IN THE COURT OF APPEAL FOR EAST AFRICA
AT DAR ES SALAAM
CORAM: (NEWBOLD, P., DUFFUS AND LAW. JJA)
CIVIL APPEAL NO 55 0F 1968
CHARLES HERBERT WITHERS BROTHERS-PAYNE}………………APPELLANT
THE COMMISSIONER OF INCOME TAX}……………………………RESPONDENT
[Appeal from the Decree of the High Court of Tanzania at Arusha (Platt, J.) dated 8th October, 1968) in Civil Appeal No.17 of 1967].
3 April, 1969.
The following Judgments were read:.
The appellant was assessed to income tax for the years of income 1965 and 1966,
He appealed to the High Court against the assessments and his appeal was dismissed.
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.
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.
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.
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.
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.
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,
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.
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.
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.
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.
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.
For these reasons I would dismiss the appeal as both the other members of the Court agree it is so ordered.
By agreement between the parties, no order for costs will be made.
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.
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.
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."
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.
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.
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.
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.
I agree with the judgment of my lord President.