Dias and Commissioner of Income Tax
193$Present; Moseley S.P.J. and Wijeyewardene J.DIAS, Appellant, and COMMISSIONER OP INCOME
No. 6 (Inty.) Income Tax.
Income Tax—Purchase of estates by planter—Within the year of assessment—Commence to carry on business—Income Tax Ordinance (Cap. 188),s. 11(3).
Where a planter who owns estates buys other estates within the year ofassessment, he commences several agricultural undertakings in respect ofthose estates and each of the estates acquired involved the commence-ment of the carrying on of a business within the. meaning of section 11(3)
of the Income Tax Ordinance.
ASE stated to the Supreme Court by the Board of Review of theIncome Tax Ordinance. The facts appear from the argument.
H. V. Perera, K.C. (with him S. J. V. Chelvanayagam and H. W.Jayawardene), for the assessee, appellant.—In 1940 the assessee ownedcertain tea and rubber properties. Subsequently he acquired certainother tea and rubber properties. The question is whether, wheneverhe bought a new property, he “ commenced to carry on a businesswithin the meaning of section 11 (3) of the Income Tax Ordinance(Cap. 188).“ Business ” is defined in section 2. Section 11 (3) has
been interpreted in Commissioner of Income Tax v. Rodger 1 and Rowan v.Commissioner of Income Tax 2 with reference to the words " employmentand “ profession ” respectively. Those two decisions' are applicable,by way of analogy, as regards the meaning to be given to the word‘‘ business ” in that section. What is contemplated by “ businessis the type of business or the way in which a man employs himself asdistinct from something specific and analogous to an office. See alsoDavies v. Braithwaite3. The acquisition of a new tea estate by a manwhose business is already that of producing tea cannot be regarded asthe commencement of a new business. The word “ business ” in section11 (3) of the Income Tax Ordinance cannot be interpreted in the mannerwhich one would interpret section 19 (1) of the Excess Profits DutyOrdinance, No. 38 of 1941. The different estates under considerationin the present case are merely assets or units of the same “ agriculturalundertaking
H. H. Basnuyake, C.C., for the Commissioner of Income Tax.—Theappellant was admittedly carrying on the business of an agriculturalundertaking. Cultivation of land for the purpose of selling the produceis a business—Back v. Daniels *. The word “ business ” has a widemeaning, and whether a man is carrying on one business or separatebusinesses is a question of fact—Commissioner of Income Tax v. Govinda-sami Naidu 5; Commissioners of Inland Revenue v. The Marine SteamTurbine Co., Ltd.3; Commissioners of Inland Revenue v. The Korean
1 (1933) 35 N. L. R. 169.
1 (1939) 40 N. L. R. 224.
* L. R. (1931) 2 K. B. 628.
(1924) 9 T. O. 183 at 203.
(1922) 1 Indian T. G. 174 at 176.(1919) 12 T. G. 174 at 179.
MOSELEY J.—Dias and Commissioner of Income Tax.
Syndicate, Ltd.1. The commencement of a business can be distinguishedfrom an extension of it—Fullwood Foundry Co., Ltd. v. Commissioners ofLand Revenue 1 2.
Section 11 (3) of Cap. 188 is not controlled by the decisions in Rodger’scase (supra) and Rowan’s case (supra) because that section was subse-quently amended by section 5 of Ordinance No. 25 of 1939. CertainEnglish cases are of assistance in the present case—Fullwood FoundryCo., Ltd. v. Commissioners of Land Revenue3 4; Gloucester Railway Carriageand Wagon Co., Ltd. v. Commissioners of Inland Revenue *; Farrel v.Sunderland Steamship Co., Ltd.3; H. & G. Kinemas, Ltd. v. Cook *;Scales v. George Thomson & Co., Ltd.7; Birt, Potter & Hughe?, Ltd. v.Commissioners of Inland Revenue 8. The test is whether there is anyinterdependence or unity embracing two or more businesses, and this is aquestion of fact.
The proviso of section 13 (3) of the Income Tax Ordinance indicatesthat a person "can have more than one agricultural undertaking, so thatall his agricultural undertakings do not necessarily fall under one head.See also sections 30 (2) and 31 (2).
H. V. Perera, K.C., in reply.—“ Business ” in section 11 (3) means-kind of business and not a particular activity, and involves a purequestion of law. That word is not caught up by the amendment intro-duced by section 5 of Ordinance No. 25 of 1939. The reasoning in thejudgments in Rodger’s case and Rowan’s case is, therefore, applicable inthe present case.
English cases are not applicable because, in Ceylon, there is no enact-ment similar to rule 11 (2) of Schedule D of the English Income Tax Act.In England rule 1 (2) of Schedule D has to be read with rule 11 (2).
Cur. adv. vult.
June 18, 1944. Moseley J.—
This is a case stated by the Board of Review, at the request of theassessee, for the opinion of this Court.
On April 1, 1940, and for some years previous thereto the assesseewas—
co-owner with others of Wallawe Estate of 385 acres in extent,
planted in tea and rubber;
sole owner of Eachchakaduwa Estate of 114 acres, planted in
In the year 1941 he acquired interests in other estates as follows:-—
on January 1, 1941, an undivided one-third share of Opata Group
being 171 acres of rubber;
on July 1, 1941, an undivided one-fourth share in Godadessa Estate
of 300 acres, planted in tea and rubber; and
on the same date, an undivided one-fifth share in Randola Estate
of 300 acres of tea.
112 T. C. 181 at 196.
2(1924) 9 T. C. 101.
4(1924) 12 T. C. 720 at 742.
(1903) 4 T. C. 60S.
(1933) 18 T. C. 116.
(1927) 13 T. C. 83 at 89.
(1926) 12 T. C. 976 at 994.
MOSELEY J.—Dias and Commissioner of Income Tax
In consequence of the three latest acquisitions he was assessed for theyears of assessment 1940-41, 1941-42, and 1942-43 on the basis that,at the respective dates of acquisition, he had “ commenced to carryon …. a …. business ” within the meaning of sections
11 (3) and (4) of the Income Tax Ordinance (Cap. 188).
The assessee was dissatisfied with this basis of assessment and appealedto the Commissioner of Income Tax who confirmed the assessment,which was in due course confirmed by the Board of Review. Hencethis appeal by way of case stated.
The relevant sub-sections of section 11 of Chapter 188 are asfollows: —*•
“ (3; Where on a day within a year of assessment any person whetherresident or non-resident commences to carry on or exercise a trade,business, profession, vocation, or employment in Ceylon, or, being aresident person, elsewhere, any profits arising therefrom for the periodfrom such day to the end of the year of assessment shall be statutoryincome of such person for such year of assessment.
Where on a day within the year preceding a year of assessment,any person whether resident or non-resident has commenced to carryon or exercise a trade, business, profession, vocation, or employmentin Ceylon, or, being a resident person, elsewhere, his statutory incometherefrom for that year of assessment shall be the amount of theprofits for one year from such day.”
The decision of this case depends upon the interpretation to be givento the word “ business ”. Does it mean business in general, or aparticular business ? Counsel for the appellant relied upon two decisionsof this Court to support his contention that the meaning to be applied is“ business in general ”. If his contention were to be accepted therewould be no commencement of carrying on a new business but merelyan expansion of a business already being carried on by the assessee.
The cases upon which he relies do not touch the word “ business ”but he sought to apply to that term the principles laid down bv thisCourt in regard to the term “ employment ” where the two words appearin the same context in the section under consideration. In Commissionerof Income Tax v. Rodger 1 it was held that where a person goes over to anew employer within a year preceding the year of assessment, butcontinues in the same form of employment, he does hot “commence to.carry on an employment ” within the meaning of sub-section (4). Again,in Rowan v. Commissioner of Income Tax 2, the assessee, who had beenemployed by a firm of proctors and received, by way of remuneration,a salary and percentage of profits, was admitted as a partner of the firmand was thereupon to get a share of the profits only. It was held that,on his admission as a partner, there was no cessation of an employmentwithin the meaning of section 11 (6) and no – commencement of theexercise of a profession as contemplated by sub-section (3).
It emerged, somewhat late in the course of the argument, that section11 of Chapter 188 has been amended by section 5 of Ordinance No. 25 of
1 (1933) 35 N. L. R. 169.* (1939) 40 N L. R. 224.
MOSELEY J.—Dias and Commissioner of Income Tax
1939, in such a way as to nullify the effect of the decisions in Rowan v.Commissioner of Income Tax (supra) and Commissioner of Income Tax v.Rodger (supra). Counsel for the appellant sought to turn the fact ofamendment to the advantage of the latter, by submitting that the amend-ment, since it does no efiect the question of “ business ”, leaves it open,to us to interpret that term, by analogy, in the way in which this Court'had prior to the amendment, dealt with the term “ employment ”,But does that necessarily follow ? It seems to me that each of theexpressions “ trade ”,” business ”,“ profession ”,“ vocation ”, and
" employment ” must receive attention individually, inasmuch as itmust be conceded that some may have wider meaning than others.The word under discussion, viz., ‘‘ business ” was described by EowlattJ., in Commissioners of Inland Revenue v. The Korean Syndicate, Ltd.1as a very wide word. “ It may ” he said “ mean business for the
acquisition of gainor it may mean merely an occupation
or a function.” Wo are therefore relieved of any obligation to follow thereasoning in those cases in seeking an interpretation of the term*' business ”.
In these circumstances one may look for guidance to the Englishdecisions on the somewhat analogous provisions of the Income Tax Acts.
The word " trade ” in rule 1 (2) of the rules applicable to CasesI and II of Schedule D of the Income Tax Acts has been interpreted tomean a specific trade and not a kind of trade. Counsel for the appellantsubmitted that “ trade ” had been given that interpretation becauserule 1 (2) was read in the light of rule 2 (2) of the same rules whichmade it quite clear that “ trade ” in the former rule meant a specifictrade. I think we may with advantage adopt a similar method ofinterpretation.
Section 2 of Chapter 188 defines “ business ” as including” agricultural undertaking ”.
The question, therefore, in the present case is whether the assesseecommenced several agricultural undertakings at different times or hecommenced his agricultural undertakings when he started life as a planterand his activities in respect of the various estates “ are nothing butincidents in the conduct ” of his agricultural career. The question maybe put differently thus: —Had the appellant several agricultural under-takings or merely an agricultural undertaking which involved him inactivities in respect of several estates at various times ?
blow Chapter IV deals with the ascertainment of statutory income;Chapter V, the ascertainment of assessable income; and Chapter VI,.the ascertainment of taxable income. These subjects are so clearlyconnected that they could have been dealt with under one chapter.'I think that we may turn to the proviso of section 13 (3) occurring inChapter V. for assistance to interpret section 11 (3) in Chaper IV.The proviso to section 13 (3) reads—
Provided that where any person carries on more than one agri-cultural undertaking, a loss incurred in any such undertaking shall bededucted in the first instance from the statutory income arising fromhis other agricultural undertakings.
1 12 T. C. 181 at 196.
Gunawardene Harminey and Charles Appuhamy
This proviso would have been superfluous if the various holdings1 of anagriculturist would always amount to an “ agricultural undertaking ".I hold, therefore, that section 11 (3) contemplates the possibility of aplanter who buys several estates commencing several agricultural under-takings in respect of those estates.
This was the opinion held by the Assessor, and in turn by the Com-missioner and the Board of Review. Since I am in agreement withthat view on a matter which is the only point of law which arises in thecase stated there is nothing more to be said. In pursuance of that viewthe Assessor proceeded to hold that each of the interests acquired by theassessee under the designations (c) (d) and (e) above involved the com-mencement of the carrying on of a business. This is a question of fact.If authority be needed for the proposition it may-be found in The Glou-cester Railway Carriage and Wagon Co., Ltd. v. The Commissioners ofInland Revenue 1. That being so, it is not a matter which concerns thisCourt. We are bound by the finding of the Board of Review as long asit appears to us that there is evidence to support it. Of that there is anabundance, since it was admitted that each of the five estates owned,either solely or with others, by the assessee has its1 own staff, keeps itsown check roll and accounts, that the produce is gathered, prepared fo*the market and sold separately, and that the profits are shown separatelyin income tax returns. It is unnecessary, in the circumstances, to refeito the numerous English decisions cited by Counsel for the Commissionerin which a similar view has been taken in very similar circumstances.
The appeal is dismissed with costs.
Wijeyewardene J.— I agree.
DIAS, Appellant, and COMMISSIONER OF INCOME TAX, Respondent