Lucie-Smith, C.J. This is an appeal from the judgment of the learned Acting Chief Justice and arises out of an assessment made by the Deputy Commissioner of Income Tax in respect of the income, for the year 1945-46, of one of the six partners in the firm of S. D. Karam and Sons who carry on business in this Colony.
The appeal comes before this Court under section 56 (11) of the Income Tax I Ordinance, 1943.
What the Court is asked to do is to interpret the meaning of section 7 (a) of the said Ordinance in view of the Agreed Statement of Facts, which, put shortly, are as follows:-
(1) The appellant carries on business in partnership with five others in this Colony.
(2) There is another partnership in England consisting of the same partners as here.
(3) This English partnership inter alia buys and ships goods for the Gold Coast firm.
(4) During or as a result of the recent war a system of quotas was adopted in England whereby goods ordered for British West Africa were distributed amongst the four British West African Colonies.
(5) As a result of this quota system the Gold Coast partnership was unable to have all their orders for the Gold Coast shipped to the Gold Coast and in the financial year 1944-45 five consignments were made to Messrs. S. D. Karam and Sons (of the Gold Coast) in Nigeria.
(6) These five consignments were sold in Nigeria by Messrs. Barclays Bank, Lagos, on the instructions of Mr. T. S. Karam the then Managing partner of the Gold Coast partnership.
(7) These sales realised a profit of £986 odd which amount was remitted to the Gold Coast and brought to account in the books of the Gold Coast partnership for the financial year 1944-45 or, in other words, the 1946 year of assessment vide section 18 (1).
(8) During the financial year 1945-46 a further consignment of goods was sent to Nigeria and sold and delivered to a Mr. Waded George of Lagos by Barclays Bank, Lagos, acting on behalf of Messrs. S. D. Karam and Sons, “c/o Barclays Bank, Lagos”. It is to be noted that at that time there was in fact no Nigerian registered partnership of Messrs. S. D. Karam and Sons.
(9) The letter, appearing at pages 3 and 4 of the record, addressed to Mr. Wadi George of Lagos and signed by” S. D. Karam and Sons-To S. Karam-Accra Branch “ may become significant. As well as the signature; the following extracts from that letter “ value of the following goods which have been sold and delivered to you on our behalf “ may be material.
(10) This last consignment realised a profit of £4,000 odd which amount was put on deposit with Barclays Bank, Lagos, and was not brought to account in the books of the Gold Coast partnership for the year 1945-46.
The Commissioner of Income Tax assessed the partners of the Gold Coast partnership in respect of their share of this £4,000 odd and it is from this assessment that this appeal arises.
In the Divisional Court learned Counsel for the appellant and respondent based their arguments on the English Acts and decided cases.
The learned Acting Chief Justice, however, based his judgment on the Indian Acts and decided cases (which unfortunately are not available to us) and in this Court learned Counsel following the learned Acting Chief Justice have based their arguments on the Indian law.
I propose basing this judgment on what I consider to be the proper interpretation of section 7 (a) of the Gold Coast Income Tax Ordinance.
Section 7 of the Income Tax Ordinance, 1943-so far as material-reads as follows :-
“The tax shall be payable upon the income of any person accruing in, derived from, or received in, the Gold Coast in respect of-
“(a) gains or profits from any trade for whatever period of time such , trade may have been carried on or exercised.”
Though the learned Acting Chief Justice found that the income was “accruing in “ the Gold Coast, it was not, I think, argued seriously, if at all, before this Court that the words “accruing in” or “received in “ were applicable to the circumstances of this case. If that be so then what the Court has to decide is the construction to be placed on the words “derived from, the Gold Coast in respect of gains or profits from any trade for whatever period of time such trade may have been carried on or exercised”.
In interpreting these words it must be borne in mind that statutes which impose pecuniary burdens are subject to strict construction- “It is a well settled rule of law that all charges upon the subject must be imposed by clear and unambiguous language, because in some degree they operate as penalties. The subject is not to be taxed unless the language of the statute clearly imposes the obligation,” (See Maxwell on the Interpretation of Statutes, 8th Edition, pages 250-251 and cases cited therein.)
Had the words “in the Gold Coast” followed the words “carried on or exercised “ used in section 7 (a) it might have simplified our task. As it is, the section is very wide and the trade or business carried on would not appear to be limited geographically. That being so we have to decide whether the income sought to be taxed was derived from a trade or business carried on by the appellant-San Paulo Railway v. Carter (1) is authority for saying that where the trade is wholly or partially carried on in England the trader is liable to pay income tax on the profits of his trade. In the first quoted report the Master of the Rolls, Lord Esher, says at page 586:-
“The profits are earned by the whole operation of carrying on the trade and, moreover, the material question under the words of the statute is not where the profits are earned, but where the trade is carried on.” In the words of Lord Halsbury, L.C., at page 38 of the 1896 Report:-
“The person who decides what shall be done in respect of the adventure, what capital shall be invested in the adventure, on what terms the adventure shall be carried of, in short, the person, who in the strictest sense, makes the profits by his skill or industry, however distant may be the field of his adventure, is the person who is trading.”
Lord Davey at page 42 of the same Report:-
“It is clear to my mind that the direction and supreme control of the appellant Company’s business is vested in the board of directors in London who appoint the agents and officials abroad, and either by general orders or by particular directions control or may control their duties, remuneration, and conduct, and to whom any question of policy or any contractor other matter may, and if deemed of sufficient importance I suppose would, be referred for their decision. The business is therefore in very truth carried on in and from the United Kingdom, although the actual operations of the Company are in Brazil, and in that sense the business is also carried on in that country.”
See also The London Bank of Mexico and South America Limited v. Apthorpe (2). Lord Esher, M.R., at page 382:-
“It is untrue to say that the business which they carry on is carried on in Mexico. They have only one business which they carryon in England. It is true that part of the profits of that business carried on in England is earned by means of transactions abroad, but that is not carrying on the business abroad; it is carrying on the business in England by means of some transactions of it which are carried out abroad; but those transactions are carried out subject to the directions and at the will and pleasure of the masters and owners, resident in London, of that business.”
See also Apthorpe v. Schoenhopen Brewing Co. Ltd. (3) and St. Louis Breweries Ltd. v. Apthorpe (4).
Supposing the appellant had ordered goods from England for delivery at Takoradi and that by some mischance those goods were over-carried to Lagos where there was a great demand and the appellant, to save time and trouble and perhaps owing to the state of the market and the opportunity of a higher profit,
instructed someone in Lagos to take delivery of and sell those goods in Lagos- could it be argued that the profits arising from the transaction were not derived from the business carried on in the Gold Coast ?
In my opinion the £4,000 odd lying in the Bank in Lagos are taxable in the Gold Coast as being income derived from the Gold Coast in respect of gains or profits from a trade or business carried on or exercised by the appellant. Had I any reasonable doubt as to this then that doubt would have been resolved in favour of the appellant since it is laid down in Maxwell (supra) that ., in a case of reasonable doubt the construction most beneficial to the subject is to be adopted” .
In my opinion the appeal should be dismissed.
M’Carthy ,J. I have had the advantage of leading the judgment which is about to be read by my learned brother Mr. Justice Hooper, with which I am in general agreement, and there is little further that I wish to say.
It is, of course, clear that if the point for determination were whether the business in question was carried on wholly or partly in the Gold Coast the answer would be in the affirmative. The cases to which the learned Chief Justice of Sierra Leone has referred are conclusive authorities on that point.
The crucial question in this case, which to a great extent depends on the interpretation of section 7 of the Income Tax Ordinance, 1943, is not whether certain moneys are the gains or profits from a business wholly or partly carried on in the Gold Coast, but whether those gains or profits were derived from or accrued in the Gold Coast.
In the course of his judgment in the San Paulo Railway case (1) Lord Davey said:- “The business is therefore in very truth carried on in and from the United Kingdom, although the actual operations of the Company are in Brazil, and in that sense the business is carried on in that country.”
But he also said:- “No doubt the profits of the Company are derived from the profitable use of land in Brazil, and from the business of carriers carried on in that country, and in that sense it is a Brazilian business.”
It seems to me that section 7 contemplates that a firm may be established in the Gold Coast but that profits in respect of business carried on by it may be largely derived from another country.
I concede that in a special sense, on the learned Acting Chief Justice’s view of the facts, the profits could be said to have been derived from the Gold Coast, because they were made as the result of operations closely controlled by a firm established in the Gold Coast. But I see nothing in the Ordinance to indicate that the words which we have to construe, “accruing in “ or “ derived from “ the Gold Coast should be given this special meaning. The onus to establish this rests on the respondent. In my view the profits did not accrue in the Gold Coast, and giving the words their natural meaning were only partly and not pre- dominantly” derived from” the Gold Coast, and consequently they are not assessable for income tax under section 7.
In my opinion the appeal should be allowed and the judgment of the Court below set aside.
Hooper J. This appeal has come before this Court in the following circumstances, The appellant, T. S. Karam, is a member of a firm of merchants who have been carrying on business in the Gold Coast for a number of years past. They are also registered and carry on business in England, the English firm purchasing and shipping goods to the Gold Coast firm. In the years 1944 to 1946 the English firm was allotted quotas of goods for export to the Gold Coast, but owing to an exchange, a portion of the goods comprised in the quotas was shipped to and sold in Nigeria in respect to the two years 1944 to 1945 and 1945 to 1946, Delivery of these goods was taken on behalf of the appellant by Barclays Bank in Lagos, fl who sold them to a Mr. Wadi George, the appellant taking steps, not yet complete, Ii to register the business name of his firm in Nigeria to meet the situation created by the virtual opening up of business there. In respect to the year 1944 to 1945 the profits on the sales in Nigeria were remitted to the appellant in the Gold Coast. They were duly assessed for income tax purposes and the tax in respect to them paid. With respect to the year 1945 to 1946, however, the situation altered owing to the fact that the profits on the sale of goods in Nigeria remained in the hands of the Bank in Nigeria, through whom the goods were sold on behalf of the appellant and have never been remitted to the appellant in the Gold Coast.
Nevertheless the appellant was assessed to income tax in respect to the profits for the year 1945 to 1946 by the Commissioner of Income Tax, the sum in question being £4,101 10s. 8d., on the ground that the profit was” assessable to Gold Coast tax as a profit accruing to the firm in the Gold Coast” (letter of the 8th April, 1947, from Deputy Commissioner of Income Tax to the appellant). The appellant being dissatisfied with the assessment in respect to this sum, appealed, and the matter came before the Divisional Court at Accra. Judgment was delivered on the 20th October, 1947, the Acting Chief Justice finding that the profits in question were” the profits of the business of the firm in the Gold Coast and that they have not yet been received in this Colony”. The learned Acting Chief Justice held that “the true test when the profit is income from a business, is where is that business carried on and is the profit the direct result of the activities of that business. If it is in the Gold Coast the income accrues “. The learned Judge came to the conclusion that the income in question was liable to pay income tax owing to the view he took that the sum in question had accrued in the Gold Coast.
Against this judgment the appellant now appeals on the grounds that the profit in question was an income accruing in, derived from and received in Nigeria, and was not an income accruing in, derived from, or received in, the Gold Coast. During the hearing in the Court below, Counsel for both appellant and respondent argued the appeal with reference to decisions of the English Courts on Income Tax Law and procedure, but in the course of his judgment, the learned Judge found judgments of the Courts in England to be of little assistance, since the text of the English enactments differed considerably in detail from that of the Gold Coast, With this I agree. On the other hand, the learned Judge has himself referred, in the course of his judgment, to certain Indian cases decided on the text of the Indian Income Tax Act; and during the argument of the appeal before this Court, learned Counsel for both the appellant and the respondent have agreed in submitting, in effect, that this appeal should be decided on the view this Court might take as to the effect of these Indian decisions, I am unable, however, to adopt this view, for it seems to me that the doubt expressed by the learned Judge as to the applicability to the interpretation of the Gold Coast Ordinance of English decisions based on a different text of law, applies with equal cogency to the Indian Act.
I therefore propose, for the purposes of this case, not to rely upon decision either of the English or of the Indian Courts upon English or Indian Income Tax legislation, save so far as decisions of the English Courts upon the principles to be applied in construing the text of a taxing enactment are concerned; for we are dealing here with an Income Tax enactment, enacted for the first time in I 1943, and I deem it desirable to construe the relevant provisions of the Ordinance from, or received in, the Gold Coast. There is no express provision in the Ordinance extending its application to profits made outside the Gold Coast.
If it could be shown that the words” accruing in, derived from, or received in, the Gold Coast” can be construed reasonably to include profits accruing in, derived from, or received in, a territory outside the Gold Coast, then it must be at once conceded that the sum in question in this appeal is liable to pay income tax. But in my opinion this is not the case, for the following reasons.
The words “accruing in” and “received in “ appear to me to import a clear territorial limitation to the Gold Coast.
The words “derived from”" appear to me to be designed to meet, among other things, cases where profits arise from transactions carried out in the Gold Coast, but where a taxpayer is not resident in the Gold Coast. Can they reasonably be said to apply to the case where a firm established in the Gold Coast carries out a business transaction or series of transactions in a country outside the Gold Coast, the profits in respect to which do not accrue in and are not received in the Gold Coast?
Upon consideration, I am of the opinion that any such interpretation would be straining the meaning of the words too severely against the taxpayer. For me to be able so to hold, I am of opinion that some clearer statement of intention by the legislator is essential.
Looking at the section as a whole and in the light of the general objects of the Ordinance, I have come to the conclusion, in the absence of some express provision to a contrary effect, that the true meaning of section 7 of the Ordinance is that the liability to pay income tax is limited in the geographical sense to transactions carried on in the Gold Coast, and does not extend to transactions carried on outside it.
I am not unmindful of the fact that when the Ordinance first came into force special provision was made by sub-section 1 of section 8 of the Ordinance with regard to cases of trades or businesses where all their operations were not carried out in the Gold Coast. This sub-section, however, has been repealed and replaced by another dealing with non-residents and the Ordinance is now silent in this respect. The importance of this sub-section appears to me to reside in the fact that originally it may have been included to meet such a case as the present one. It would at least have a bearing on it. But it has been repealed.”
I am therefore unable to agree with the learned Acting Chief Justice that the sum in question has accrued in the Gold Coast.
In my opinion the appeal should be allowed.