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NEWBOLD, P.
[1] The appellant was assessed to income tax for the years of income 1965
and 1966,
[2] He appealed to the High Court against the assessments and his appeal was
dismissed.
[3] He now appeals to this Court against the decision of the High Court. The
facts are not in dispute and the issue in respect of both assessments is
precisely the same and falls within a very narrow ambit.
[4] For each year the salary of the appellant from his employer was £1,740
and for each year from this salary his employer deducted the amount of lithe
development levy for which the defendant was liable under the. Development
Levy Act, 1965, before paying the appellant any salary.
[5] This issue is a simple one:
Is the income of the appellant for the purpose of the determination of the
income tax payable by him the amount of his salary or the amount of his
salary less the development levy? The trial judge held that it was the
amount of his salary and I have no doubt whatsoever that he was right.
[6] The appellant, who argued his appeal most attractively and skillfully,
submitted that as he never received the amount of £1,740, but only that
amount less the development levy, his chargeable income was not £1,740 and
to regard it as such would have the effect that he would be paying income
tax on an amount paid for development levy and which he had never received.
[7] The appellant stressed the well-known phrase of Rowlatt, J. that "recieveability
without receipt is nothing". Broadly this may be correct, but there are
circumstances in which the phrase is not correct.
[8] Assuming it to apply to the circumstances of this case, the question
nevertheless arises as to what is receipt. It is clear that a person may in
law receive income without physically receiving it,
[9] The appellant accepted this to be correct - indeed he could not do
otherwise - but submitted this was only so where his employer had paid with
the appellant's consent a part of his salary to a creditor or had utilised
it otherwise for the appellant's benefit. The appellant urged, however, that
the development levy was not deducted from his salary with hi consent, but
by force of the law,-and that the amount which was deducted was not utilised
for his benefit as no part of it ultimately came back to him or to his
estate.
[10] Section 5 of the Development Levy Act charges a levy on the income of
specified persons, of whom the appellant is one, and section 6 provides the
machinery for its collection by means of a deduction made by the employer
from the income. It is obvious that anyone taking employment in Tanzania who
is liable to pay this development levy knows this position will arise; and
by virtue of his taking employment he has impliedly consented to the
deduction. I am not sure that I accept the appellant’s submission that a
person would only receive in law an amount deducted with his consent from
his salary where the deduction of that amount benefits him or his estate.
For example, I consider that the appellant would have received in law an
amount deducted from his salary and paid by his direction to a charity.
[11] In any event, the development levy, being part of the revenue of the
country in which the appellant is living and whose protection and amenities
he enjoys, ultimately enures for his benefit in the form of such protection
and amenities.
[12] I am satisfied that the amount of the development levy deducted by his
employer from his salary is nonetheless part of the income of the appellant
which he has received and which is chargeable to income tax.
[13] I am unable to see for this purpose any distinction between the payment
by the employer on behalf of the appellant of the development levy and any
payment made by the employer at the request of the appellant to satisfy any
other debt of the appellant. In each case it is a payment out of the income
of the appellant which is regarded as having been received, and unless such
payment is deductable under the income tax law, which the payment was not,
the income is chargeable to income tax.
[14] For these reasons I would dismiss the appeal as both the other members
of the Court agree it is so ordered.
[15] By agreement between the parties, no order for costs will be made.
LAW, J.A.
[16] I agree with the judgment prepared by the President, Sir Charles
Newbold, and will only add a few words. It is of course quite wrong in
principle that part of a taxpayer's income, which is deducted at source in
the form of a government levy before it reaches his hands, should be subject
to income tax.
[17] I have much sympathy with the appellant's argument that such a levy
does not form part of his income, as it was never received by him.
[18] But as Sir Ronald Sinclair, Vice-President (as he then was) remarked in
A.L. Vs. commissioner of Income Tax (Case No. 37 Vol. 11 E.AT.C.) "The law
of income tax is such that it is useless to try to relate it to any
standards of natural justice."
[19] The statutes enacted for the imposition and collection of income tax
must be strictly construed.
Receivability is not the only test of liability to tax in East Africa;
income is taxable if it accrues in, derives from or is received in East
Africa. In the case of a salaried person with no other source of income in
East Africa, such as the appellant, his income is his gross salary, less
such deductions as the law allows.
[20] The relevant statutory provision as to allowable deductions is section
14 of the East African Income Tax (Management) Act, 1958, read together with
section 15. Nothing in section 14 of the Act allows the deduction of
development levy for the purpose of ascertaining the total income of a tax
payer, and section 15(2) (c) of the Act is specific in stating that no
deduction shall be allowed in respect of any income tax or tax of a similar
nature paid on income, subject to exceptions which are immaterial for the
determination of this appeal. The development levy, being a deduction from
income is clearly a tax of a similar nature to income tax. Another example
of a tax of a similar nature to income tax is graduated personal tax in
Kenya, which under the Graduated personal Tax Act (Cap. 470, Revised Laws of
Kenya) is payable in respect of income, and which by section 8 of that Act
must be deducted at source, in the case of an employed person, by his
employer, in the same way as development levy is deducted in Tanzania.
[21] Amounts so deducted in respect of graduated personal tax are not
deductible from "income in ascertaining the employee's total income for
income tax purposes, although these amounts are never actually received by
the employee. They remain part of his gross salary, and therefore of his
total income.
[22] The appellant has been unable to point to any statutory provision
entitling him to deduct development levy in the assessment of his income for
income tax purposes, and I have reluctantly also come to the conclusion that
this appeal must fail, and the assessments the subject of this appeal be
confirmed.
DUFFUS, J.A.
[23] I agree with the judgment of my lord President. |
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