining the rate of income tax whilst also claiming to be a business for the purpose of deductions for expenses. The appellant is seeking to approbate and reprobate which cannot be allowed.

Cases referred to:

1. Province of Bengal v. Hingul Kumari Al R 1946 Cal 217 at 224
2. Grove v. YMCA 4 TC 613 .
3. Ranasinghe v. Premadharma and others [1985]1 Sri LR 63 at 70

APPLICATION for an Opinion on a Case Stated by the Tax Appeals Commission.

Dr. Shivaji Felix with Gamini Balasooriya for the Appellant.

Manohara Jayasinghe, S.C., for the Respondent.

cur. adv. vult.

August 3, 2019

J. DE SILVA, J.

The Appellant has been incorporated by the Young Men's Buddhist Association, Colombo Ordinance No. 11 of 1927 (Ordinance). The Appellant submitted its return of income tax for the years of assessment 2004/2005, 2005/2006 and 2006/2007. The returns were rejected by the assessor for the reason that the Appellant has treated the profits and income received

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