Supreme Court upholds taxpayer rights
View(s):The Supreme Court in a key judgment last week by Justice Priyantha Jayawardena PC, (with Justices Yasantha Kodagoda PC and K.K. Wickramasinghe agreeing) has upheld the principles relating to the time bar which protect taxpayers from the issue of assessments for income tax by the Inland Revenue Department belatedly.
According to the judgment, Seylan Bank PLC, the appellant in this case had filed its income tax return for the year of assessment 2007/2008 on 30th September 2008 which was the due date in terms of the Inland Revenue Act No.10 of 2006. In terms of the said Act, if the assessor was not accepting the income tax return he was required to issue an assessment within 18 months after the end of year of assessment. i.e. on or before 30th September 2009.
The Inland Revenue (Amendment) Act No.19 of 2009 extended the time period to furnish a return by two months and the time period to make an assessment by six months respectively. The actual assessment for the year of assessment 2007/2008 was issued on 26th March 2010 on the basis that the amending act extended the time period given to an assessor to make an assessment of income tax for such year of assessment (if any) by six months. i.e. from 30th September 2009 to 31st March 2010.
The amending act has set out specific dates on which certain specific amendments would come into effect and the amendments not so mentioned came into force on 1st April 2009. The amendments relating to the time periods for the filing of income tax returns and the issue of assessments were not specifically mentioned and therefore it was held that the relevant provisions of the amending act even though procedural in nature would operate with prospective effect from 1st April 2009. It was held that it was textually not possible to give retrospective effect to the amendments in relation to the extension of time given to the tax payer to file the tax return and the time for the issue of an assessment. If the amendments were to be given retrospective effect, the tax payer was being deprived of filing income tax returns for such year of assessment within the extended time period as such extended time period had passed by the time the said amendments came into operation, according to the judgment.
In the absence of expressed provisions to the contrary it was not possible to give retrospective effect to part of the amendment which extended the time period given to the tax payer to file the tax return for the year of assessment 2007/2008 and give prospective effect to the other part of the amendment which extended the time period given to the assessor to make an assessment. Accordingly, both amendments should be interpreted as having prospective effect and the amendments have no application to the year of assessment 2007/2008, it said.
The Court further held that in terms of Section 6(3) of the Interpretation Ordinance since the Appellant had furnished the return on income in terms of the principle enactment the right had accrued to the Appellant to have an assessment for income tax made (if any) within 18 months from the end of year of assessment. The Court further held that since the taxpayer was unable to avail itself of any extended period to file a tax return, the assessor should not be given the benefit of an extended time period to issue an assessment in terms of the amending act. The law should not be interpreted to give an advantage to an assessor and deprive a taxpayer since in terms of Article 12(1) of the Constitution all persons are equal before the law and are entitled to the equal protection of the law. Hence the amendments made should be interpreted to secure the rights of both taxpayers and assessors of the Department of Inland Revenue.
The Court set aside the judgment of the Court of Appeal and the determination of the Tax Appeals Commission and held that the assessment for the year 2007/2008 issued by the assessor against the Appellant was time barred. F.N.Goonewardena appeared for the Appellant and Priyantha Nawana PC, Additional Solicitor General with I. Randeny, State Counsel appeared for the Respondent.
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