IN THE STATUTORY TRIBUNAL, FIJI ISLANDS
SITTING AS THE TAX TRIBUNAL

Income Tax Appeal No 10 of 2010

BETWEEN:

A PROPERTY MANAGEMENT AND INVESTMENT COMPANY
Applicant

AND:

FIJI REVENUE & CUSTOMS AUTHORITY
Respondent

Counsel: Mr A.K. Narayan, AK Lawyers for the Applicant 
Ms I Ratuvuku, FRCA Legal Unit for the Respondent

Dates of Hearing: Thursday 13 September 2012
Monday 19 November 2012
Wednesday 12 December 2012

Date of Judgment: Thursday 3 January 2013

JUDGMENT

INCOME TAX ACT (CAP 201) – Section 11; Capital Gains; Disposition of Property; Objective Purpose Test of Acquisition; Dealing in Land; 

Background

1.	This an application for review against the decision of the Respondent Authority dated 30 August 2010, disallowing the Applicant’s objection to the Assessment made by the Respondent, that net profits derived from the sale of land at The Cove, Denaru Island, Nadi, were income for the purposes of the Income Tax Act (Cap 201).

2.	The Agreed Facts between the parties are as follows:

•	The Applicant company was incorporated on 24 October 1978 and engages in the business of property management and investment.

•	The Applicant currently owns eight properties, four of which are let out for residential and commercial purposes, most of which were acquired more than ten years ago
•	The Applicant was established for the sole purpose of holding income earning properties as long term investments for its shareholders. The list of properties are:-

o	CT8430 - building constructed on this land at Mark Street and is yet to be let out;
o	CT11175 - A building at Kings Road Ba;
o	Lease No 104928 - Ba Town;
o	CT 20593 - Land at Ganga Singh Street Ba;
o	CT 19470 - Park Street, Varadoli Ba;
o	CT31636 - land at Yalalevu Ba;
o	CT 10576 - land where applicant as a joint venture with another company to be developed.

•	 The Applicant had not sold any property in the past until the property giving rise to assessment by the Respondent in this appeal.

•	On 2 January 2003, the Applicant acquired land covered by CT34783 situated on The Cove, Denaru Island, pursuant to a sale and purchase agreement dated 10 September 2002, in consideration for the sum of $340,000.00 plus VAT of $34,000.00.

•	In or about November 2009, the Applicant sold the property to Mr and Ms T for the sum of $2.1 million. 

•	As a result of the sale of the property, the Respondent sent a formal Notice of Assessment, via its letter dated 7 April 2010 for advance tax assessed for 2010.

•	The total tax was $490,896.00 which was ascertained on a net profit of $1,753,200.00.

•	On 3 June 2010, the Applicant lodged with the Respondent a Notice of Objection to the Assessment (the objection), on the grounds that the Applicant is not liable for income tax under Section 11(a) of the Income Tax Act. 

•	The Respondent wholly disallowed the Applicant’s objection via its letter dated 30 August 2010, stating that the sale of the property is caught within Section 11(a) of the Act.

Issues Before the Tribunal 

3.	While the document that sets out the Agreed Statement of Facts and Issues is a very essential starting point for the Tribunal and the parties in the conduct of the case, this is not an arbitration of a fixed set of issues. 

4.	The issue before this Tribunal, is whether or not the proceeds derived from the sale of the property, is income for the purposes of the Income Tax Act (Cap 201).

5.	The application is heard in accordance with the relevant provisions of the Tax Administration Decree 2009 and the Magistrates Court (Amendment) Decree 2011. 

The Case of the Taxpayer

6.	In considering the case of the Taxpayer and in addition to the submissions and Authorities provided, the Tribunal has had regard to:

•	The Affidavit evidence of Mr A (Shareholder and Company Director of the Taxpayer) sworn on 11 September 2012;

•	The Affidavit evidence of Mr P (Chartered Accountant) sworn on 24 October 2012;

•	The Affidavit evidence of Mr W (Real Estate Agent) sworn on 24 October 2012;

•	Supplementary Affidavit evidence of Mr A sworn on 12 September 2012;

•	The Affidavit evidence of Mr P (Shareholder and Company Director of the Taxpayer) 

7.	Further, the Tribunal was supplied and referred to various documents, including:-

•	Annual Reports of the Reserve Bank of Fiji;

•	Pontifex.B, Canadian Income Tax: The Income War Tax Act, 1917 with explanations by the Minister for Finance (as reported in Hansard) and Instructions of Finance Department.Carswell Co.(Undated);

•	Various historical extracts of comparative taxing provisions pertaining to Australia and New Zealand. 

8.	It is a matter of record that the Taxpayer only made available one witness for cross-examination before the Tribunal.

9.	The case of the Taxpayer according to its submissions is “quite straightforward”. 

The applicant submits that the transaction was clearly a one off transaction. The sale of the property was a consequence of a lucrative offer against the background of the political and economic situation after December 2006. The transaction in this case stands isolated and alone. This also supports the applicant’s contention in the first and second limb.

10.	As Counsel for the Applicant advised the Tribunal in his opening remarks, the Taxpayer was initially a family company from Ba. The nature of the company’s business was in the construction of buildings and subsequent rental activities, both for office and domestic accommodation. The taxpayer acquired its first property around 1980. 

11.	The taxpayer is owned by four shareholding brothers. According to Mr Narayan, the primary income source of the taxpayer is in the monthly tenancies arising out of its properties, as well as the rental activities it provides to a supermarket business, the majority of shares of which are owned by two of the brothers. 

Evidence of Mr P

12.	Mr P gave evidence to the Tribunal in his capacity as a Company Director of the Taxpayer. His evidence was both by way of Affidavit and oral testimony.

13.	In the Affidavit sworn and dated 24 October 2012, the witness states that the property at Denaru was financed through a bank loan.

14.	At paragraphs 20 to 22 of the Affidavit, Mr P states that as Denaru was to be established as the largest integrated resort in Fiji, provided the Company with an incentive to acquire the property in order to develop an executive residence for long term residents. 

15.	He states, that with increases in interest rates during the period 2004 to 2006, caused the company to defer implementation of construction on Denaru for better anticipated returns on other projects. 

16.	Mr P claims that property prices had fallen on Denaru following the aftermath of events of December 2006 and April 2009. In November 2009, Mr and Ms T of 	New Zealand purchased the property for the purposes of building a holiday home.

17.	His Affidavit concludes:

The property was acquired in 2003 and sold almost 6 years later. The applicant has not sold any other property it owned.

The company did not have any scheme at anytime including when it acquired the property for the purpose of making profit from resale. The Company had at no time engaged an agent for the sale nor had it ever advertised the property as being up for sale. The sale of the property was a one off isolated transaction. 

18.	In his oral evidence before the Tribunal, Mr P indicated that with the proceeds of sale, the Taxpayer paid off the loan on the vacant property (approximately $143,000.00) and the balance was put into a term deposit as collateral to build the Marks Street Suva property.

19.	In response to questioning from the Tribunal, Mr P indicated that he had anticipated the return from the duplex structure once completed, would generate a return of 	between $4,500.00 to $6,000.00 per month, on each residence. That is, yielding an approximate return of $12,000.00 per month. 

20.	According to the witness, he was involved in the management of the design of the duplex to be located on the site. He was wanting to move into one of the homes with his wife. He had intended to pay the market rent. The witness indicated that he was presently residing at Kings Road, Ba, where he has lived in the same home for 45 years. He claims to have been paying rent at $1000.00 per month.

The Case of the Respondent

21.	The case of the Respondent is in effect that that the property was acquired for the purpose of selling or otherwise disposing of the ownership of it and that the Applicant had derived a profit from the carrying on or carrying out of any undertaking or scheme, entered into or devised for the purpose of making a profit. 

22.	In the Affidavit of Mr H, a Principal Auditor with the Respondent, he states, that upon investigation of the purchase and disposition of the property, the fact that the block was still vacant at the time of disposition, was a relevant consideration in determining liability of the Taxpayer. 

23.	 It was claimed that the location of the property, was well known for investment by speculators. According to Witness Mr H, the Respondent was not satisfied that proper plans and steps had been undertaken to pursue the Applicant’s purpose for the 	purchase of the property. 

The Case Before the Tribunal

24.	The issue before this Tribunal is whether or not the proceeds of sale are income for the purposes of Section 11 of the Income Tax Act (Cap 201). 

25.	Section 11 of the Act is set out as follows: 

For the purpose of this Act, ―total income means the aggregate of all sources of income including the annual net profit or gain or gratuity, whether ascertained and capable of computation as being wages, salary or other fixed amount, or unascertained as being fees or emoluments or as being profits from a trade or commercial or financial or other business or calling or otherwise howsoever, directly or indirectly accrued to or derived by a person from any office or employment or from any profession or calling or from any trade, manufacture or business or otherwise howsoever, as the case may be, including the estimated annual value of any quarters or board or residence or of any other allowance or benefit provided by his employer or granted in respect of employment whether in money or otherwise, and shall include the interest, dividends or profits directly or indirectly accrued or derived from money at interest upon any security or without security or from stock or from any other investment, and whether such gains or profits are divided or distributed or not, and also the annual profit or gain from any other source including the income from, but not the value of, property acquired by gift, bequest, devise or descent, and including the income from, but not the proceeds of, life insurance policies paid up upon the death of the person insured, or payments made or credited to the insured on life insurance, endowment or annuity contracts upon the maturity of the term mentioned in the contract:

26.	In addition, the general provision is supported by Section 11(a) of the Act, that contains within it three illustrative examples (limbs). In the case of this first limb, it reads:

any profit or gain accrued or derived from the sale or other disposition of any real or personal property or any interest therein, if the business of the taxpayer comprises dealing in such property; (my emphasis) 

27.	The ‘second limb’ reads fully:

any profit or gain accrued or derived from the sale or other disposition of any real or personal property or any interest therein, if the property was acquired for the purpose of selling or otherwise disposing of the ownership of it 

28.	The third limb deals with any profit or gain derived from the carrying on or carrying out of any undertaking or scheme entered into or devised for the purpose of making a profit. 

29.	Finally, there is an exclusionary provision to Section 11(a). It provides that none of the three illustrative examples (the ‘three limbs’) shall be considered to contribute to total income, where the profit or gain derived from a transaction of purchase and sale does not form part of a series of transactions and which is not in itself in the nature of business. In McClelland v Commissioner of Taxation, the Privy Council concluded that a single transaction can fall within the notion of assessable income, where the undertaking or scheme exhibits features that give it the character of a business deal.

Interpreting the Legislation

30.	I am grateful to Counsel for the Applicant in providing the Tribunal with extensive submissions pertaining to the analysis and interpretation of Section 11 of the Act. From a historical point of view though and to the extent that the Tribunal should draw from the history of the legislation to assist in its interpretation, I nonetheless offer the following comments. 

31.	Firstly, income tax was introduced into Fiji via the Inland Revenue (Income Tax) Ordinance 1920, not the Income Tax Ordinance 1921. In Taxpayer S v Fiji Revenue & Customs Authority, this Tribunal sets out the scope of the initial taxing provision and also compares and contrasts that provision with other then independent dominions such as Canada and New Zealand. 

32.	It may be interesting to point out here, that by way of comparative example, the Land and Income Assessment Act (NZ) 1908 defined “income derived from business” as 

79. lncome derived from business “includes, but without limiting the meaning of the words, the profits derived from or received in New Zealand by any taxpayer, in or out of New Zealand, in each year ending the thirty-first day of March, from the following sources:—-- 

(a.) From any business:
(b.) From the purchase, sale, or other disposition of personal property:
(c.) From the purchase, sale, or other disposition of real property,
if the taxpayer’s ordinary business comprises dealing in such
property, but not otherwise:........

33.	Some eight years later, that concept was widened further, with the introduction of Section 85(c) of the Land and Income Tax Act 1916 (NZ). 

34.	Section 85(c) read:

85. Without in any way limiting the meaning of the term, the assessable income of any person shall for the purposes of this Act be deemed to include, save so far as express provision is made in this Act to the contrary,-
..........
c) All profits or gains derived from the sale or disposition of land 
or any interest therein, if the business of the taxpayer comprises dealing in such property, or if the property was acquired for the purpose of selling or otherwise disposing of it as a profit:

35.	Mr Narayan drew the Tribunal’s attention to the parliamentary debate coinciding with the making of that law, and indicated that the purpose of the amendment was to regulate those that ‘dealt in property’, being “property dealers”. 

36.	Counsel also flagged to this Tribunal, the amendment introduced to the definition of “income” under Australian law, upon the introduction of the Income Tax Assessment Act of 1930 , when the following was inserted within that definition:

any profit arising from the sale by any person of any property acquired by him for the purpose of profit-making by sale or from the carrying on or carrying out of any profit-making undertaking or scheme " 

37.	To put that amendment in context, the consolidated definition of income from personal exertion or income derived from personal exertion, was given the meaning within Section 6 of the Income Tax Assessment Act 1936 as:

income consisting of earnings, salaries. wages, commissions, fees, bonuses, pensions, superannuation allowances, retiring allowances and retiring gratuities, allowances and gratuities received in the capacity of employee or in relation to any services rendered, the proceeds of any business carried on by the taxpayer either alone or as a partner with any other person, any amount received as a bounty or subsidy in carrying on a business, the income from any property where that income forms part of the emoluments of any office or employment of profit held by the taxpayer, and any profit arising from the sale by the taxpayer of any property acquired by him for the purpose of profit-making by sale or from the carrying on or carrying out of any profit-making undertaking or scheme,

38.	As Mason J makes clear in his judgment within Whitfords Beach, 

The explanatory memorandum mentioned in the Treasurers 1930 Second Reading Speech stated:

This amendment is merely a statutory declaration of what has for many years been accepted as settled law in Australia, viz that a profit derived from any transaction or scheme entered into for the purpose of profit-making income which is assessable to income tax notwithstanding that the transaction or scheme does not amount to or is not part of a trade or business.... 

39.	It is recognised within the judgments of Whitford’s case, that there is extensive discussion as to whether the 1930 amendment of the Australian law, was in fact to restate what the Australian law was, or whether it was to prevent any confusion and to shield against the decision in Jones v Lemming [1930] AC 415. The point is also made, that the Australian and English taxing regimes were different and the case law distinguishable, by virtue of the unique statutory language governing these regimes. Despite all of this, as Mason J noted, in the subsequent case of Edwards (Inspector of Taxes) v Bairstow, the House of Lords overruled the proposition prescribed in Jones v Lemming in any event. 

40.	The resultant implication of all of this, was that it was the intention of the Australian parliament and backdated for certainty to 1922, that capital gains made on the sale of property acquired for the purpose of profit making by sale, regardless of whether or not the sale undertaken arose out of the business of the Taxpayer, was to constitute income for taxation purposes. 

41.	To recap, in the case of New Zealand, as can be clearly seen as early as 1908, what many in Fiji refer to as the first two limbs of Section 11 (a), was long regarded as income derived from business under the New Zealand law. 

42.	In the case of Fiji, the fact that the law when enacted in 1921, sought to embrace a broader approach to the way in which income was defined, appears to be a consequence of many factors. As the Tribunal has indicated in the case of Taxpayer S, the 1920 Ordinance was wide ranging in scope. The subsequent definition of income within the Ordinance of 1921, clearly drew from the Canadian Income War Tax Act (1917). Though it is the case that the Fijian definition was both wider and designed to work as standalone law. The Canadian federal law at that time, was complementary to provincial income tax laws already in place by virtue of the British North America Act 1867. As a result, it is understandable that the jurisprudence that flows from Canada and Fiji from that 1921 point in time onwards, is going to be placed on different trajectories. 

43.	Any attempt by the Applicant to try to import meaning into the Fijian tax law in 2012, having regard to parliamentary debates of the Canadian war time almost one hundred years earlier, is simply not relevant or helpful. 

44.	 In the case of Australia, if there was any mischief to be corrected by the 1930 amendments to its definition of income, it was intended to defeat any influence that the English case of Jones v Lemming would have, where capital gains arose out of transactions that were not a concern in the nature of trade. That mischief and the pursuit by the legislature to capture capital gains within the income tax net, is unique to the historical development of the laws of that country. It has no bearing on Fijian law. 

45.	The definition of “income” under the Fijian Income Tax Act, remained for present purposes, stationary for 37 years. This to my mind, was suggestive that the legislature was content in the broad provision that was Section 11 of the Act. 

46.	When it did see fit to amend the law in 1957, the legislature introduced an amendment to the then Section 3 of the Income Tax Ordinance as follows:

 by adding the following subsection immediately after subsection (1) – 

(1A) Without in any way affecting the generality of the last preceding subsection, total income for the purposes of this Ordinance shall include (a) all profits or gains derived from the sale or other disposition of any real or personal property or any interest therein, if the business of the taxpayer comprises dealing in such property or (except in the case of a transaction which is isolated and not part of a series of transactions) if the property was acquired for the purpose of selling or disposing of it, and all profits or gains derived from carrying on or carrying out of any undertaking or scheme entered into or devised for the purpose of making a profit. 

47.	As Counsel correctly notes, the third limb of this proviso, was located within the New Zealand law by 1951. In Australia, this had taken place by 1930. 

48.	As a result of the above, I do not share the view of Counsel for the Applicant, that in 1957, that 

The Commissioner in Fiji misconstrued the words he borrowed to support some other intent clearly not there from the ordinary and literal interpretation of the words 

49.	The pattern of development and changes between the taxation laws of Australia, New Zealand and Fiji, appears responsive to the unique issues facing each of those countries at different times. One may well ask the question, why did the New Zealand parliament see fit to have the first two limbs enshrined within their legislation as early as 1908 and yet in Fiji, it did not incorporate the illustrative example until 50 years later? The same could be said of what may be generically referred to as the ‘third Fijian limb’. That limb was introduced in a comparable form in Australia in 1930, but not apparently required in New Zealand until 1951 and Fiji until 1958.. 

50.	In Eunson v Commissioner of Inland Revenue, Henry J stated:

If the (New Zealand) legislature meant to tax all profits from the sale of land, the three limbs of Section 88 would be unnecessary

51.	This comment should not go unnoticed, because for 38 years the general provision that is Section 11 of the Fijian Income Tax Act (Cap 201), survived without any limbs whatsoever. But when it was determined that there was a need to provide some clarifying law, the language of the Second Reading Speech coinciding with the introduction of the Income Tax (Amendment)(No2) Ordinance Bill 1957, was quite clear and unequivocal. 

52.	For the sake of completeness, I will repeat it as follows:

Despite the criticism that has been aimed at it, (the clause) is merely a clarifying clause. The section it proposes to clarify is an important one as it defines “total income”. This provisions now writes into the law what is believed is already in the law, but it has been a matter of continual dispute and I believed that it is now necessary to have this in the law so that the taxpayer can see how and on what he is liable to pay taxes...........

This definition follows very closely that laid down in the model ordinance and has often been referred to as “wide as a church door”. I too believe that it is and, also, the few people who have disputed it in Court have found it is....

The new provision has been referred to in these terms: “It seems unjust and un-British in so far as it sets to tax items of capital” Similar provisions are written into most British laws either by inference or specifically, mainly specifically, and I do not consider, Sir that they are unjust and un-British. In order to determine whether it sets out to tax items of capital, I would like to refer to a now famous remark of the Lord Justice Clarke in the case of Californian Copper Syndicate v Harris, 5 Tax Cases 165:

“it is quite a well settled principle in dealing with questions of assessment of income tax that where the owner of an ordinary investment chooses to realise it, and obtains a greater price for it than he originally acquired it at, the enhanced price is not profit in the sense of ...assessable to income tax. But it is equally well established that enhanced values obtained from realization or conversion of securities may be so assessable, where what is done is not merely a realization or change of investment, but an act done what is truly the carrying on or carrying out of a business...” 

I contend , Sir that the proposed amendment, or rather I prefer to call it the addition, to our law, does not intend to by-pass the principle laid down in those remarks. 

53.	In Bull v Commissioner of Inland Revenue, the Majority Judges stated

it is now widely accepted in many common law jurisdictions that recourse by the courts to legislative history and extrinsic materials is a legitimate aid to interpretation. For present purposes it is sufficient to refer to the decision of the House of Lords in Pepper v. Hart [1993] AC 593 where the rule excluding reference to Parliamentary materials as an aid to statutory construction was relaxed so as to permit such reference when-

(1) the legislation is ambiguous or obscure or leads to absurdity,
(2) the material relied upon consists of statements by a Minister or other promoter of a Bill together with such other Parliamentary material as is necessary to understand such statements, and
(3) the statements are clear.

54.	The Tribunal is satisfied that the Second Reading Speech coinciding with the introduction of the 1957 Bill, is capable of being relied on in these circumstances. Apart from some minor restructuring and renumbering of these specific provisions, the language of the law following the 1957 amendments, has remained unchanged within the Consolidated Ordinance No 32 of 1964, the Income Tax Act No 6 of 1974, or the current provision that is Section 11 of the Income Tax Act (Cap 201).

55.	The current provision that is Section 11 (a) now reads

Provided that, without in any way affecting the generality of this section, total income, for the purpose of this Act, shall include – 

 (a) any profit or gain accrued or derived from the sale or other disposition of any real or personal property or any interest therein, if the business of the taxpayer comprises dealing in such property, or if the property was acquired for the purpose of selling or otherwise disposing of the ownership of it, and any profit or gain derived from the carrying on or carrying out of any undertaking or scheme entered into or devised for the purpose of making a profit; but nevertheless, the profit or gain derived from a transaction of purchase and sale which does not form part of a series of transactions and which is not in itself in the nature of trade or business shall be excluded;

56.	In Taxpayer A, this Tribunal sought to set out a clear way of breaking down the elements that makes up Section 11(a) as follows:

The first clarifying example (or limb) of Section 11(a) is as follows:
Total income shall include any profit or gain accrued or derived from the sale or other disposition of any real or personal property or any interest therein, if:

•	The business of the taxpayer comprises dealing in such property; or 
•	If the property was acquired for the purpose of selling or otherwise disposing of the ownership of it. 

The second clarifying example in Section 11(a) is as follows:
Total income shall include any profit or gain derived from the carrying on or carrying out of an undertaking or scheme entered into or devised for the purpose of making a profit.

The proviso to Section 11(a) demonstrates those categories of case that are excluded not included for the purposes of the Act. It reads:
Profit or gain derived from a transaction or purchase and sale which does not form part of a series of transactions and which is not in itself in the nature of trade or business shall be excluded.

57.	The language of these provisions seem quite clear. I am satisfied that the illustrative examples were only intended to be what they are. They appear designed to assist in the case of uncertainty.The structure of the provision is uniquely Fijian. For the above reasons, I reject the submissions of the Applicant in relation to the historical development and purpose of the introduction of Section 11(a) of the Act. 

Are the Proceeds from the Sale Caught by Section 11 of the Act?

58.	For the present time, what is needed to be determined, is whether or not, the sale of the property at Denaru was a transaction that was it itself in the nature of trade or business.

59.	The first point of examination is found within the words at Section 11 of the Act, that read:

profits from a trade or commercial or financial or other business or calling or otherwise howsoever, directly or indirectly accrued to or derived by a person from any office or employment or from any profession or calling or from any trade, manufacture or business or otherwise howsoever, as the case may be,

60.	The profit arising from the sale in 2009, does seem to be profits from the Taxpayer's business, directly accrued to the Taxpayer. This was profits from the sale of land, purchased by the Taxpayer for business purposes. To my mind it makes no real difference whether or not, the Taxpayer was going to let out the finally constructed property to an unknown entity or to one of the Company Directors himself. This was profit from a business derived from that business. It was more than a mere capital accretion having regard to the law that is California Copper. The profits would be captured by the general provision of Section 11 of the Act.

Are the Profits Also Captured by Section 11 (a) of the Act? 

61.	For the sake of completeness, I am also satisfied that the proceeds could be caught by the language that is described as the first limb of Section 11(a) of the Act. The business of the Taxpayer could be argued to comprise dealing in property. While I note that the definition of "dealing in property" was introduced into Section 2 of the Act in 1974, this definition was not an exhaustive one. The term dealing, given its ordinary meaning, would mean "to do business with" or "to trade". The fact that the illustrative example had been in place since 1957, some 17 years prior to the introduction of that definition, makes it clear that the term was always intended to be interpreted broadly.

62.	I am satisfied that the term could capture the activities of the Taxpayer. The Taxpayer is a Property Management and Investment Company. It does more than receives passive income rental. It acquired a property, held it, did nothing with it and disposed of it, having made a sizeable profit. According to the submissions, it saw a better opportunity to exploit, needed the money and reapplied it elsewhere. 

63.	In Shankar Lal s/o Ram Tahal vCommissioner of Inland Revenue, Dunckley J., stated: 

by definition, to be a business as a property dealer, a person must buy and sell properties with the object of profit. A dealer in property is a trader in property. Usually the more transactions a person enters into, the more obviously he can be termed a dealer. In this case, the number of transactions is not large in relation to the period involved. This does not necessarily mean that the appellant is not a dealer

64.	It needs to be kept in mind here, that his Honour was speaking of the business of a property dealer. The first limb though does not require that the Taxpayer be a property dealer, only that the business of the Taxpayer comprises dealing in property. If the legislature sought to only capture 'property dealers' by way of this illustrative example, it would have been a very simple drafting task to do so. Instead it chose a wider net, that while clearly cognisant of comparative taxation law of the time, was also steeped in its own rich jurisprudential tradition, arising out of the very wide language that was the 1920 Income Tax Ordinance. 

65.	In the present case, the business of the Taxpayer does comprise dealing in property, even if that activity only takes place intermittently. I find accordingly. 

66.	Against the backdrop of determining that the profit is captured by both the general provision and the first limb, at one level makes the ongoing enquiry in relation to limbs two and three, somewhat superfluous.

67.	 In any event, in relation to the second limb, I tend to support the view of the Respondent in this regard. The Applicant was slow acting in the development of the property. There is simply no evidence of anything transpiring in the Year 2003. In my mind that is a lengthy period of time to do nothing with a property that was supposedly acquired for investment purposes. The Applicant provided to the Tribunal no evidence of any estimated construction cost. The architect plans contained within the Supplementary Affidavit Evidence of Mr A, were dated 2005. Three years after acquisition. The true motivations and intentions of the Taxpayer must as a result, be in some doubt. The purpose of the Taxpayer at acquisition, was more likely than not to have been a profit making one. Though I do not make any conclusive determination in this regard. 

Was this an Undertaking or Scheme?

68.	 In Lowe v Commissioner of Inland Revenue, Richardson J defined the words "scheme" to connote a plan or purpose which is coherent and has some unity of conception. He defined "undertaking" as a project or enterprise organized and directed to an end result. I see no reason why the proposed development of an executive residence to be let out for rental purposes cannot fall within this category of case. 

69.	There was clearly a plan with an end result. The proceeds and activity could be arguably also caught within the third limb of Section 11(a), though I accept that there would be some inconsistency in approach if one was to accept that the second limb and third limb applied. 

70.	If the purpose was profit maximising and the focus acquisition and disposition, then clearly this could be at odds with an undertaking or scheme. This is where any legal analysis that seeks to cover all bases, by examining the implication of each limb, is perhaps unnecessary and unwise.
 
Conclusions 

71.	I am satisfied that the proceeds of sale arising from the disposition of the said property are caught by the general provision of Section 11 of the Act, as well as the first limb of Section 11(a). I find accordingly. 

72.	The Application is unsuccessful and is dismissed. The Respondent is free to make an application for costs within 28 days,

DECISION

(i)	The Application for review is dismissed. 

(ii)	The Respondent is free to make an application for costs within 28 days. 

Mr Andrew J See
Resident Magistrate