Chief Collector of Taxes v Folkes [1981] PNGLR 58 (13 March 1981)

Papua New Guinea Law Reports - 1981

[1981] PNGLR 58 - The Chief Collector of Taxes v James Morton Folkes 

[1981] PNGLR 58

N287

PAPUA NEW GUINEA

[NATIONAL COURT OF JUSTICE]

THE CHIEF COLLECTOR OF TAXES

V

JAMES MORTON FOLKES

Waigani

Andrew J

6 March 1981

13 March 1981

INCOME TAX - Appeals - Practice and procedure - Rules under Supreme Court Act 1975 to apply in absence of rules under Income Tax Act, 1959.

APPEAL - Practice and procedure - Income Tax - Rules under Supreme Court Act 1975 to apply in absence of rules under Income Tax Act, 1959.

APPEAL - Appeal on question of law - Meaning of “question of law” - Whether facts fall within statutory provisions a question of law - Income Tax Act, 1959, s. 255(1).

INCOME TAX - Appeals - Appeal on question of law - Meaning of “question of law” - Whether facts fall within statutory provision a question of law - Income Tax Act, 1959, s. 255(1).

An appeal brought under s. 255 of the Income Tax Act 1959 to the National Court from a decision of the Income Tax Appeals Tribunal, should be instituted by a notice of appeal and the Supreme Court Rules 1977 should regulate and prescribe the practice and procedure of the appeal.

It is the decision of the Tribunal in respect of which the appeal is lodged and, if that decision involves a question of law, then the whole case, and not merely the question of law, is subject to appeal.

Ruhamah Property Co. Ltd. v. Federal Commissioner of Taxation [1928] HCA 22; (1928) 41 C.L.R. 148 referred to.

Where a decision involves a term used in a statute, the question whether the ultimate decision was established by the “primary” or “evidentiary” facts will generally always be a question of law.

Farmer v. Trustees of the late William Cotton [1915] UKHL TC_6_590; [1915] A.C. 922 at p. 932 applied.

Whether or not a particular sum of money forms part of the assessable income of a taxpayer under the Income Tax Act 1959 is a question of law.

Whether or not facts fall within the provisions properly construed of s. 361 of the Income Tax Act 1959 is a question of law.

The Scottish Australian Mining Co. Ltd. v. The Commissioner of Taxation [1950] HCA 16; (1951) 9 A.T.D. 135 at p. 138 applied.

Appeal.

This was an appeal brought pursuant to s. 255 of the Income Tax Act 1959, and from a decision of the Income Tax Review Tribunal upon a reference to it pursuant to s. 247 of the Act.

Counsel:

J. M. Geddes, for the appellant.

M. White and P. A. Dempsey, for the respondent.

Cur. adv. vult.

13 March 1981

ANDREW J:  Separate applications have been made by the appellant and the respondent and for convenience have been dealt with together.

The appellant seeks orders that a notice of appeal instituted in the National Court be accepted in its present form and directions be made as to the rules which might apply when an appeal is brought under the Income Tax Act 1959. There are no rules of this Court relating to appeals under the Act.

The appeal is from a decision of the Papua New Guinea Income Tax Review Tribunal handed down on 30th January, 1981, upon a reference to the tribunal pursuant to s. 247 of the Income Tax Act and the appeal is brought pursuant to s. 255 of the Act.

The court has in the past made directions that such appeals be conducted in accordance with the procedure of the rules of the High Court of Australia: See Thiess Bros. (Pacific) Pty. Ltd. v. Chief Collector of Taxes[cx]¹. However, in my view, the Supreme Court Rules 1977 (No. 22 of 1977) and in particular Pt. III thereto, are  adequate to regulate and prescribe the practice and procedure of appeals of this nature and I see no reason for this Court to have to resort to the rules of another jurisdiction.

I order and direct that this appeal to the National Court from a decision of the Income Tax Appeals Tribunal be instituted by a notice of appeal and I accept the notice of appeal which is before the court upon this application. I further order and direct that the Supreme Court Rules 1977 shall regulate and prescribe the practice and procedure of the appeal.

It remains now to consider the application of the respondent who objects to the competency of the appeal on the ground that particulars of the grounds relied on in support of the appeal do not show that the appeal involves a question of law.

Section 255 of the Income Tax Act is as follows:

“255

(1)      The Chief Collector or taxpayer may appeal to the National Court from any decision of the Review Tribunal that involves a question of law.

(2)      ...”

The relevant grounds of appeal are as follows:

“NOTICE OF APPEAL

1.       ...

2.       ...

3.       So much of the Income Tax Review Tribunal is appealed from as contains the Tribunals finding that the sum of K82,712.00 was not part of the assessable income of the taxpayer for the year of income ended 31 December 1978.

4.       PARTICULARS OF THE GROUNDS RELIED ON IN SUPPORT OF THE APPEAL ARE AS FOLLOWS—

(a)      the Tribunal erred in not holding that the sum of K82,712.00 or such other amount being a proportionate amount of the sale price of the shares in PNG Motels Pty Limited which took place on or about 8 December 1978 formed part of the assessable income of the taxpayer for the year of income ended 31 December 1978.

(b)      the Tribunal erred in not holding that there was an arrangement within the meaning of Section 361 of the Income Tax Act 1959 of K82,712.00 was received by the taxpayer and formed part of his assessable income for the year of income ended 31 December 1978.

(c)      the Tribunal erred in holding that the loan transaction including the agreement that the taxpayer should be liable for interest cannot be linked with the subsequent sale.

(d)      the Tribunal erred in holding the exchange of cheques was no more significant than the adjustments made to the company’s other assets and liabilities.

(e)      the Tribunal was in error holding that the attendant circumstances are not part of an arrangement.

5.       ...”

The distinction between a question of fact and a question of law is invariably difficult and has proved to be particularly so in taxation cases, and many of the decisions appear to be conflicting.

I think that one of the first points to note is that it is THE DECISION of the Board in respect of which the appeal is lodged and, if that decision involves a question of law, then the whole case, and not merely the question of law, is subject to appeal: see Ruhamah Property Co. Ltd. v. Federal Commissioner of Taxation[cxi]².

In Farmer v. Trustees of the Late William Cotton[cxii]³ Lord Parker said:

“The views from time to time expressed in this House have been far from unanimous, but in my humble judgment where all the material facts are fully found, and the only question is whether the facts are such as to bring the case within the provisions properly construed of some statutory enactment, the question is one of law only.”

It is important to realize that there are two kinds of facts. The “primary” or “evidentiary” facts are those which are provable by direct evidence. The second kind, called “ultimate facts” or “conclusions of fact” are inferences of fact drawn from the “primary” or “evidentiary” facts, or as it is sometimes expressed the factum probandum (the ultimate fact in issue) and facta probantia (the facts adduced to prove or disprove that ultimate fact). Where the factum probandum involves a term used in a statute, the question whether the accepted facta probantia establish that factum probandum will generally always be a question of law.

A mixed question of law and fact is a question of law and it is not proper to attempt “to secure for a finding on a mixed question of law and fact the unassailability which belongs only to a finding on questions of pure fact”: Great Western Railway Company v. Bater[cxiii]⁴ and Australian Temperance and General Mutual Life Assurance Society Ltd. v. Federal Commissioner of Taxation[cxiv]⁵.

In my view the particulars of the grounds of appeal in this case amount to questions of law and the appeal is therefore competent.

Ground 4(a) involves the question of whether or not a sum of money formed part of the assessable income. That was the ultimate fact in issue (factum probandum) and involves the construction of the word “income” which has acquired a technical meaning in income tax law, and that is a question of law: see Hayes v. Federal Commissioner of Taxation[cxv]⁶; Buckland v. Federal Commissioner of Taxation[cxvi]⁷; XCO Pty. Ltd. v. Federal Commissioner of Taxation[cxvii]⁸.

In a similar way ground 4(b) raises the construction of the technical word “arrangement” but furthermore the question is raised whether the facts fall within the provisions of s. 361 of the Income Tax Act. As was said in The Scottish Australian Mining Co. Ltd. v. The Commissioner of Taxation[cxviii]⁹:

“... there is no dispute as to the facts and where all the material facts are found by the Tribunal of fact, and the only question is whether they are such as to fall within the provisions properly construed of some statutory enactment, the question is one of law and not of fact unless the facts show that more than one inference is reasonably open and the question is one of degree.”

On the evidence before me the facts were not in dispute and no inferences were drawn from the facts.

Whether questions of law are raised by grounds 4(c), 4(d) and 4(e) appears to me to be more difficult. Due weight must be given to the words of s. 255(1) of the Act which are apparently meant to have a restrictive effect by limiting the appeals which may be brought. I have for consideration only the grounds of appeal themselves and not the reasons for decision nor the arguments which were advanced. I am in some doubt whether I should single out each ground of appeal, having already found that the first two grounds make the appeal competent and thus make the whole case subject to appeal. On the whole I am satisfied that grounds 4(c) and 4(d) involve a conclusion on the facts which may well involve a mixed question of law and fact and I as satisfied that ground 4(e) involves the interpretation of the technical word “arrangement” which as I have already found, involves a question of law.

I therefore dismiss the application of the respondent and I declare the appeal to be competent.

Application as to competency of appeal dismissed.

Solicitor for the appellant: The State Solicitor.

Solicitor for the respondent: Gadens.

<<

[cx][1977] P.N.G.L.R. 62.

[cxi](1928) 41 C.L.R. 148.

[cxii][1915] UKHL TC_6_590; [1915] A.C. 922 at p. 932.

[cxiii] (1922) 8 T.C. 231 at p. 244.

[cxiv](1933) 2 A.T.D. 217.

[cxv](1956) 96 C.L.R. 47.

[cxvi] (1960) 12 A.T.D. 166.

[cxvii](1971) 71 A.T.C. 4152.

[cxviii][1950] HCA 16; (1951) 9 A.T.D. 135 at p. 138.