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ΠΑΓΚΥΠΡΙΟΣ ΔΙΚΗΓΟΡΙΚΟΣ ΣΥΛΛΟΓΟΣ
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(1988) 3 CLR 915
1988 May 4
[STYLIANIDES,j.]
IN THE MATtER OF ARTICLE 146 OF THE CONSTITUTION
1. KITI BEACH LIMITED (IN LIQUIDATION)
2. NICOS IONIDES, IN HIS CAPACITY AS LIQUIDATORm OF KITI BEACH LIMITED,
Applicants
v.
THE REPUBLIC OF CYPRUS, THROUGH
1. THE MINISTER OF FINANCE,
2. THE COMMISSIONER OF INCOME TAX,
Respondents.
(Cases Nos. 311/86 and 312/86).
Reasoning of an administrative act-What constitutes "due reasoning" is a question of degree depending on the nature of the decision itself-The reasoning may be ascertained and supplemented from the material in the file-in this case the decisions to treat profit from sale of land as liable to income tax and special contribution were not duly reasoned.
Discretion of administration-Exercise of-Judicial control-Principles applicable.
The facts of this case sufficiently appear in the judgment of the Court.
Sub judice decision annulled.
No order as to costs.
Cases referred to:
Pikis v. The Republic (1965) 3 C.L.R. 131;
Coussoumides v. The Republic (1966) 3 C.L.R.1;
Georghiades v. The Republic (1982) 3 C.L.R. 659;
Mangli v. The Republic (1983) 3 C.L.R. 52;
Co- Operative Socienty of Alona v. The Republic (1986) 3 C.L.R. 222.
Recourses.
Recourse against the income tax and the special contribution Assessments raised on applicants for the years 1979 - 1981.
A. Triantafyllides, for the applicants.
Y. Lazarou, for the respondents.
Cur. adv. vult.
STYLIANIDES J. read the following judgment. The applicants by these recourses seek the annulment of the assessments Nos. 79/86/03, 80/86/03 and 81/86/03 and of the decision of the respondents to impose income tax on the applicants for the years of assessment 1979, 1980 and 1981, the annulment of the special contribution assessment No. IA 4291 for the years 1979, 1980, 1981, and the annulment of the decision of the respondents to consider as taxable income the profit realized by the applicants from the sale of 8 donums of land to Sandy Kitium Co. Ltd., for £40,000.
The applicant is a private company of limited liability. They own interest in land. In 1968 V.P.E. Limited, which was at the time fully owned by the main shareholder of applicants' company and his family., gifted to the applicants 100 donums of land.
Eight donums of the aforesaid land was sold by the applicants to Sandy Kitium Co. Ltd. for £40,000.-.
On 25.7.1983 the respondent examined the applicants liability to tax for the years of income 1975 to 1980 (year of assessment 1976 to 1980), informed same of adjustments made to the computations submitted and proceeded to raise assessments inter alia for 1979 and 1980, whereby an amount of £31,460.-, representing profits arising from the disposal of land, was treated as trading profit liable to income tax. The assessment for 1980 was revised in the following year by the issue of an additional assessment.
The applicants objected to the assessments raised by letters dated 23.8.1983 and 27.9.1983.
Following applicants objection the respondent on 28.12.1983 requested certain additional information which was received on 27.2.1984 - (see Appendices G and H).
The respondent out of the amount of £40,000.-, received over the years 1979 to 1981 by the applicants from the disposal of the aforesaid eight donums of land, treated £31,460.- as trading profit and allocated over these three years. He communicated this to the applicants on 9.4.1984.
Applicants objected to the assessment raised by letter dated 27.4.1984.
On 24.10.1985 the respondent raised an assessment on the applicants in respect of the years 1981 whereby' an amount of £13,370. - was treated as trading profit arising from the disposal of land.
The applicants objected against the assessment of income tax by letter dated 20.11.1985, in which in more than two pages they give detailed facts on which they based their said objection, the applicants contended that the profit from the sale of this land was not a trading profit. They objected to the assessment for special contribution by letter dated 21.11.1985.
The respondent Commissioner disposed the objections, on the basis of the provisions of section 20(5) of the Assessment and Collection of Taxes Laws, 1978 - 1979 (Laws No 4/78, 23/8 and 49/79).
The decision of the respondent Commissioner is contained in the letter dated 25.2.1986 - (Appendix M.), which was sent to' applicants together with the relevant notices of tax payable.
The applicants being aggrieved filed these recourses. Case No. 312/86 refers to the assessment for income tax, and Case No. 311/86 to the special contribution.
The power of this Court is limited to the scrutiny of the legality of the administrative decision and to ascertain whether the Administration has exceeded the outer limits of its powers. Provided they confined their action within the ambit of their power, an organ of public administration remains the arbiter of the decision necessary to give effect to the law; and so long as they make a correct assessment of the factual background and act in accordance with the notions of sound administration, their decision will not be faulted - (Pikis v. The Republic (1965) 3 C.L.R. 131, 149; Coussoumides v. The Republic (1966) 3 C.L.R., 1; Georghiades v. The Republic (1982) 3 C.L.R. 659 and Ioulia Mangli v.The Republic (1983) 3 C.L.R 52).
The sub judice decisions are attacked on more than one grounds. The case for the applicants is that they acquired the property, part of which was sold to Sandy Kitium Co. Ltd., as a gift from another company. The purpose of acquisition was to develop the land for tourist purposes. This is, also, the main object of the applicant company, i.e. the main and first object appearing in the Memorandum of Association. However, as this declared object of the applicants could not be fulfilled, due to circumstances beyond their control, i.e. lack of water, the applicants disposed of part of the land to Sandy Kitium Beach Co. Ltd.
The first ground on which the applicants rely is that the sub judice decision is faulty, as is not reasoned at all, or not duly reasoned.
It is well settled that administrative decisions should be adequately reasoned and that the lack of due reasoning renders them contrary to law and as taken in access or abuse of power. The reasoning of an administrative decision may be supplemented by the material in the file of the case.
What is "due reasoning" is a question of degree depending upon the nature of the decision concerned. The reasoning may be ascertained and supplemented from the material in the file of the Administration - (See Co-operative Society of Alona v. The Re- public of Cyprus (1986) 3 C.L.R., 222 and the cases cited therein).
In the present case the decision of the respondent contained in Appendix M, letter of 25.2.1986, does not satisfy the requirement for reasoning of an administrative decision. Furthermore no reasoning could be ascertained from any material which the Administration placed before the Court.
Learned Counsel for the respondent frankly admitted that the acts challenged by these recourses are not duly reasoned, and, therefore, their legality could not be supported.
For the foregoing, the sub judice decisions are hereby declared null and void and of no effect whatsoever under Article 146.4 (b) of the Constitution.
Let there be no order as to costs.
Sub judice decision annulled.
No order as to costs.