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HIGH COURT OF FIJI ISLANDS
CHIMAN LAL JAMNADAS
MICHELLE APARTMENTS LIMITED
PRIMETIME PROPERTIES LIMITED
v
COMMISSIONER OF INLAND REVENUE
[HIGH COURT, 1999 (Byrne J) 24 August]
Appellate Jurisdiction
Income Tax- travelling and accommodation expenses- whether deductible- late filing penalty- whether appealable- Income Tax Act (Cap 201) Sections 1 and 63nd 63.
Bentleyskes and Lowless v. Beeson [1952] 2 All 82.
Edwards (Inspector of Taxes) v. Warmsley Henshall & Co. <968]
<60; &160; 1 All ER<1089MaMallalieu v. Drummond pector of Taxes) [1983] 2 All E.R. 1095.
Newsom v. Robertson [1952] 2 All E.R. 728.
Ricketts v. Colquhoun (1925) 118.
Swee>Sweetman v. Commissioner of Inland Revenue Civ. App. No.
;ټ < < ـ005/95S.F(42 FLR)
Watkis v. Ashford Sparkes and Hand Harward (a firm) [1985] 2 All E.6.<916.
Appeal fhe Cof Ration) ion) to the Higrt.
G.A. Kea the Rdent
<160;<160;
is an appeal peal from the decisiocision of the Hon. M.J.C. Saunders sittinghe Cof Revated 6th Octh October 1997. The facts which
are not inot in dispute are these:
Mr. >Mr. Jamnadas, irstFirst Appellant, practised as a lawyer in Suva, Fiji. In 1982 he acquired control of Michelle Apartments Limited
(Michelle). In 1987 he acquired control of time Properties Limited (Primetime).
In 1988 M988 Mr. Jas moas moved himself and his family to Adelaide, South Australia for the purpose of educating his children in Australia.
He intends to return to the Fiji Islands upon completing the education s children. He and his wife wife still retain their Fiji passports.
When he left for Australia he let the family home in Suva. He had an interest in a family deceased’s estate, which produces
Fiji income and he retained his interests in Michelle and Primetime. He began to travel regularly and for considerable periods from
his Australian residence to Fiji to look after the estate and business interests. He had no business interests in Australia and ran
down his practice as a solicitor in Suva until it ceased at the end of 1990.
When he came to Fij pate pattern of his visits was always the same. He left Adelaide, flew to Nadi and caught a bus from Nadi to Suva
where he stayed at the then-called Travelodge now Centra.
While e Trage he paid faid for acor accommodation, telephone calls, faxes, laundry, dry cleaning and meals.
When he returned tlaide immediately after he finished his business in Suva he left Suva, stayed overnight in t in Nadi and then flew
across the followiy to Adelaide. The reasons why he stayed at the Travelodge were that it was very central anal and that he could
use the hotel’s facilities such as the telephone and fax.
After va discussions wins with the Respondent’s representatives, made necessary as the financial position of each Appellant
changed, Mr. Jamnadas and his Accountant Mr. Mudaliar reached agreemenh the Commissioner on most most of the items claimed as deductions
by the Appellants. When the matter came before me only two issues remained for determination, whether as a matter of law the taxpayer’s
travel and accommodation expenses are deductible and what (if any) penalty should be imposed on Michelle Apartments for late lodgements
of returns. To determine these issues calls for this Court to interpret the meaning of Section 19 of the Income Tax Act Cap. 201 which so far as r as relevant:
“In determining tong total income, no deductionll be allowed in respect of -
160; persand livingnexpenses anes and, .......;
(b)  ny disbursement or t or expense not being money wholly and exclusively laid out or expended for the purpose e trausinerofession,
employmenvocation of the taxpayer;”
There is a cons consideraiderable bble body oody of law on Section 19 and its equivalent in England including cases known in the profession
as ‘travelling cases’. Mr. Saunders treated this as a travelline and likened it at p.9 of 9 of his Decision, p.1313 of
the record, to that of a commuter travelling regularly from his place of residence to his place of business. He said:
“pt for the dihe distance, there is no difference between Mr. Jamnadas, say, living at Pacific Harbour, some 60 kilometres from
Suva, and travelling to Suva to attend to his businesses, and hiselling from Adelaide to Suvo Suva to attend to his businesses. His
accountant, Mr. Mudaliar, wrote to the Respondent on 18th November 1993 (p.78 of the bundle) saying “The taxpayer has been
commuting between Suva and Adelaide since September 1988”.
I consider it a grety tity that the noun “commuter” or its verb “to commute” were ever used in these proceedings
because, having considered the material, it seems to me with respect that it may well have coloured the view which the Court of Review
took of the admitted facts, particularly the admission by the Appellant that he does not need to live in Adelaide for the purposes
of his business.
In the d Dictionary andy and Thesaurus edited by Sara Tulloch the first meaning of the verb commute is to travel to and from one’s
daily work, usually in a city, especially by car or train.
;
Thus one talks of peop people commuting from their homes say in Nausori to Suva daily by bus and from even Pacific Harbour to Suva
by bus or by their own private transport. In countries such as Australia and England which have extensive public transport systems
one speaks for example of commuter trains or commuter trams or buses.
In this I consider ther there is a clear distinction in the various cases between daily travel from the house where a taxpayer chooses
to live and sleep on the one han business or professional trips on the other. A barrister oter on circuit is on a professional trip
and his travelling expenses are always deductible. A barrister commuting daily from his home to his chambers is engaged in travel
that is part of his living expenses and is not deductible.
This principle is clearly stated in the cases the first of which I mention is Newsomobertson #160;[1952] 2 All E28. This This was a case where a barrister chose to live out of London at Whipsnade. H disad his daily travetravel
expenses between Whipsnade and his London chambers as a living expe expense. It was an expense incurred to enable him to live and
sleep some distance from his place of work.
Romer L.J. put it this way at p.732, letter “F” of the report:
0;Moreover, it cann cannot be said even of the morning journey to work that it is undertakeorder to enable the traveller to exercise
his profession. Ion. It is undertaken for the purpose of neutralising the effect of his departure from his place of business, for
private purposes, on the previous evening. In other words, the object of the journeys, both morning and evening, is not to enable
a man to do his work, but to live away from it.”
On the other hand a business trip such as one undertaken by a barrister on circuit stands on an entirely different footing. It is
not daily commuting. Inot an expense of daily living. It is a special excursion for a special purpose. The expensxpense of maintaining
the barrister’s home continues while he is away. In my judgment that cannot be said of Mr. Jamnadas. In my view what he did
when coming to Fiji from time to time was to embark on a business trip. He did not travel home from Fiji each night. In no sense
were his travelling expenses to Fiji part of his daily living expenses.
To my mind there is a wealth of difference between a resident of Pacific Harbour travelling daily to Suva for the purpose of his business
or employment and that of a retired businessman su Mr. Jamnadas travelling some thousands of miles from AdelaAdelaide to Fiji for
the purpose of his business interests. Thus in my judgment the learned Court of Review was wrong in equating the facts in Newsom v. Robertson#160;#160;to those of the instant case.
Likewise in my jnt Mr. Mr. Saunders erred in relying on the case of Rickettsolquhoun>م) 10 TC 118, a decision of the House of Lords in which it h it was held that a barrister who held the Recordership of Portsmouth was not led
to deduct from the emoluments of his office the cost ofst of travelling between London and Portsmouth in order to attend Quarter
Sessions (of which he was the Judge) his hotel expenses at Portsmouth or the cost of conveyance of his robes to the Court there.
The first comment e aboe about Ricketts v. Colq> is that it concerns a etelyetely different schedule of the English Tax Act. It deals with schedule E and not D, the equivalent
of which in Fiji is Section 19 of the Income Tax Act.
At p. 133, line 3 Viscount Cave, L.C. (using phrasesved from Rule 9 which applies to Schedule E) said:
“rder that trat trat travelling expenses may be deductible uthis rule from an assessment under Schedule E, they must best be
expenses which the holder of an office is necessarily obliged to occ that is to say, obliged byed by the very fact that he holds
the office, and has to perform its duties, - and they must be incurred in, that is in the performance of, those duties.”
The Recorder was not claiming his expenses under Schedule D. As to this, in the Court of Appeal Lord Pollock M.R. pointed out at p.127:
“Ttention of n of the Legislawas, I am sure, to make the deductions narrow, and, in as m as much as this emolument of an office
falls to be taxed under Schedule Eess Rule 9 applies, it is of no moment to say that had it b it been taxable under Schedule D something
else might have been deducted.”
In my opini is reasonabsonable to infer from that remark that Lord Pollock would have accepted the Recorder’s claims if he had
brought them under the correct Schedule.
In my judgment the fa t of the Appellant living in Adelaide is irrelevant. If it were relevant the result would be that no retired
taxpayer could ever deduct business travelling exp when monitoring his investments nor could any taxpayer stir still in the workforce
who chose to live somewhere that was not one of his business locations. There are many people in such situations. In my judgment
the true test is whether or not the trip is a business trip or, on the other hand, is part of the taxpayer’s daily living expenses.
Hotel Accommodation
Accommodation when on i business trip is treated as a business expense for tax purposes. The approach taken both e Courts and the
Commissioner for Inland Revenue in the United Kingdom seems to be that acct accommodation at a taxpayer’s home is available
to him as part of his domestic expenses. If he is obliged to be away from home for a business purpose and incur the additional costs
of hotel accommodation, then these additional costs are incurred solely for a business purpose. They are expenses additional to and
quite distinct from his ongoing domestic expenses in maintaining a home. The principles are referred to by Nourse J. (as he then
was) in Watkis v. Ashford Sparkes and Harward [1985] 2 All E.R. 9his was was a case in which a large firm of solicitors who had four offices in the West of England held local
office meetings at which a modest lunch
&
wovided weekly or y or fortnightly during the lunch hour andr and occasional evening meetings in which all the partners met to discuss
matters affecting the whole firm. The evening meetings were followed by dinner during which discussion of the firm’s business
continued. The firm also held an annual weekend conference attended by the partners accompanied by their wives and children, which
involved staying overnight at the hotel where the conference was held. The firm appealed against the Revenue’s refusal of a
claim to deduct the expenditure incurred in providing the meals at lunch time and evening meetings, and the cost of overnight accommodation
for the partners at the annual conference. They also appealed against the Revenue’s refusal to allow the firm’s share
of the expenditure incurred in providing a room and food and drink for the partners from three other firms and themselves which was
held in a private room at the hotel and at which dinner was provided.
At p.933 (f) Nour said:said:
“Tst of the fthe food, drink and accommodation at the annual conference stands on a differenting. I do not think that the cost
of the accommodation can necessarily be said to have been been expenditure which met the needs of the partners as human beings. They
did not need it for that purpose because they all had their own homes where they could have spent the night. The reason why they
needed it was so that they could continue their discussion of the particularly important topics informally between the formal sessions
on the Saturday afternoon and the Sunday morning. If they had had to break up and go home after dinner on the Saturday evening and
come back on the Sunday morning, that continuity, which was of considerable importance and value, would have been broken or at least
seriously damaged. In the circumstances, it seems to me that the commissioner was entitled, on the facts found, to conclude that
the business purpose in incurring the cost of the accommodation was the exclusive purpose and that the private benefit to the partners
was purely incidental.”
en continued at letter tter (h):
“The same considerations do not necessarily apply to the cost of the food and drink. The well-establisheeral practice of the Inland Revenue in the case of what aret are known as `travelling occupations’ is not to distinguish between the cost of travel and accommodation on the one hand and food and drink on the other. In other words, hotel bills, if reasonable in amount, are usually allowed in full. I have no reason to think that the practice does not correctly represent the law. However, counsel for the Crown has
suggested, altho th I think rather faintly, that since the profession of a solicitor is not usually regarded as a travelling occupation, the position is different in the present case. It seems to me that thatestion cannot stand with thth the decision of Cross J in EdwaInspector of Taxes) xes) v. Warmsley Henshall & Co. [1968] 1 All ER 1089. In my view no distinction is to be made between the cost of the overnight accommodation on the one hand and the and drink on the other.r.”
In my judgment emarks orks of Nourse J. can be applied to the facts of the present case.
Likewise I con the same same principles apply to his laundry claims. These were an additional expense necated by his being on a busi
business trip. At home his wife would have attended to laundry requirements. All laundry bills claimed like the meals were part of
his hotel bill.
The next case ant isis Bentleys, Stokes owless less v. Beeson [1952]l E.R. 82. The headnoeadnote reads as follows:
̶ partners in a in a firm of solicitors were accus to eain eng clie clients of the firm to luncheon at a soci social club and various restaurants. Duri During luncheon, business was discussed. egal advice given to clientlients at luncheon was charged to them in the normal way, but the fees charged did not include the expenses of the meals, which were paid by the firm. This practice was adopted by the partners both for their own convenience, so that they could devote the remainder of the day to other work in their offices, and for the convenience of clients. The partners claimed to deduct the cost of these entertainments (which included the cost of their own meals) in computing the profits of the firm for assessment to income tax. The Income Tax Act, 1918 scheduled D, Cases I and II, r.3(a), forbids the deduction of “any disbursements or expenses, not being money wholly and exclusively laid out or expended for the purposes of the trade, profession, employment, or vocation.”
HELD: in of an elen element of hospitality which was necessarily inherent in what was done, in the circumstances the sole object in incurring the expenses was the promotion of the business of the firm, therefore, they were R “money wholly and exclusively laid out or expended for the purposes of the profession” within r.3(a) and were properly to be deducted in computing the amount of the firm’s profits to be charged to tax.
Per curiam: “If the activity be undertaken with the object both of promoting business and also with some other purpose, for
example, with the object of indulging an independent wish of entertaining a friend or stranger or of supporting a charitable or benevolent
object, then the rule is not satisfied though in the mind of the actor the business motive may predominate.”
This case appearhave beve been rejected by the House of Lords in the later case of Mallalieu v. Drummond (Inspector of Taxes) [1983] 2 Al. 1095 in which hich the House of Lords over-ruling both the Judge at first instance Mr. Ju Slade and the Court of Appeal
held that a practising lady barrister could not claim as a ts a tax deduction the cost of replacing, cleaning and laundering of certain
items of clothing which she wore in court for the purpose of complying with the notes for guidance on dress in court approved by
the Bar Council and which had received the assent of the Lord Chief Justice.
Mallalieu did not onot only wear her subdued clothing in Court but she also wore it occasionally on social outings.
rgumes that the Court aurt and the Tax Commissioner should look primarily at her intention tion which she said was to buy clothing
ths appropriate for her appearances in Court from which she derived her income.
;
The Csioners of Taof Taxation, the first appellate authority, disagreed with her. They took the view that she had a domestic or social
purpose as well. Mr. Justice Sand the Court of Appeal reversed that finding. Sir John Donn Donaldson M.R. said in the Court of Appeal
[1983] 1 All E.R. 801 at 806:#160;
“From From those findings of fact there is in my judgment only one reasonablenable conclusion to be drawn, namely that axpayer’s
sole purpose in incurring the expenditure was a professional purpose, any oany other benefit being purely incidental.”
In the HousLords, Lord Lord Elwyn-Jones dissenting agreed with Sir John Donaldson. The majority of four law Lords however upheld the
Commissioners, the leading speech being given by Lord Brightman. The House held that because Miss Mallalieu had a dual purpose namely
a domestic or private purpose as well as her business or professional purpose she must fail.
With all due humility and with the respect which any Puisne Judge must pay to a decision of the House of Lords I am obliged to say
that I prefer the opinion of Sir John Donaldson. In this however I derive much solace from the decision of the Supreme Court of Fiji
in Sweetman v. Csioner of I of Inland Revenue Civil Appeal No. CBV 0005 of 1995S, judgment of 23rd October 1996 (42 FLR).
Whatever tecise nature ture of the ratio in Mallalieu’s case it is clear in myment that the Supreme Court has emphatically endorsed and pand perhaps extended the approach exemplified by eys Stokes and Lo v. B. At p.19 the Supreme Court (Lord Cooke, Sir Sir Anthony Mason and Sir Maurice Casey) sey) said:
“It may id that an expenditure which serves the purpose of the taxp taxpayer’s business or profession also serves the taxpayer’s nal purposes on the basis that what is good for his business or profession will be good ford for him personally. However, it is scarcely to be supposed that the legislature intends to disqualify an expenditure for that reason. In other words, the non-business or non-professional purpose to be excluded by s.19(b) is a purpose distinct from the business or professional purpose which justifies the deduction of the expenditure. And this supports the view that motive, though it may be a relevant factor, is by no means a decisive factor. If the purpose of the expenditure is truly for the purpose of the taxpayer’s business or profession, it matters not that the taxpayer has in mind some personal advantage which is a consequence of that purpose.
“all such penalties shall be assessed and collected from the person liable ... in the same manner in which tax is assessed and
collected ...&;
The Appe submitubmits, and I agree, that when Sections 62 and and 63 confer rights of objection and appeal against the Commissioner’s
assessments, they must include a right to object and appeal against his assessment of penalties.
In my judgment if axpayaxpayer is to be deprived of a right of appeal against an assessment of a penalty the words in Sections 62
and 63 would have to be read down or even rewritten. For example, in Section 63 the words conferring jurisdiction on the Court of
Review would have to be read down as if they confer jurisdiction to hear
“appeals from the the assessment of the Commissioner but only assessment of primary tax and excluding an assessment of penalties”.
 
To do so in my view would be quite contrary to prin principle in that the taxpayer is entitled to receive the benefit conferred by
the legislation. I consider the intention is quite plain. Section 63 provides that the Court of Review is established:
“for the puroose of hearing and determining appeals from the assessment of the Commissioner ...”
All penalties are to be imposed by assessments and all taxpayers have the right of objection and appeal against assessments.
In my judgtherefore thee the Court of Review was wrong in refusing to accept that it had jurisdiction to deal with penalties.
I sarlier that Mr. Saun Saunders was obviously sympathetic to Mr. Jamnadas or Michelle Apartments on the question of penalties. At
p.1317 of the record he said this:
“For severalsyears, until 1995, the Respondent has encouraged, and suggested to Mr. Jamnadas’s methods of claiming both travel and accommodation expenditure which, inclearest terms and the best authority, is not allowed underunder the Act. It is clear to this Court, having seen and listened to all the witnesses, that having reduced his income to such an extent that it was not worth claiming travel and accommodation expenses any longer against it, he, Mr. Mudaliar and the Respondent got together to arrange a redistribution of these unlawful expenditure claims against the growing incomes of Primetime and Michelle.
The Responshould hald have disallowed them from 1988 onwards. Mr. Jamnadas, of course, thought that he could continue to claim them but in a different way, and the Responshould have stopped him.
For these reae reasons, I would think that the Respondent would be bound to exercise his discretion in respect of penalties to a greater
extent than he has indicated.”
Cl for the Respondent hent hformed Mr. Saunders that that the Respondent was prepared to forego 80% of the penalty in each case. Obviously
Mr. Saunders thought tas not enough and I agree. The penalty originally imposed wsed was $26,313.00 in respect of Michelle Apartments
which had been reduced when the appeal came before me to $11,621.00.
Howit cannot be forgottrgotten that the failure by the Appellant to lodge the returns for Michelle Apartments was not the fault of
the Revenue. Probably Mr. Jamnadas did what he could in the circnces to overcome the probleroblem but in my judgment it would be
unfair to allow him to escape scot free from the imposition of any penalty. In all the circumstances I consider it be fair to impose
a penalty of 10% or $1,160.00.
For the reasons I hivengiven I uphold the appeals and order that the Respondent must pay the Appellants’ costs both in the Court
of Review anthis Court.
I shall adjohe further ther hearing of this case to a date to be f be fixed to hear argument as to the amount of these costs.
(Appeal allowed.)
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