DlAS VS. COMMISSIONER GENERAL OF INLAND REVENUE

DlAS VS. COMMISSIONER GENERAL OF INLAND REVENUE

COURT OF APPEAL
ERIC BASNAYAKE, J.
CHITRASIRI, J.
CA 764/2000 (REV)
DC COLOMBO 68552/TAX
JULY 28,2008
JULY 24,2009

Inland Revenue Act 38 of 2000 - Section 146, Section 149 (1), Section 166, Section 166(1) -Income Tax Ordinance - Section 62 - Similarities? Inland Revenue Act 4 of 1963 - Defaulter a Company - Is a Director or Principal officer of a limited liability Company liable to pay taxes due from Company from his personal assets - Jurisdiction? Vicarious liability - Exceptional circumstances - Applicability of the amendment 12 of 2004

The Deputy Commissioner of Inland Revenue filed a certificate of tax in default in the name of the petitioner claiming a certain sum of money. The tax defaulter is the Company and the petitioner was sued on the basis of vicarious liability. The trial Court held that in terms of Section 166 (1) an action could be instituted against the Managing Director to recover tax defaulted by the Company.

It was contended that, the petitioner cannot be a defaulter since he has not been duly assessed. It is the Company that was duly assessed and that there is no provision under the Act to recover taxes in default from the Managing Director of a Company - who is only a representative of  the Company - in his personal name.

Held:

(1)  Imposition of vicarious liability under a statute is not lightly to be presumed and such liability must necessarily be imposed on clear  and unambiguous language.

(2)  There is no provision in the Act which makes the principal officer liable for tax due from the Company - he is not liable to pay from his personal assets.

Per Eric Basnayake, J.

"Provision has now been made by Section 144(B) of the InIand Revenue (Amendment Act) 12 of 2004 - making the directors and principal officers liable to pay income tax payable by Companies - this provision could not affect the present case."

Per Eric Basnayake, J.

"Liability was imposed on the petitioner without having authority to do so. It could be considered as constituting an exceptional ground for the Court to exercise extra-ordinary jurisdiction."

APPLICATION in Revision from an order of the District Court of Colombo.

Cases referred to:-

1. M.E. de Silva us. The Commissioner of Income Tax - 53 NLR 280.
2. Rajan Philip us. Commissioner of Inland Revenue - CA 1174/81 - DC 1 5676/Tax Vol IV Tax Cases pg. 2 1 1.
3. Hamza US. Commissioner of Inland Revenue - 1991 - Vol IV Tax Cases at 30 1
A.S.K. Senarath Aratchi for respondent - petitioner
Anusha Samaranayake SSC for plaintiff-respondent.

Cur.adv.vult

October 15th 2009
ERIC BASNAYAKE J.

    The Deputy Commissioner of Inland Revenue filed a Certificate of Tax in Default (PI) in the District Court of Colombo, under section 149 (1) of the Inland Revenue Act No. 38 of 2000 (the Act) in the name of the respondent -petitioner (petitioner), claiming a sum of Rs. 4,442,500/-. The address of the petitioner is given as Managing Director, Multisacks Pvt. Co. No. 222, Galle Road, Gorakana, Panadura. The certificate P1 refers to File No. 1 14133 159 ,for the year 2002/2003.

It is common ground that the tax defaulter is the company and the petitioner is sued on the basis of vicarious liability. The learned Additional District Judge by his order dated 20.4.2006 held that in terms of section 166 (1) of the Act,an action could be instituted against the Managing  Director to recover tax defaulted by the company. Section 166  of the Act makes the secretary, manager, director or other principal officer liable to do all such acts as required to be done by the Act. The section further makes them liable for any offences committed by the company. Section166 reads as follows:-

1. The secretary, manager, director or other principal officer of every company or body of persons corpor

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