Reddy Construction Co. Ltd v Commissioner of Inland Revenue [1985] FijiLawRp 23; [1985] 31 FLR 159 (8 March 1985)

[1985] 31 FLR 159

SUPREME COURT OF FIJI

Appellate Jurisdiction

REDDY CONSTRUCTION COMPANY LIMITED

v

THE COMMISSIONER OF INLAND REVENUE

Rooney, J

8 March 1985

(Income Tax − $50,000 was lent to subsidiary as working capital in joint venture − taxpayer charge to hire thereto for its equipment and to share in profits − joint venture failed − $50,000 not deductible − loss of capital nature.)

V. Kalyan for the Appellant.
M. J. Scott the Respondent.

Appeal by Reddy Construction Company Limited against a decision of the Court of Review of 6 April, 1984 where it dismissed an appeal to it against an assessment of income tax by the Commissioner of Inland Revenue which inter alia rejected a claim by the taxpayer that a sum of $50,000 lost by the taxpayer, was a deduction chargeable against income tax.

In 1968 tender and contract documents were prepared by the Crown Agents for Overseas Governments and Administration for the construction of a hospital at Lautoka. A construction company Sir Lindsay Parkinson Company Limited was interested in obtaining the contract. The taxpayer was a Fiji Company engaged in that industry. Before it tendered, Parkinson and the tax payer entered into a pre bidding agreement.

The main provisions (paraphrased) of this included the following:

(1) That Lindsay Parkinson would tender for the contract to build the hospital.

(2) That the appellant and Lindsay Parkinson would form a temporary association for the purpose of jointly preparing and submitting the tender for the works and (if the tender was successful) the parties to the agreement would execute the works as a joint venture, notwithstanding that the contract would be in the name of Parkinson.

(3) The parties would place at the disposal of the joint venture all their technical skill and knowledge without any additional consideration.

(4) That the parties would share in the profit or loss of the venture in equal shares.

(5) Reddy's undertake to supply all the necessary Plant and Equipment in good workable condition as may be required to execute this Contract, other than particular units of Plant as set forth on Schedule B attached, at hire rates mutually agreed and upon which the Tender has been based.

The Plant and Equipment shall be supplied in good workable condition and properly insured to the approval of both Parties. The Premiums for these Insurances shall be for the account of the Joint Ventures.