Peiris v. Commissioner of Income Tax
1960Present: de Silva, J., and Sansoni, J.PEIRIS, Appellant, and COMMISSIONER OF INCOME TAX,RespondentS. C. 1—Income Tax Case No. BRA. 261
Income tax—Cessation of employment—Meaning of word “ employment ”—Income
Tax Ordinance (Cap. 188), ss. 11 (6) (a), 11 (6B).
When a person goes over to a new employer but continues to do the samekind of work, he cannot be said to cease to carry on an employment withinthe meaning of section 11 (6) of the Income Tax Ordinance (Cap. 188) whenhe leaves his former employer. In such a case, the word “ employment ” issynonymous with business or occupation, and does not indicate a particularcontract of service under a particular master.
The assesseo, who was a Visiting Surgeon of the General Hospital, Colombo,from 1936 and a Visiting Lecturer of the University of Ceylon from 1942, waspaid a salary by the Ceylon Government for the Work done by him as Visiting^Surgeon, and by the University for his work as a Visiting Lecturer. Tho2*—S 18162 (5/64)
SANSONI, J.—Peiris v. Commissioner of Income Tax
Public Service Commission released his services and he was seconded for servicewith the University as Professor of Surgery from 1st June 1952. There wasno material change in the manner in which he was employed after he wasappointed Professor.
Held, (i) that the assessee did not cease to be employed under the Govern-ment inasmuch as he Was only seconded for service in the University.
(ii) that, even if the assessee ceased to be a Government servant on 1stJune 1952, he did not cease to carry on an employment on that date. Atmost he merely changed his employer.
C ASE stated under section 74 of the Income Tax Ordinance (Cap. 188).
S. Ambalavanar, with F. X. J. Rasanayagam, for Appellant.
' A. G. Alles, Acting Solicitor-General, with A. Mahendrarajah, Crown
Counsel, for the Respondent.
Cur. adv. vult.
/October 11, 1960. Sansoni, J.—
This is a case stated by the Board of Review under the provisionsof Section, 74 of the Income Tax Ordinance, Chapter 188, at the requestof the assessee, Dr. M. V. P. Peiris.
From 1936, he was a Visiting Surgeon of the General Hospital, Colomboand also a Visiting Lecturer, first of the Ceylon Medical College, and from1942 of the University of Ceylon. He was paid a salary by the CeylonGovernment for the work done as Visiting Surgeon, and by the Univer-sity for his work as a Visiting Lecturer. The Public Service Commissionreleased his services and he was seconded for service with the Universityfrom 1st June 1952.
During the period' of secondment, the Government could have askedhim to resume- his service under the Government, and he had the rightto go back to Government service of his own accord. By arrangementbetween the Government and the University his pension rights were-preserved, the University making a contribution for the period he servedunder it. It has also been found by the Board of Review that prior to1st June, 1952 as Visiting Surgeon the assessee had to work in the Out-Patients Department Clinic on certain days, and" had 85 beds allocatedto him in the General Hospital; and as Visiting Lecturer he had a certainnumber of students allotted to him, and they received instruction fromhim in the Clinic and also followed his operations and post-operativetreatment. After 1st June, 1952 also, as Professor of Surgery he had towork at the Out-Patients’ Department Clinic on certain days, and healso had to work as a Surgeon at the Hospital where he had 65 beds allo-cated to him. His students received instruction from him just as theyhad done prior to 1st June, 1952.
SANSONI, J,—Peiris v. Commissioner of Income Tax
The assessee claimed that there -was a cessation of employment in termsof section 11 (6) (a) of the Ordinance, when he ceased to be a VisitingSurgeon and assumed duties as Professor of Surgery. The materialprovisions read :
11.(6) Where a person whether resident or non-resident ceases to
carry on or exercise a trade, business, profession, vocation, or employ-ment in Ceylon, or, being a resident person, elsewhere, his statutoryincome therefrom shall be —
as regards the year of assessment in which the cessation occurs,
•the amount of the profits of the period beginning on the firstday of April in that year and ending on the date of cessation ;and
as regards the year of assessment preceding that in which the
cessation occurs, the amount of the statutory income ascomputed in accordance with the foregoing sub-sections, or theamount of the profits of such year, whichever is the greater,
and he shall not be deemed to derive statutory income from such trade,business, profession, vocation, or employment for the year of assessmentfollowing that in which the cessation occurs.
The^Board of Review held against him on the grounds (1) that he didnot cease to be employed under the Government inasmuch as he wasonly seconded for service in the University, and (2) that even if it beassumed that be terminated his services under the Government when hebecame Professor of Surgery, he did not cease to carry on an employment,because there was no material change in the manner in which he wasemployed after he was appointed Professor.
I think that on both points the decision of the Board of Review wascorrect. With regard to the period of secondment, it would seem that nopension was paid to the assessee ; it was merely a temporary arrangementwhereby the assessee worked in the University of Ceylon until such timeas he or the Government chose to terminate that arrangement, if eitherparty desired to do so.
The more important question, however, is whether, even if the assesseeceased to be a Government servant on 1st June, 1952 it could be saidthat he ceased to carry on an employment on that date, either on theground that there was a radical change in the nature of bis employment oron the ground that he was working for a new employer. The former is aquestion of fact and I have already referred to the finding of the Boardthat there was no material change in the nature of the work done by theassessee. That finding must be upheld. We are then left with the ques-tion of law whether, when a person goes over to a new employer but■ continues to do the same kind of work, he can be said to cease to carry onan employment when he leaves his former employer. On this questionwe are bound by the decision in Commissioner of Income Tax v. Rodger1.
1 (1933) 35 N. L. R. 169.
SANS ONI, J.—Peiris v. Commissioner of Income Tax
Although Drieberg, J. had to deal in that case with the meaning of theword ‘ employment ’ in section 11 (4) and we are dealing with themeaning of the word in section 11 (6), that decision binds us beoause theprinciple underlying it is applicable to both cases. The word was heldto mean that on which a person is employed, and to be synonymouswith business or occupation, and not to indicate a particular contract ofservice under a particular master.
Mr. Ambalavanar sought to distinguish that case on its facts from thepresent case, but I can see no distinction between the two in this respect.He was also constrained to argue that the decision was wrong in principle,and his main argument was that it overlooks the scheme of the Ordinancewhereby, in the machinery of assessment, each employer is regarded as aseparate and distinct source of income so that on a cessation of a particularcontract of employment the source ceases. Drieberg, J. has not overlookedthis question of source in his judgment, and it seems to me that themeaning one gives to the word ‘ employment ’ in the particular sub-sectiondecides the question. This judgment was followed in Rowan v. Com-missioner of Income Tax *, where Poyser, J. applying the reasoning ofDrieberg, J. that an accountant commences an employment as anaccountant when he first begins to do the work of an accountant, takingremuneration for his services, held that a proctor who was employed ona salary does not cease to carry on an employment as a proctor whenhe is admitted as a partner of a firm of proctors.
Finally, Mr. Ambalavanar submitted that the case was governed bysection 11 (6B) which was added to the Ordinance in 1939 and reads :
11.(6B) For the purposes of this section, a person shall be deemed
to carry on or exercise an employment notwithstanding that he carrieson or exercises a trade, business, profession or vocation if such trade,business, profession or vocation is carried on or exercised by him asthe employee of another and not on his own account or in partnershipwith another ; and a person so deemed to carry on or exercise anemployment shall be deemed to commence or cease to carry on orexercise such employment when he commences or ceases to be such anemployee :
Provided that if a person who is so deemed to carry on or exercisean employment carries on or exercises, in addition to such employment,any trade, business, profession or vocation on his jown account or inpartnership with another, the profits arising from such trade, business,profession or vocation shall be assessed as profits from a separate source.
I do not think that this provision helps the assessee, and I agree with thedecision of the Board on this point also. It deals with the case of aperson who carries on or exercises a trade, business, profession or vocationas an employee of another, not on his own account or in partnership withanother, and then ceases to do so. Such a person is deemed (1) to carryon or exercise an employment; and (2) to commence or cease to carry on or
1 (1930) 40 N. L. R. 4.
SRI SKANDA RAJAH, J.—Isohamy v. Haramanis
•exercise it when, he commences or ceases to be employed by another..Since the assessee in this case did not cease to be an employee of another•during the years of assessment tinder consideration, but at most merelychanged his employer, the sub-section has no application to this case.In my view the sub-section left the decision in Rodger’s case (supra)unaffected, though it probably nullified the effect of the decision inRowan’s case (supra).
The appeal is dismissed with costs.be Silva, J.—I agree.
PEIRIS , Appellant, and COMMISSIONER OF INCOME TAX, Respondent