|
ΠΑΓΚΥΠΡΙΟΣ ΔΙΚΗΓΟΡΙΚΟΣ ΣΥΛΛΟΓΟΣ
|
|
|
(1989) 3A CLR 169
1989 January 30
[DEMETRIADES, J.]
IN THE MATTER OF ARTICLE 146 OF THE CONSTITUTION
AGIS TEFKROU LOIZOU,
Applicant,
v.
THE REPUBLIC OF CYPRUS, THROUGH THE MINISTER OF
FINANCE AND/OR ANOTHER,
Respondents.
(Case No. 298/84)
Taxation -Capital Gains Tax -The Capital Gains Tax Law, 1980 (Law 52/80) -The words"εν τοιαύτη περιπτώσει"(in such a case) in the first proviso to section 10(b) -Meaning of.
Words and phrases - "εν τοιαύτη περιπτώσει" (in such a case) in the first proviso to section 10(b) of The Capital Gains Tax Law, 1980 (Law 52/80).
Constitutional Law-Taxation -Constitution, Article 24-Capital Gains Tax -The Capital Gains Tax Law 1980 (Law 52/80) -Imposition of tax by reference to the 27th day of June 1978 -Whether the Law imposes tax retrospectively contrary to the Constitution -Question determined in the negative -Case Law on the point adopted and followed.
On the 4th October 1982 applicant's father donated to the applicant certain pieces of property. The applicant sold these properties on 2nd February 1983. Respondent assessed the Capital Gains Tax payable under the aforesaid Law by reference to the difference between the value, which the properties had as on 27th June 1978, and the price, at which they were sold in 1983.
The Court did not accept applicant's contention that the aforesaidLaw imposes tax retrospectively. In this respect the Court adopted and followed the cases of Papaconstantinou and Another v. The Director of Inland Revenue (1986) 3 C.L.R. 1672 and Panayiotou v.The Republic (1986) 3 CLR.2311.
The Court did not accept the interpretation suggested by applicant as regards the words"εν τοιαύτη περιπτώσει" (in such a case) in the aforesaid proviso. In the opinion of the Court these words cannot but refer to the case of a gift as described in paragraph (b) of section 10 of Law 52/80. What is meant by the wording of the proviso is that the value of the property should be considered, at the time of the gift, to be that which the property had at the time of its acquisition by the donor, or its value as on, 27th June 1978, whichever date might be subsequent. This section does not refer to any subsequent sale. It merely sets the value of the property at the time of the gift, for whatever purpose might follow, so that no room will be left for tax evasion.
In the light of the interpretation placed by the Court on the aforesaid words, the Court concluded that the respondent rightly calculated the profit by reference to the difference between the sale price and the value of the land as on 27th June, 1978.
Recourse: dismissed. No order as to
costs.
Case referred to:
Papaconstantinou and Another v. Director of the Department of Inland Revenue (1986) 3 C.L.R. 1672,
Panayiotou v. Republic (1986) 3 C.L.R. 2311.
Recourse.
Recourse against the decision of the respondentsto impose on applicant the amount of £65.000, -as capital gains tax.
P. Demetriou, for the Applicant.
A. Evangelou, Senior Counsel of the Republic, for the Respondents.
Cur.adv. vult.
DEMETRIADES, J. read the following judgment. By this recourse the applicant challenges the decision of the respondents, dated the 5th April, 1984, by which capital gains tax amounting to £65,000.-was imposed on him.
The applicant was the owner of two pieces of land situated at Peyia village in the District of Paphos. The first piece, plot 10/1 of Sheet/Plan 44/32 was registered in his name under Registration No. 41762, and was of an extent of 50 donums, 2 evleks and 2760 sq. feet and the second, plot 389, of Sheet/Plan 44/24, was of an extent of 2 donurns and 3 evleks. These pieces of land were transferred in his name on the 4th October, 1982, by way of gift from his father.
On the 2nd February, 1983, the applicant sold the said properties at the price of £750,000.-
As a result of the deal, respondent No.2 raised an assessment on the applicant for capital gains tax, amounting to £65,000.and by Notice dated the 17th September, 1983, he informed the applicant of his decision. The applicant, through his lawyers, by letters dated the 10th October, 1983 and 5th March, 1984, objected to the said assessment, on the following grounds:
(a)the applicant, as a donee, was exempted from tax from the period preceding the gift;
(b)the taxation is personal and does not run with the land;
(c) there had been no increase in the value of the land during the period between 1982, the date of the gift, and 1983, the date of the sale;
(d)the retrospective valuation of the land was contrary to the law and the Constitution.
By his letter dated the 5th April, 1984, respondent No. 2 dismissed the objection of the applicant and maintained his assessment, hence the present recourse.
Counsel for the applicant argued that -
(a)The increase in the value of the property took place between the 27th June, 1978, the date fixed by the Law, and the 4th October, 1982, the date when the property was gifted to the applicant by his father and no tax is payable on such increase as it is specifically exempted by the provisions of the Law.
(b)There had been no increase in the value of the property between the date of the gift and the date of the sale of the property by the applicant.
(c)The respondents misinterpreted the provisions of the Law in this respect (section 10 of Law 52/80) in that the meaning of the proviso to paragraph (b) of section 10 of the Law is not clear and that in any event the words '' εν τοιαύτη περιπτώσει'' (in such a case) clearly refer to the event of a gift, even though the existence of the proviso is thus rendered meaningless.
(d) The taxation is personal and not a charge on the land, and the applicant could not have made any profit out of the increase of the value of the property which occurred before he acquired the property itself or any interest in it.
(e) Law (52/80) in so far as it imposes tax on profit on land made before its enactment is contrary to Article 24.3 of the Constitution and, therefore, unconstitutional. The computation of the tax as from the 27th June, 1978, that as long before the day of the enactment of the Law, constitutes retrospective taxation.
The question of constitutionality of Law 52/80 was raised and decided by this Court on previous occasions. Thus, in the case of Papaconstantinou and Another v. The Director of the Department of Inland Revenue (1986) 3 C.L.R. 1672, A. Loizou J., as he then was, after making reference to the Law and a number of authorities, said the following at p. 1678:
"It is clear therefore that the sections of our Law challenged do not impose tax retrospectively merely because the profit is calculated by reference to time prior to its enactment. Nor are they retrospective merely because a part of the requisitesfor its action is drawn from a time antecedent to the enactment of the Law. It would have been retrospective only if the section imposed tax on transactions prior to the date of its coming into force, namely the 1st August 1980."
The above case was followed in the case of Panayiotou v. The Republic (1986) 3 C.L.R. 2311, where Pikis J. said the following at p. 2315:
"The test of retrospectivity, as indicated by the Privy Council in Yew Bon Tew v. Kenteraan Bar Mara is whether the statute impairs existing rights and obligations. If it has that effect it is retrospective; but not otherwise. The law here under consideration is, in my judgment, prospective in scope and effect. It does not alter the tax obligations of the applicant prior to the date of its enactment. In fact, the obligation to pay tax under the statute arose years after its enactment on 29.3.84, coincident with the sale of immovable property."
I share the views of my brother Judges expressed in the above cases and I, therefore, find that the provisions of Law 52/80 in this respect are not unconstitutional.
I now turn to the first part of the arguments of counsel, concerning the interpretation of section 10(b) of Law 52/80. This section reads as follows:
"10. Διά τους σκοπούς του παρόντος Νόμου διάθεσις ιδιοκτησίας περιλαμβάνει πώλησιν, συμφωνίαν πωλήσεως, ανταλλαγήν, μίσθωσιν, ήτις ενεγράφη συμφώνως προς τας διατάξεις του εκάστοτε εν ισχύϊ περί Ακινήτου Ιδιοκτησίας (Διακατοχή, Εγγραφή και Εκτίμησις) Νόμου και δωρεάν ιδιοκτησίας ως και εγκατάλειψιν χρήσεως ή εκμεταλλεύσεως οιουδήποτε σχετικού δικαιώματος, αλλά δεν περιλαμβάνει -
(α) μεταβίβασιν αιτία θανάτου
(β) δωρεάν γενομένην υπό γονέως προς τέκνον, μεταξύ συζύγων ή συγγενών μέχρι δευτέρου βαθμού συγγενείας ή προς εταιρείαν περιορισμένης ευθύνης άπαντες οι με τοχοι της οποίας είναι μέλη και εξακολουθούν διά μίαν πενταετίαν μετά την τοιαύτην δωρεάν να είναι μέλη της οικογενείας του διαθέτου:
Νοείται ότι, εν τοιαύτη περιπτώσει, ως αξία της ιδιοκτησίας λογίζεται η αρχική αξία κατά τον χρόνον της κτήσεως της ιδιοκτησίας υπό του δωρητού ή η αξία αυτής κατά την 27ην Ιουνίου, 1978, οιαδήποτε των ημερομηνιών τούτων ήθελεν είναι η μεταγενέστερα:
Νοείται περαιτέρω ότι εις περίπτωσιν καθ' ην η ιδιοκτησία εκτήθη υπό του δωρητού προ της 14ης Ιουλίου, 1974, ο δωρεοδόχος δύναται να επιλέξη όπως ως αξία της ιδιοκτησίας λογισθή η αξία αυτής κατά την 14ην Ιουλίου, 1974."
("10. For the purposes of this Law, disposal of property includes sale, agreement for sale, exchange, a lease registered in accordance with the provisions of the immovable Property (Tenure, Registration and Valuation) Law in force for the time being and a gift of property, as well as an abandonment of the use or enjoyment of any relevant right but it does not include -
(a) a transfer in contemplation of death;
(b)a gift made from parent to child or between husband and wife or relations within the second degree of kindred or to a limited company all shareholders of which are and continue to be members of the disposer's family for a period of five years after such gift:
Provided that in such a case the value of the property shall be deemed to be the original value of the property at the time of its acquisition by the donor or the value thereof on 27th June, 1978, whichever date is subsequent:
Provided further that where the property has been acquired by the donor before the 14th July, 1974, the donee may elect that the value of the property be deemed to be the value thereof as on 14th July, 1974;")
Counsel for the respondents argued in answer to the arguments of counsel for the applicant, that although the phrase εν τοιαύτη περιπτώσει (in such a case) which is found in the first proviso to section 10(b) refers to the original gift, the subsequent sale is caught by the provisions of section 4. It is his contention that the provisions, of the proviso have a twofold affect, first to exempt gifts from parent to child from payment of capital gains tax and, secondly, to prevent evasion of payment of tax by the alienation of property within the family.
Having carefully considered the provisions of the Law and the arguments of counsel, I do not think that there is any lacuna or ambiguity in the provisions of section 10. In my view, the words εν τοιαύτη περιπτώσει (in such a case), appearing in the first proviso to paragraph (b) of that section cannot but refer to the case of a gift as described in the said paragraph and that what is meant by the wording of the proviso is that the value of the property should be considered, at the time of the gift, to be that which the property had at the time of its acquisition by the donor or its value as on the 27th June, 1978, whichever date might be subsequent. And this is immaterial to whether the donee sells the property or not. This section does not refer to any subsequent sale. It merely sets the value of the property at the time of itss acquisition by the donee, for whatever purpose might follow so that no room will be left for tax evasion, in case the donee decides to dispose of the donated property at a. later stage. So, if and. when the donee decides to alienate the same property in a way other than those exempted by the provisions of section 10, he will inevitably be caught by the provisions, of section 4 of the Law and will then have to pay the tax provided for by the Law.
The contention of counsel for applicant as to the interpretation of section 10(b) of the Law is, therefore, dismissed.
Coming now to the last contention of counsel for the applicant under (d) above, in the light of my findings as above, this should be dismissed also. The property was valued at £420,000.-as at 27th June, 1978, and had the same value when it was donated to him by his father in October 1982. The same property was sold by the applicant in 1983 for £750,000-. Andthe profit, having regard to the provisions of the Law, in the light of my findings as above, is considered to be his own.
In view of the above, I find that the sub judice decision was reasonably open to the respondents.
In the result, this recourse fails and is hereby dismissed with no order as to costs.
Recourse dismissed. No order as
to costs.