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COMMISSIONER OF INCOME TAX v. PEIRIS
NLR58V4
1956 Present: Gratiaen,
J., and Gunasekara, J.
THE COMMISSIONER OF INCOME TAX, Appellant, and J. L. D.
PEIRIS, Respondent
S. C. 27-Case stated under Section 74 of the Income Tax Ordinance
(Cap. 188)
Income tax-Death of person
carrying on a business-Computation of statutory income -" Ceases to carry on a
business "-Income Tax Ordinance (Cap. 1SS), s.s. 5 (1), 11 (1), 11 (6), 11 (.9),
11 (10).
When a person who carries on a business dies, it cannot be said that, upon
his death, he ceases to carry on or exercise a trade, business, profession or
vocation in Ceylon within the meaning of section 11 (6) of the Income Tax
Ordinance. Therefore, paragraph (b) of section 11 (6) does not apply for the
purposes of computing the statutory income of the deceased for the year of
assessment preceding that in which he died.
CASE
stated under section 74 of the Income Tax
Ordinance.
M. Tiruchelvam, Deputy Solicitor-General, with A. Mahendrarajah'
Crown Counsel, and R. S. Wanasundera, Crown Counsel, for the appellant.
H. V. Perera, Q.C., with S. J. Kadirgamar and John de Saram,
for the respondent.
Cur. adv. vult.
March 2, 1956. GRATIAEN, J.-
This is a case stated under the provisions of section 74 of the Income Tax
Ordinance (Cap. 188). Mrs. Nancy Charlotte Peiris (hereafter called " the
deceased ") died on October 23rd 1951. One of her sources of taxable income had
been her agricultural business. It was common ground between the taxing
authority and her Executor that her statutory income for the year of assessment
in which she died should, in respect of all her sources of income, be computed
under section 11 (9) of the Ordinance. There was disagreement, however, as to
how her statutory income for the preceding year should be ascertained. The
Assistant Commissioner decided that the income derived from agricultural
business during that year must be computed under paragraph (b) of section 11 (6)
because she had " ceased ", by reason of her death, to carry on this business.
Upon appeal, the Commissioner confirmed the assessment on this basis, but the
Board of Review ruled in favour of the executor that section 11 (6) (6) applied
only to " a cessation of business by a living person ". It is common ground that
the deceased's income from other sources must be computed under section 11 (1).
The questions of law submitted for the opinion of this Court at the instance of
the Commissioner are in the following terms :
" On the facts as submitted between the parties, did Mrs. N. C. Peiris, upon her
death on 23.10.51, cease to carry on or exercise a trade or business, profession
or vocation in Ceylon within the meaning of section
11 (6) of the Income Tax
Ordinance (Cap. 188) ? If so, does paragraph (6) of section 11 (6) of the said
Ordinance apply for the purposes of computing the statutory income of Mrs.
Peiris for the year of assessment preceding that in which she died ? "
The admitted facts which are relevant to our decision are that the deceased had
continued to carry on an agricultural " business " within the meaning of the
Ordinance until the date of her death. She had also derived income from this and
other taxable sources during the year of assessment in which she died, viz.
1951/1952 and also during the preceding year 1950/1951. The amount of tax in
dispute is Rs. 175,956.66.
The scheme of taxation laid down by the Ordinance appears in section 5 (1), 11
(1), 11 (6) and 11 (9). Their provisions are to the following effect:
Section 5 (1) : " Income tax shall, subject to the provisions of this Ordinance
. . . . be charged . . . . for each subsequent year of assessment
(i.e. after the year commencing on 1st April 1932) in respect of the profits and
income of every person for the year preceding the year of assessment .... but
without prejudice to any of the provisions of this Ordinance which enact that
tax is to be charged in particular cases in respect of
