J U D G M E N T
WOOD, CJ:
The action which triggered this
appeal is described as a
“friendly action”, instituted in
the joint interest of the two
parties for a judicial
pronouncement on a tax regimen
that is said to have been in
practice in
the jurisdiction for a long time
without challenge from the
business community, the people
most affected by it. It is in
this light that the appellant
company described it, more or
less in public interest
litigation terms, as having
purposely been instituted “for
the development of the tax law”
as it stood at the date the
cause of action accrued. For the
material period, the substantive
law, which both parties were
agreed governed the action and
which the parties therefore
relied on in support of their
respective cases, is the Income
Tax Decree 1975, (SMCD 5), as
amended by the Income Tax
Amendment Law 1983, PNDCL (61).
By the time the trial court came
to deliver its judgment however,
SMCD 5 had come to be replaced
by a new law; The Internal
Revenue Act, 2000 (Act 592) and
its subsidiary legislation LI
1675. The passage of the new
law, Act 592, was intended to
plug any legal loopholes that
this dispute may have unearthed.
Under Act 592, investments
incomes, such as the interest
income earned by the appellants
in this instant case, is
amenable to tax independently of
a company’s other sources of
income. Pertinently, the passage
of the Act 592 during the
pendency the action did not
however render the action or the
issues arising therefrom moot,
as the law governing the action
remained the SMCD 5. The
litigation thus remains live,
not only in relation to this
instant appeal, but other
actions based on the old law,
SMCD 5, and which may, for one
reason or the other be pending
in the courts.
The facts which led to the
fiscal dispute are in themselves
simple. The appellants, a pay
television company, broadcasts
programmes to its customers, as
is to be expected, not
gratuitously, but for
subscription fees. For the
period 1994-1999, it deposited
its revenue generated by way of
subscription fees in an interest
income yielding account, and
earned profits thereon. The
respondents describe the profits
so earned as colossal.
Nonetheless, the appellant
claimed per its financial
statement for each fiscal year
that, it recorded losses in
respect to its business. The
legitimate question is how did
this come about? The appellant
company arrived at this
conclusion by grossing up income
from the television business
proper and the interest earned
on the subscription fees and
deducting all allowable heads of
expenses wholly incurred in its
main line television business to
declare the net losses.
The respondent commissioner, as
the tax administrator, took
exception to the methodology
adopted by the appellant company
to reckon net losses. He was of
the opinion that although the
appellant was engaged in two
separate, but in some way
interrelated lines of business,
namely, pay television and
interest income using revenue
from the television business,
the company was nevertheless not
entitled in law to aggregate the
two incomes, reckon it as their
assessable income, and then
deduct expenses exclusively
incurred from its television
business from it. He took the
position that the law allows the
deduction of expenses only if
they wholly or directly relate
to the production of the
particular income under
consideration, and further that
it was clearly wrong for the two
incomes to be grossed up to
determine the company’s
assessable income. He thus
rejected the appellants’ method
of assessment, assessed tax from
the two separate sources
independently of each other and
plainly disallowed the deduction
of expenses of the company’s
core business, that is, the pay
television business from the
interest income.
The appellants disputed the
assessment and commenced
proceedings in the High Court to
challenge its legality for the
period 1994-99 and prayed
further that these be set aside
on the main ground that the
disputed assessments had the
effect of wrongfully taxing the
interest income separately.
The trial court found for the
appellants, basing its decision
on the principal ground that the
interest income is not severable
from profits and loss accounts
of the appellant company’s core
business operations for the
period in question. Their
Lordships of the Court of Appeal
upheld the trial court’s finding
that, notwithstanding that the
company keeps two sources of
income, the sections 4 and 5 of
SMCD 5 permit the deduction of
the company’s main line business
expenses from the interest
income. In spite of these
positive primary findings
however, their Lordships
nevertheless expressly reversed
the final decision on the
company’s tax liability, setting
the stage for this appeal.
Two additional grounds A and B
were tagged on to the original
ground that their Lordships were
“in error in holding that that
the income in question was
taxable.” The additional ground
A, which in any event is not in
substance different from the
original ground, impugns the
decision of the Court of Appeal
as not being supportable in law.
The second additional ground B,
namely that “the holding of by
the court of Appeal that “the
appeal succeeds in part is not
comprehensible” does not, in my
view, constitute a valid ground
of appeal. It appears to have
been provoked by the appellate
court’s reversal of the order of
the trial court and the
conclusion that the appeal
succeeds in part. I do
appreciate the appellants
concerns and his specific
reference to the final
conclusion on the outcome of the
appeal. More disturbingly, from
the records for the day judgment
was delivered; the court, per
its order, gave the respondent
more than they won. Instead of
the partial success, the court
order read:
“The appeal is allowed. The
order made by the trial court in
respect of the interest is
hereby set aside.”
In any event, notwithstanding
the apparent inconsistency or
contradiction in the judgment,
and final orders of the court, I
do not think the appeal ground B
as formulated, is permissible
under the rules or even at all
necessary. Under the Supreme
Court Rules, 1996, CI 16, rule
(4), grounds of appeal are
expected to be set out
concisely, and without argument
or narrative. More importantly,
by rule (5), aside from the well
known and oft used umbrella
ground of appeal- the judgment
is against the weight of
evidence- a ground of appeal
which is vague, or general in
terms, or fails to disclose a
reasonable ground of appeal is
not permitted.
A ground of appeal which
questions the comprehensibility
of a finding of law or fact, a
ruling or decision cannot, in my
opinion, constitute a valid
ground of appeal in terms of the
rule (4) of the CI 16, and ought
properly to be struck out under
rule (5) of the CI 16. I would
have thought that in those
cases, where a party’s only
complaint is that it finds an
order or a decision
incomprehensible, unless the
rules of court expressly
prohibits, and I know not of any
such rule, that the proper
procedure would be to seek
clarification or directions from
the court which issued the order
or decision complained of, by
invoking its inherent
jurisdiction. On the other
hand, as in this instant case,
where there are other
substantial grounds on which the
decision of the court may be
questioned, then it is difficult
to see the utility of such a
ground as a separate and
distinct ground of appeal, since
the success of the others would
necessarily impact the final
orders of the court, including
the impugned order, that is the
alleged incomprehensible order.
In other words, the success of
those other grounds will lead
automatically to a correction of
all contradictions and
inconsistencies, and thus
perfect the grand conclusion of
whether the appeal succeeds or
fails.
This appeal will therefore be
examined in the light of the
original ground and additional
ground A, both of which in any
event, also fail to identify
concisely but with specificity,
the errors of law complained of.
At the trial, three primary
issues that the court thought
were of critical importance is
whether the appellant company
operated two separate business
lines, run two separate sources
of income and therefore
“entitled to deduct expenses
wholly, exclusively and
necessarily incurred in its
Television business, as a source
of income from another source of
income, namely interest income.”
The trial court found that
while it is true that the
company had two separate sources
of income, indeed the interest
income formed only a fractional
portion of the “full amount of
income” of the company. The
trial judge thus reasoned that
on the peculiar facts of the
case, “the interests it earned
from its savings at a Commercial
Bank are declared not capable of
being severable from the profit
and loss of accounts of the
plaintiffs company from 1994 to
1999.” The learned trial judge
thus concluded: “The
plaintiff’s (sic) investments it
made by investing sums of its
money into savings account with
a commercial bank for which it
earned some interests were
“required for the purposes of”
the plaintiffs (sic) company and
the interest it earned from the
investment must be brought into
the profit and loss account of
the company.”
It was on these bases that the
trial court declared the
corporate tax liability imposed
on the appellants a complete
nullity.
Their Lordships of the Court of
Appeal rightly affirmed the
finding that the appellants had
two sources of income. In
actuality, given the state of
the pleadings, that fact was
never in dispute. Thus, the real
and indeed only matter in
controversy between the parties
and indeed as was rightly
pointed out by the appellate
court was, “whether or not upon
a true and proper interpretation
of section 4, 4A, 5 and 11 (1)
of SMCD 5 as amended the
plaintiff is entitled to deduct
the company’s expenses wholly
exclusively and necessarily
incurred in its television
business as a source of income
from another source of income
namely; interest income.”
Their Lordships cast the issue
thus:
“Whether it would be legal for
it to deduct any losses or
expenses incurred from the
Television business from the
(sic) interest income earned
from that source.”
The court answered this question
in the negative and set aside
the tax liability imposed by the
respondent commissioner. The
learned justices based their
final conclusion on three
critical findings. First, that
the law only allows for the
deduction of expenses which a
Company has wholly, exclusively
and necessarily incurred “in the
production of the income”.
Second, that as urged by the
appellant company, all the
moneys generating the interest
income were derived from the
Television business. Third,
notwithstanding that it keeps
two sources of income, that all
expenses incurred in generating
that income qualify as money
expended in the their mainline
business activity, namely, the
pay television business .
The court proceeded further to
provide details of what is
allowable under sections 4 and
5. They are:
“(1) That all outgoings and
expenses wholly, exclusively and
necessarily incurred by the
Company (MULTICHOICE GHANA LTD)
during the period, being
1994-1999 can be legally
deducted from the interest
income if only that company can
prove that it wholly exclusively
and necessarily incurred them in
the production of that income
(namely the interest).”
From the state of the pleadings,
these questions still remain the
core issues. I have been
compelled to emphasise this fact
for one simple reason, and it is
this. Appellant counsel was
compelled in his reply, to
provide answers to a question
which plainly never arose for
consideration and was introduced
for the first time in the
respondent’s written statement.
Counsel submitted:
“In this case we are concerned
in identifying the revenues that
would constitute the income not
the deductibles…It is not the
appellant’s contention that
interest earned on the deposits
into the saving accounts be
deducted in computing the
assessable income. On the
contrary, it is the appellant’s
case that its interest income be
added as revenue or income in
computing the assessable
income.”
This line of argument was
undoubtedly provoked by the
respondent’s contention that:
“whatever monies were deposited
in the interest yielding account
could not be included in
determining appellants
assessable income since the
invested monies did not
constitute outgoings or expenses
incurred in the production of
the income as provided for in
section 4 of SMCD Income Tax
Decree 1975 (SMCD 5)…”
Respondent Counsel contended
further that the SMCD 5 “draws a
distinction between interest
earned as an income …and
interest paid on loans which is
an allowable expenses or
outgoing.” The latter, but not
the former, they maintain is
deductible, provided it meets
the requirement of s.4 of SMCD
5. Interest on the investment
income, they argue, is not an
expense or an expenditure item
on the company’s operation, and
cannot therefore be a deductible
expense.
I am in entire agreement with
appellant counsel that in this
case “we are concerned with
identifying the revenues that
would constitute the income not
the deductibles.” In other
words, the central issue is what
constitutes assessable income
for the purposes of taxation. Is
it made up of only the
subscription fees or
additionally the income
interest? As already noted,
respondent’s contention marks a
noticeable shift from their
original stand. The appellants,
as plaintiffs, had pleaded:
“ 3 Under sections 4,10,and 11
of the Income Tax Decree 1975
(SMCD 5) the defendant was
empowered to levy tax on the
plaintiffs aggregate income from
subscriptions received to its
pay television programmes and
interests accruing on such
subscriptions deposited in the
bank.”
The appellants unreservedly
admitted the correctness of the
appellants stated position. They
averred as per the paragraphs 3,
10 and 11 of their statement of
defence:
“3 Paragraph 3 of the statement
of claim is admitted.
10 Defendant says that it is the
aggregated income from the two
lines of business activities of
the plaintiff as shown in
paragraph 8 of statement of the
statement of Defence which were
taxed as required by section 11
(1) of the income Tax Decree of
1975, SMCD5.
11 Plaintiff’s averment
contained in paragraph 5 of the
statement of claim that
defendant insists on taxing its
sources of income separately is
denied. The incomes from the two
sources of the plaintiff were in
fact aggregated and taxed
according to law.”
These plain admissions under
paragraph 11 actually reflect
the correct position of the law.
The s1 ss2 of SMCD 5 provides
for the taxation of income
accruing in, derived from,
brought into, or received in
respect of gains or profits from
any business, interest or
discount. I think that under
the 11(1) of SMCD 5, it is the
aggregate income of a corporate
body, the assessable income, and
which income could be derivable
from two or more sources, as in
this instant case, that is
subject to tax. The s11 (1)
provides:
“Except in the case of any
income of an employee derived
from his employment and except
as otherwise provided by this
section, the income of any
person for each year of
assessment from each source of
his income (hereinafter referred
to as “assessable income”) shall
be the full amount of his income
from each source for the year
immediately preceding the year
of assessment, notwithstanding
that he may have ceased to
possess any such source or that
any such source may have ceased
to produce income.”
My conclusion has been dictated
by the strict constructionist
approach to the interpretation
of statutes reserved for fiscal
legislation. The general
principle is that tax statutes
are to be construed strictly.
Viscount Simon LC in the Privy
Council case of Canadian Eagle
Oil Company Limited and The King
[1946 AC 119 at 140] relied on
Rowlatt J’s formulation of the
rule in Cape Brandy Syndicate v
IRC [1921 1KB 64, 71]. He
observed: “In the words of the
late Rowlatt J whose outstanding
knowledge of this subject was
coupled with a happy conciseness
of phrase, “in a taxing Act one
has to look merely at what is
clearly said. There is no room
for any intendment. There is no
equity about a tax. There is no
presumption as to tax. Nothing
is to be read in, nothing is to
be implied. One can only look
fairly at the language used.”
I am not disposed to straining
the words of SMCD5 to conclude,
as argued by the respondent
that, on the facts, the two
incomes, so in extrinsically
linked cannot be grossed to
constitute the company’s
assessable income. It bears
emphasis that as in this instant
case, where the interest income
of a company not another
(separate and distinct entity,
but the same company) accrued in
the course of their business; it
constitutes part of the
company’s revenue and
consequently, at law, forms part
of its assessable income. Apply
these principles to the s.1 ss
(1) and 11 of SMCD5, and the
conclusion I arrive at is that
upon a true and proper
construction, the respondents
argument must fail.
The final question is whether
the appellant company is
entitled to deduct expenses
wholly and exclusively and
necessarily incurred in its
television business from the
interest income. Differently
stated, could all outgoings and
expenses wholly and exclusively
and necessarily incurred by the
plaintiff during 1994-1999 in
respect of its pay television,
be legally deducted from the
aggregated or assessable income
and a fortiori the interest
income. The answer to this
would settle the legal arguments
proffered by the two sides in
respect of the two grounds of
appeal.
The respondent contends that by
the provisions of the s. 1 (2),
4 and 5 of SMCD 5 the
expenditure of the pay
television cannot be deductible
from the interest income. They
read:
“4 For the purpose of
ascertaining the income of any
person other than an employee,
for any period from any source
chargeable with tax under this
Decree there shall be deducted
all outgoings and expenses
wholly and exclusively incurred
during that period by such
person in the production of the
income…”
Having read particularly the s.
4 of SMCD5, I endorse the
findings and conclusions on this
issue, arrived at by the trial
court and the reasons in support
thereof, and which findings were
indeed affirmed by the appellate
court. The interest income is
not severable from the company’s
profit and loss accounts and
must be brought into it. Since
this income, which I have
demonstrated constitutes part of
the appellant company’s
assessable income, were drawn
from the pay television, it
stands to reason, that the
company’s outgoings and expenses
incurred in generating the
entire pay television business,
qualifies as allowable expenses
and consequently, by virtue of
s.4 of SMCD5, can be subsumed
under and is indeed deductible
from the interest income.
I wholly affirm the decision of
the trial court. I set aside the
judgment of the court below and
substitute in its place the
judgment of the trial court.
[SGD] G.
T. WOOD [MRS.]
CHIEF
JUSTICE
[SGD] J.
V. M DOTSE
JUSTICE OF THE SUPREME
COURT
[SGD]
ANIN
YEBOAH
JUSTICE OF THE SUPREME
COURT
[SGD] N. S.
GBADEGBE
JUSTICE OF THE
SUPREME COURT
[SGD] V.
AKOTO-BAMFO [MRS.]
JUSTICE
OF THE SUPREME COURT
COUNSEL:
KOFI OHENE ABANKWAH FOR THE
RESPONDANT.
KWAMI ADOBOR FOR THE APPELLANT
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