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C. L. PAGE v. THE RECEIVER-GENERAL OF THE GAMBIA

JELR 83880 (WACA)

West Africa Court of Appeal  •   •  West Africa [For WACA cases]

Coram
COR. KINGDON AND GRAHAM PAUL, C.JJ., AND DOORLY, J.

Judgement

 President :- This matter comes before this Court by way of case stated by the Judge of the Supreme Court of the Colony of the Gambia under section 47 (9) of the Income Tax Ordinance, 1940 (No. 14 of 1940) of the Gambia. The following is the case :-

“Upon the hearing of the said appeal the following facts were proved or admitted before me :-

“1. That the Appellant is an employee of the United Africa Company Limited under Agreement with the Company which is annexed hereto and marked “A”.

“2. That the Company expressed their intention to grant a commission to the Appellant on the net profits of the Company in the manner described in a letter addressed to the Appellant by the Company dated the 23rd September, 1938, and further exemplified in a letter addressed to the Appellant dated the 24th October, 1941, which are annexed hereto and marked respectively as Exhibits “C” and “E” .

“3. That in the year 1942 the Appellant was credited with the sum of £562 as commission which was paid by the Company into the Appellant’s Provident Fund “ A” Account under the rules of that Fund which are annexed hereto and marked “B”.

“ 4. That the attention of the Court was directed to the aforesaid annexures and was directed also to the passages marked in Exhibits “L” and “M” which are annexed hereto.

“5. The Appellant contended that the commission of £562 was not taxable.

“6, The Respondent directed the attention of this Court to section II (b) of the Income Tax Ordinance, 1940 and contended that the commission was taxable.

“7. The parties were unrepresented and had no argument to adduce.

“8. The Grounds of Appeal, the facts thereof, and the relevant provisions of the Income Tax Ordinance as amended by No. I of 1942 and No. 10 of 1942 are stated fully in my judgment.

“9. The question upon which the opinion of Your Lordships is desired is whether upon the statement of facts I came to a correct determination in point of law, and if not, I would respectfully request Your Lordships to reverse or amend my determination or remit the matter to me with the opinion of Your Lordships thereon.”

The material part of Exhibit “A” is paragraph 4 which is in the following terms :-

“The remuneration of the employee shall be at the rate of £500 (five hundred pounds) per annum payable in Africa monthly in arrear together with such increases and with such commission if any as may from time to time be notified by the Company to the employee in writing.”

Exhibits “C” and “ E” referred to in paragraph 2 of the case are respectively in the following terms :-

Exhibit” C”

“THE UNITED AFRICA COMPANY LIMITED UNILEVER HOUSE BLACKFRIARS, E.C.4 “C. L. PAGE. ESQ., 23rd September, 1938. “BATHURST.

" Dear Sir,

“We have pleasure in advising you that while you discharge to the satisfaction of the Company the duties of ACTING GENERAL MANAGER, BATHURST it is the intention of the Company to grant you a commission of ‘065% (Point nought Six Five Per Centum) on the net profits of the United Africa Company Limited certified by the Chief Accountant in accordance The with our letter of the 24th July, 1934, as available for commission.

“The commission will be calculated at the end of the Company’s financial year or other accounting period and will be deemed to accrue from the Gambia day to day, and if you do not for any cause whatever discharge the said duties during the whole of such period the amount of commission will be based on the ratio the number of days in which you discharge such duties bears to the total number of days in the financial year or other accounting period.

“It is to be clearly understood that the commission will only be granted to you on the following conditions:-

“(1) That it will be granted voluntarily by the Company without any obligation and though there is no intention of generally withholding the grant the Company reserves to itself the right to withhold it in whole or in part and in particular in cases where the duties of the member concerned have not been carried out with the efficiency which the Company requires. . “(2) That you will only be qualified for commission in respect of the period during which you carry out the abovementioned duties and will not be qualified when absent on leave.

“ (3) The Company’s Chief Accountant’s Certificate as to the amount of net profits available for commission and commission due to you shall be binding and conclusive.

Yours faithfully, for THE UNITED AFRICA COMPANY LIMITED ORIGINAL SIGNED BY A. R. I. MELOR.”

Exhibit “E” “THE UNITED AFRICA COMPANY LIMITED UNILEVER HOUSE, BLACKFRIARS, LONDON, E.C.4. 24th October, 1941. “Dear Sir, “TERMS UNDER WHICH COMMISSION IS PAYABLE “This is to advise you that your commission is payable to you, as in the case of all members of the Coast Staff who receive a commission percentage under the following terms and conditions :-

“(1) It will be granted voluntarily by the Company without any obligation and though there is no intention of generally withholding the grant the Company reserves to itself the right to withhold it in whole or in part and in particular in cases where the duties of the member concerned have not been carried out with the efficiency which the Company requires.

“(2) You will only be qualified for commission in respect of the period during which you carry out the abovementioned duties and for normal leave periods.

“(3) The Company’s Chief Accountants Certificate as to the amount of net profits available for commission and commission due to you shall be binding and conclusive. “Kindly acknowledge receipt by signing the duplicate of this letter and returning it to us Yours faithfully, for THE UNITED AFRICA COMPANY LIMITED (Sgd.) A. R. I. MELLOR Director ,

It will be noticed that there is a discrepancy between the two letters as regards leave periods, but this is not material to the present case. In regard to paragraph 3 of the case, it is to be observed that the sum of £562 was not the only commission paid by the Company during the year 1942. The total was £843, of - which two-thirds, viz. £562, was paid as. stated, and one-third, viz. £281, was credited to Page’s account on the Coast (Exhibit C.J. “I”). This is in accordance with paragraph 18 (the marked part) of Exhibit “L” and paragraph 4 (the marked part) of Exhibit “M” referred to in paragraph 4 of the case. They are respectively in the following terms :-

Exhibit “L” (dated 1st September, 1938) “18. Commissions and Bonuses.- “Commissions” and “Bonuses” are purely’ ex gratia’ payments made to members whose services have given satisfaction. A member he no right to them, and the Company may decide not to grant them, but it does not, in practice, take that course unless there are good reasons for doing so. At least two-thirds of any commission or bonus must be paid to the member's account in the Provident Fund. Any further allocations which a member may wish to make to the Provident Fund in respect of commission or bonus declared in the first six months of a year can be paid by him at any time up to the 31st December following, to the Company, who will keep these monies on deposit, earning interest at the current rate and will transfer same, if received before 30th June, on the 30th June, if later, then on the 31st December following, to his account in the Provident Fund.”

Exhibit “M” (dated 6th February, 1934)

“4. As the purpose of the Board in taking this decision has largely been dictated by their desire to see that provision for their eventual retirement is made for members of the Coast Staff under the Provident Fund, it is to be understood that in future without exception, beginning with the distribution of commission, bonus, or additional bonus on account of the financial year ending 30th September, 1934, two-thirds instead of half the commission and for bonus will be paid into the Provident Fund as special contribution to the credit of the recipient’s account.”

The relevant sections of the Income Tax Ordinance, 1940 (as amended) are in the following terms

“3. Income Tax shall subject to the provisions of this Ordinance, be payable at the rate or rates specified hereafter upon the income of any person accruing in derived from or received in, the Gambia in respect of-

(a) gains or profits from any employment and any allowance in respect of any employment, other than the value of any quarters provided free of charge and any allowance made as a reimbursement for expenses actually incurred;

“(b) gains, or profits from any trade, business, profession or vocation for whatever period of time such trade, business, profession or vocation may have been carried on or exercised;

Provided that for the purpose of this paragraph gains or profits arising from the sale of, or from other dealings in, goods being the produce of the Gambia and exported from the Gambia shall be deemed to be income derived from the Gambia, whether the contract or other dealing is made or took place within or without the Gambia;

(c) dividends, interest, or discounts

“(d) any pension, charge or annuity; “ (e) rents, royalties, premiums, and any other profits arising from property.”

“11B. In ascertaining the chargeable income of any person who

“ (a) shall have made insurance (including insurance against death by accident) on his life or on the life of his wife in any insurance company; or

“(b) shall have been a contributor under the Widows’ and Orphans’ a Pension Ordinance, 1913 or have contributed to an approved scheme as defined in that Ordinance, or to such other public or on, private fund as the Governor may by Order declare to be an approved fund for the purposes of this section, there shall be allowed a deduction of the amount of the annual premium paid” by him for such insurance and the amount of such annual ; contribution as aforesaid;

Provided that no deduction shall be allowed of any contribution made to any such fund unless such contribution is made pursuant to statutory or contractual obligation to a fund under the rules of which such contribution may not be withdrawn from the fund except upon the death of the contributor or upon the termination of his appointment:

Provided further that no such deduction shall be allowed in respect of any such amount or aggregate amounts beyond an amount equal to one-sixth part of his income:”

Under Order No. 13 of 1942 made on the 24th day of March, 1942 under paragraph (b) of section l1B of the Income Tax Ordinance. 1940 the Governor declared the United Africa Company, limited, Union Overseas Provident Fund Trust Ltd. inter alia, to be an approved fund for the purpose of that section.”

The Receiver-General contends that the £562 in question comes within the terms of section 3 “income. ..accruing in, derived from, or received in the Gambia in respect of gains or profits from any employment and any allowance in respect of any employment “ and is not exempted by the terms of section l1B. , On behalf of Page it is contended- (a) that the sum is not “income” within the meaning of section 3 .,

(b) that, if it is income, it is not “accruing in, derived from, or received in, the Gambia;”

(c) in any case it is exempted, up to one-sixth part of Page’s income, by the terms of section II(B). These are the three questions which have to be decided by this Court. It is only in regard to (a) that there is any difficulty.

The Receiver-General contends that the case is governed by the decisions of the Court of Appeal in the case of Bell v. Gribble (1903) 1 K.B. 517 and of Channell J. in the case of Smyth v. Stretton (20 T .L.R. 443) followed by Sankey J. in the case of Bruce v. Hatton L.R. (1922) 2 K.B. 206, whilst Page contends that his case is on all fours with that of Edwards v. Roberts (19 Tax Cases 618), Unfortunately we have not available for reference the full report on that case, but have to gather the decision from Mew’s Aunual Digest 1936, p. 115 which shows that the Court of Appeal in England distinguished that case from Smyth v. Stretton (supra).

In the present case we think that the contribution of £562 to the Fund must be regarded as a voluntary contribution by Page. Although there is no obligation upon the Company to pay commission, once commission is paid it is clearly remuneration for employment under section 4 of the service agreement; the payment of two-thirds of the commission to the Fund is in accordance with notice given by the Company of its intentions in regard to disposition of commission granted and Page, by continuing in the service of the Company and accepting the payment of one-third only into his Coast account, must be taken as agreeing to the Company’s arrangements for the disposition of the commission. This being so, we are of opinion that the present case is indistinguishable from the three cases relied upon by the Receiver-General. It makes no difference that Page did not actually receive the sum, and what he (in this case, by implication) agreed to do with it is equally immaterial. Nor does it make any difference that in certain circumstances Page might never receive the money.

In Bruce v. Hatton (supra) Sankey J. said:-

“On this branch of income tax law, assuming that the fund in question is a profit or gain, two canons of construction can be laid down: (1) The fact that the taxpayer does not actually receive the sum is immaterial. This is illustrated by the cases of Bell v. Gribble and Smyth v. Stretton above referred to. (2) What the taxpayer does with the sum, or agrees to do with it, is equally immaterial. This is illustrated by the cases of Mersey Docks v. Lucas and Gresham Life Assurance Society v. Styles. .In my view it being found that the salary is £1,000, and it being further found that the respondent voluntarily joined the scheme and contracted to allow the institution to devote 5 per cent of it to the superannuation fund, it is quite Impossible for him successfully to contend that he did not in fact receive the whole sum of £1,000. It is hardly necessary to enumerate the astonishing results which would follow if it were held that when a servant directs his employer to pay part of his salary to a fund or third person, he is not liable .to pay income tax on the part directed so to be applied. I hold it is wrong , In law to say that the £50 was not received by the respondent.

“With regard to the destination of the £50 it is true that it has been found to be in the uncontrolled discretion of the Institution, but as has been pointed out above the case falls within Mr. Montgomery's definition in that it is one where the fund may not eventually come to the taxpayer by reason of something done or not done by him, and so falls within the decision in B.U v. Gribble and Smyth v. Stretton.”

In our view the present case is distinguishable from Edwards v. Roberts (supra) in that here Page obtained a vested interest in the payment to the Fund on the date on which his personal account with the Fund was credited with the sum; that this is the case is evident from paragraph 11 of the Rules of the Fund, under which, in the event of an employee’s death, his legal personal representative is entitled to receive the balance standing to the credit of his “A” account, which is the account into which the £562 was paid. On the other hand it was held in Edwards v. Roberts that the Respondent did not obtain a vested interest in the yearly payments made to the trustees at the dates when they were respectively made.

We hold that the sum of £562 is “income” within the meaning of section 3 of the Ordinance. As to contention (b) on behalf of Page, we think it clear that the sum is derived from the Gambia in respect of gains or profits from his employment. Once the Company pays commission, it is part of Page’s remuneration under his agreement and is just as much derived from the Gambia as is his salary.

As to contention (c) it is sufficient to point out that this is a the Gambia special contribution and not an annual contribution.

We hold that the sum of £562 is properly assessed as part of Page’s income for the purposes of income tax assessment under the Income Tax Ordinance, 1940, and accordingly answer in the affirmative the question submitted to us.

There will be no order as to costs.

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