WEST AFRICAN COURT OF APPEAL, GOLD COAST ‘Accra, 25th May, 1948 Lucre-Surmy, C.J. (StERRA Leone), M’CartHy anp Hoorer, JJ. IN THE MATTER OF THE INCOME TAX ORDINANCE, 1943 TOUFIC SIMON KARAM. . . + + Appellant v COMMISSIONER OF INCOME TAX . . . —«_—=Respondent Income Tax—Income Tax Ordinance, section 7 (a)—“ Accruing in” or “ derived from”. ‘The appellant's firm had goods delivered to its agent in Nigeria and sold them, the profits of the sale of £4,101 10s. 8d. remaining in Barclays Bank, Lagos. ‘The appellant was assessed to income tax in respect of this sum. ‘The appellant appealed to the Supreme Court which confirmed the assessment. Held: On appeal to the West African Court of Appeal (Lucie-Smith, C.J., dissenting), that statutes imposing pecuniary burdens must be construed strictly and therefore the profits having neither accrued in, been derived from, or been received in the Gold Coast within the meaning of section 7 (a) of the Income Tax Ordinance, they were not liable to Income Tax. Cases referred tox, (1) San Paulo Railway v. Carter (1895), Q.B. 580; (1898), 4.C. 31; 65 L.J.0.B. 161; 73 L-T. 538; 60 J-P. 84, 452; 12 T.L.R. 107. (Q) London Bank of Mexico and S. America v. Apthorpe (1891), 2 Q.B. 378; 60 L.J.0.B. 653; 65 L.T. 601; 56 J.P. 86; 7 T.L.R. 567. (8) Apthorpe v. Schoenhopen Brewing Co. Lid., 80 L.T. 395; 15 T.L.R. 245, (4) St. Louis Breweries Ltd. v. Apthorpe, 79 L-T. 551; 63 J.P. 135; 15 T.L.R. 112; 43 Sol. Jo. 114. (8) Clifford v. Commissioners of Inland Revenue (1896), 2 Q.B. 187; 65 L.J.Q-B. 582; 74 LT. 699; 12 T.L.R. 439. (6) Partington v. Attorney-General (1869), L.R. 4 (H.L.) 100; 38 L.J. Ex. 205; 21 LT. 370. (7) Aitorney-General v. Lord Selborne (1902), 1 K.B. 388; 71 L.J.K.B. 289; 85 LT. 714; 66 J.P. 132; 18 T.L.R. 111; 46 Sol. Jo. 103. ‘Appeal from the Supreme Court of the Gold Coast. Franklin for Appellant (defendant below). Buckmaster, Crown Counsel, for Respondent (plaintiff below). ‘The following judgments were delivered: Lucie-Smith, C.J. This is an appeal from the judgment of the learned Acting Chief Justice and arises out of an assessment made by the Deputy Commissioner of Income Tax in respect of the income, for the year 1945-46, of one of the six partners in the firm of S. D. Karam and Sons who carry on business in this Colony. ‘The appeal comes before this Court under section 56 (11) of the Income Tax Ordinance, 1943. What the Court is asked to do is to interpret the meaning of section 7 (a) of the said Ordinance in view of the Agreed Statement of Facts, which, put shortly, are as follows — (1) The appellant carries on business in partnership with five others in this Colony. (2) There is another partnership in England consisting of the same partners as here. 331KARAM ¥, COMMISSIONER OF INCOME TAX. Lucie-Smith, C.J. (3) This English partnership infer alia buys and ships goods for the Gold Coast firm. (4) During or as a result of the recent war a system of quotas was adopted in England whereby goods ordered for British West Africa were dis- tributed amongst the four British West African Colonies. (5) As a result of this quota system the Gold Coast partnership was unable to have all their orders for the Gold Coast shipped to the Gold Coast and in the financial year 1944-45 five consignments were made to Messrs. S. D. Karam & Sons (of the Gold Coast) in Nigeria, (6) These five consignments were sold in Nigeria by Messrs. Barclays Bank, ‘Lagos, on the instructions of Mr. T. S. Karam the then Managing partner ‘of the Gold Coast partnership. (7) These sales realised a profit of £986 odd which amount was remitted to the Gold Coast and brought to account in the books of the Gold Coast partnership for the financial year 1944-45 or, in other words, the 1946 year of assessment vide section 18 (1). (8) During the financial year 1945-46 a further consignment of goods was sent to Nigeria and sold and delivered to a Mr. Wadi George of Lagos by Barclays Bank, Lagos, acting on behalf of Messrs. S. D. Karam & Sons, ‘‘c/o Barclays Bank, Lagos”. It is to be noted that at that time there was in fact no Nigerian registered partnership of Messrs. S. D. Karam & Sons. (9) The letter, appearing at pages 3 and 4 of the record, addressed to Mr. Wadi George of Lagos and signed by “'S. D. Karam & Sons—T. S. Karam—Accra Branch ” may become significant. As well as the signa- ture; the following extracts from that letter “' value of the following goodls which have been sold and delivered to you on our behalf” may be material (10) This last consignment realised a profit of £4,000 odd which amount was put on deposit with Barclays Bank, Lagos, and was not brought to account in the books of the Gold Coast partnership for the year 1945-46. ‘The Commissioner of Income Tax assessed the partners of the Gold Coast partnership in respect of their share of this £4,000 odd and it is from this assess- ment that this appeal arises. In the Divisional Court learned Counsel for the appellant and respondent based their arguments on the English Acts and decided cases. ‘Phe learned Acting Chief Justice, however, based his judgment on the Indian ‘Acts and decided cases (which unfortunately are not available to us) and in this Court learned Counsel following the learned Acting Chief Justice have based their arguments on the Indian law. I propose basing this judgment on what I consider to be the proper interpreta- tion of section 7 (a) of the Gold Coast Income Tax Ordinance. Section 7 of the Income Tax Ordinance, 1943—so far as material—reads as follows:— ‘The tax shall be payable . . . upon the income of any person accruing , derived from, or received in, the Gold Coast in respect of— “(q) gains or profits from any trade . . . for whatever period of time such trade may have been carried on or exercised.” ‘Though the learned Acting Chief Justice found that the income was “ accruing. in” the Gold Coast, it was not, I think, argued seriously, if at all, before this Court that the words “accruing in” or “received in” were applicable to the circumstances of this case. If that be so then what the Court has to decide is the construction to be placed on the words “derived from, . . . the Gold Coast in 332 ~~) ;KARAM 9, COMMISSIONER OF INCOME TAX. Lucie-Smith, C.J. respect of gains or profits from any trade . . . for whatever period of ti trade .. . may have been carried on or exercised ”. Tn interpreting these words it must be borne in mind that statutes which impose pecuniary burdens are subject to strict construction—"It is a well settled rule of law that all charges upon the subject must be imposed by clear ‘and unambiguous language, because in some degree they operate as penalties. The subject is not to be taxed unless the language of the statute clearly imposes the obligation.” (See Maxwell on the Interpretation of Statutes, 8th Edition, pages 250-251 and cases cited therein.) Had the words “in the Gold Coast” followed the words “' carried on or exercised ” used in section 7 (a) it might have simplified our task. As it is, the section is very wide and the trade or business carried on would not appear to be limited geographically. That being so we have to decide whether the income sought to be taxed was derived from a trade or business carried on by the appel- lant—San Paulo Railway v. Carter (1) is authority for saying that where the trade is wholly or partially carried on in England the trader is liable to pay. income tax on the profits of his trade. In the first quoted report the Master of the Rolls, Lord Esher, says at page 586:— “The profits are earned by the whole operation of carrying on the trade; and, moreover, the material question under the words of the statute is not. > ‘where the profits are earned, but where the trade is carried on.” In the words of Lord Halsbury, L.C., at page 38 of the 1806 Report:— “The person who decides what shall be done in respect of the adventure, what capital shall be invested in the adventure, on what terms the adventure shall be carried on, in short, the person, who in the strictest sense, makes the profits by his skill or industry, however distant may be the field of his adventure, is the person who is trading.” Lord Davey at page 42 of the same Report:— “Yt is clear to my mind that the direction and supreme control of the appellant Company's business is vested in the board of directors in London, who appoint the agents and officials abroad, and either by general orders or 7 by particular directions control or may control their duties, remuneration, | and conduct, and to whom any question of policy or any contract or other matter may, and if deemed of sufficient importance I suppose would, be referred for their decision. ‘The business is therefore in very truth carried ‘on, in, and from the United Kingdom, although the actual operations of the Company are in Brazil, and in that sense the business is also carried on in that country.” See also The London Bank of Mexico and South America Limited v. Apthorpe (2)- Lord Esher, MR, at page 382:— “Tt is untrue to say that the business which they carry on is carried on in Mexico. They have only one business which they carry on in England. It is true that part of the profits of that business carried on in England is earned by means of transactions abroad, but that is not carrying on the usiness abroad; it is carrying on the business in England by means of some transactions of it which are carried out abroad; but those transactions are carried out subject to the directions and at the will and pleasure of the r masters and owners, resident in London, of that business.”” See also Apthorpe v. Schoenhopen Brewing Co. Ltd. (3) and St. Louis Breweries Lid. v. Apthorpe (4). Supposing the appellant had ordered goods from England for delivery at ‘Takoradi and that by some mischance those goods were over-carried to Lagos where there was a great demand and the appellant, to save time and trouble and E perhaps owing to the state of the market and the opportunity of a higher profit, 333 ie such eee eei KARAM 0, COMMISSIONER OF INCOME TAX. Hooper, J. and shipping goods to the Gold Coast firm. In the years 1944 to 1946 the English. firm was allotted quotas of goods for export to the Gold Coast, but owing to an exchange, a portion of the goods comprised in the quotas was shipped to and sold. in Nigeria in respect to the two years 1944 to 1945 and 1945 to 1946. Delivery of these goods was taken on behalf of the appellant by Barclays Bank in Lagos, © who sold them to a Mr. Wadi George, the appellant taking steps, not yet complete, 4o register the business name of his firm in Nigeria to meet the situation created by the virtual opening up of business there. In respect to the year 1944 to 1945, ‘the profits on the sales in Nigeria were remitted to the appellant in the Gold Coast. They were duly assessed for income tax purposes and the tax in respect to them paid. With respect to the year 1945 to 1946, however, the situation altered owing to the fact that the proiits on the sale of goods in Nigeria remained ; in the hands of the Bank in Nigeria, through whom the goods were sold on behalf of the appellant and have never been remitted to the appellant in the : Gold Coast. Nevertheless the appellant was assessed to income tax in respect to the profits for the year 1945 to 1946 by the Commissioner of Income Tax, the sum in ques- tion being £4,101 10s. 8d., on the ground that the profit was “assessable to Gold Coast tax as a profit accruing to the firm in the Gold Coast ” (letter of the 8th April, 1947, from Deputy Commissioner of Income Tax to the appellant). ‘The appellant being dissastisfied with the assessment in respect to this sum, > appealed, and the matter came before the Divisional Court at Accra, Judgment was delivered on the 20th October, 1947, the Acting Chief Justice finding that the profits in question were “the profits of the business of the firm in the Gold Coast and that they have not yet been received in this Colony. The learned ‘Acting Chief Justice held that “ the true test when the profit is income from a business, is where is that business carried on and is the profit the direct result of the activities of that business. If it is in the Gold Coast the income accrues ” The learned Judge came to the conclusion that the income in question was liable to pay income tax owing to the view he took that the sum in question had acerued in the Gold Coast. ‘Against this judgment the appellant now appeals on the grounds that the profit in question was an income accruing in, derived from and received in Nigeria, t and was not an income accruing in, derived from, or received in, the Gold Coast. During the hearing in the Court below, Counsel for both appellant and res- pondent argued the appeal with reference to decisions of the English Courts on Income Tax Law and procedure, but in the course of his judgment, the learned. Judge found judgments of the Courts in England to be of little assistance, since the text of the English enactments differed considerably in detail from that of * the Gold Coast. With this I agree. On the other hand, the learned Judge has himself referred, in the course of his judgment, to certain Indian cases decided on the text of the Indian Income Tax Act; and during the argument of the appeal before this Court, learned Counsel for both the appellant and the res- pondent have agreed in submitting, in effect, that this appeal should be decided on the view this Court might take as to the effect of these Indian decisions, Tam unable, however, to adopt this view, for it seems to me that the doubt expressed by the learned Judge as to the applicability to the interpretation of ‘the Gold Coast Ordinance of English decisions based on a different text of law, 6 applies with equal cogency to the Indian Act. T therefore propose, for the purposes of this case, not to rely upon decisions either of the English or of the Indian Courts upon English or Indian Income Tax legislation, save so far as decisions of the English Courts upon the principles to be applied in construing the text of a taxing enactment are concerned; for we are dealing here with an Income Tax enactment, enacted for the first time in 1943, and I deem it desirable to construe the relevant provisions of the Ordinance 335sKARAM 9, CONMISSIONER OF INCOME TAX. Hooper, J. by applying to it the general principles of legal interpretation approved by the English Courts. The relevant section of the Income Tax Ordinance of 1943, containing pro- wns as to the charge of Income Tax, is section 7, which reads as follows:— “The tax shall, subject to the provisions of this Ordinance, be payable at the rate or rates specified in this Ordinance for each year of assessment tupon the income of any person accruing in, derived from, or received in, ‘the Gold Coast in respect of— “"(@) gains or profits from any trade, business, profession or vocation, for whatever period of time such trade, business, profession or vocation may have been carried on or exercised @®) gains or profits from any employment including any allowances paid or payable in cash to or on behalf of the employee other than in respect ‘of any passage from or to the Gold Coast; “(¢) dividends, interests or discounts; «(@) any pension, charge or annuity; (@) rents, royalties, premiums and any other profits arising from property. now set out the principlés which I think should govern the Court in inter- preting the provisions of this section. It has been laid down in more than one Mork of authority that statutes which impose pecuniary burdens are to be construed strictly. ‘It is a well settled rule of law that all charges upon the subject must be imposed by clear and unambiguous language because in some degree they operate as penalties. ‘The subject is not to be taxed unless the language of the statute clearly imposes the obligation.” Maxwell on the Inter- pretation of Statutes, 8th Edition, p. 250; and in the case of Clifford v. Commis- Sioners of Inland Revenue (5), at pp. 192, 193, it was held that there was no doubt as to this being a correct statement of the law. ‘Moreover, there is other high authority in support and amplification of this view. In Partington v. Attorney-General (6), Lord Cais stated:— “as I understand the principle of all fiscal legislation, it is this: If the person songht to be taxed comes within the letter of the law he must be faxed, however great the hardship may appear to the judicial mind to be. On the other hand, if the Crown, seeking to recover the tax, cannot bring the subject within the letter of the law, the subject is free, however appar- ently within the spirit of the law the case might otherwise appear to be. Jn other words, if there be admissible, in any statute, what is called an equitable construction, certainly such a construction is not admissible in a taxing statute, where you can simply adhere to the words of the statute.” ‘This was quoted with approval in Attorney-General v.Earl of Selborne (7) by Collins, M.R., who then said : “The Crown fails if the case is not brought within the words of the statute interpreted according to their natural meaning . . . and if there is ‘a case which is not covered by the statute so interpreted, that can only be cured by legislation, and not by an attempt to construe it benevolently in favour of the Crown.” Bearing these principles in mind, I have come to the conclusion that the just approach to this question is not to see whether by some process of intricate or Subtle reasoning it is possible to make section 7 of the Ordinance apply to the appellant, on the facts of this case, but whether the Ordinance, reasonably inter~ preted, can rightly be said to leave beyond all doubt the fact that the appellant is liable to pay the tax in respect of the profits earned in Nigeria. Section 7 of the Gold Coast Ordinance provides that the tax shall be payable for each year of assessment upon the income of any person accruing in, derived 336KARAM U. COMMISSIONER OF INCOME TAX. Hooper, J. from, or received in, the Gold Coast. There is no express provision in the Ordinance extending its application to profits made outside the Gold Coast. If it could be shown that the words “accruing in, derived from, or received in, the Gold Coast” can be construed reasonably to include profits accruing in, derived from, or received in, a territory outside the Gold Coast, then it must be at once conceded that the sum in question in this appeal is liable to pay income tax. But in my opinion this is not the case, for the following reasons. The words “ accruing in” and “‘ received in” appear to me to import a clear territorial limitation to the Gold Coast. ‘The words ‘ derived from ” appear to me to be designed to meet, among other things, cases where profits arise from transactions carried out in the Gold Coast, but where a taxpayer is not resident in the Gold Coast. Can they reasonably be said to apply to the case where a firm established in the Gold Coast carries out a usiness transaction or series of transactions in a country outside the Gold Coast, the profits in respect to which do not accrue in and are not received in the Gold Coast ? ‘Upon consideration, I am of the opinion that any such interpretation would ye straining the meaning of the words too severely against the taxpayer. For me to be able so to hold, I am of opinion that some clearer statement of intention by the legislator is essential. Looking at the section as a whole and in the light of the general objects of the Ordinance, I have come to the conclusion, in the absence of some express pro- vision to a contrary effect, that the true meaning of section 7 of the Ordinance is that the liability to pay income tax is limited in the geographical sense to transactions carried on in the Gold Coast, and does not extend to transactions carried on outside it. Tam not unmindful of the fact that when the Ordinance first came into force special provision was made by sub-section 1 of section 8 of the Ordinance with regard to cases of trades or businesses where all their operations were not carried out in the Gold Coast. This sub-section, however, has been repealed and replaced by another dealing with non-residents and the Ordinance is now silent in this respect. ‘The importance of this sub-section appears to me to reside in the fact that originally it may have been included to meet such a case as the present. one. It would at least have a bearing on it. But it has been repealed Lam therefore unable to agree with the learned Acting Chief Justice that the sum in question has accrued in the Gold Coast. In my opinion the appeal should be allowed. Appeal allowed. 337