May 2025 Newsletter

ARC Findings/Rulings

INCOME TAX

Construction Cost Consultants Ltd v DG-MRA ARC/IT/350-17

Facts

• The Committee gave its decision in this case and the MRA is to take a stand in the VAT case – ARC/VAT/175-17.
• The MRA had issued an assessment totaling Rs 1,515,226 which was later revised to Rs 1,380,724 after the applicant lodged an objection.
• In reaching its conclusion, the MRA considered that:
• There was insufficient evidence to support the company’s claim that services worth Rs 4,509,454 were neither rendered nor invoiced, and that no payment was received in relation to these services.
• A stated income of Rs 2,536,232, allegedly arising from supplies made to a company called EPB Quantity Surveyors Ltd in October 2014 and which had already been declared in the VAT return for the quarter ending 30 June 2012, did not correspond with the invoices declared in the relevant VAT return.
• Expenses amounting to Rs 65,459 were private in nature and not incurred in the production of gross income, and therefore inadmissible for tax deduction purposes. However, legal and professional fees amounting to Rs 539,678 for the assessment year 2015/2016 should be allowed.
• The company made representations with the ARC to challenge the MRA’s decision, calling for a fair reconsideration of the assessments and urging that due process and legal standards be upheld in the determination of its tax obligations.

Issue

• Whether the sum of Rs 4,509,454 should be deemed accrued income and thus taxable.
• Whether the sum of Rs 2,536,232 constituted undeclared taxable income.
• Whether the sum of Rs 399,027.71 should be treated as income due and therefore taxable income

Held

The committee found in favour of the Applicant in view of the factual inconsistencies, procedural shortcomings, and absence of reliable evidence from the MRA to substantiate its claims, and in contrast to the credible, supported, and consistent submissions by the Applicant.

MR. HOK SHUI HAU v THE DIRECTOR-GENERAL, MRA, ARC/IT/303-16 – FINDING

Facts

• The Applicant derived emoluments from 3 companies in which he was a major shareholder.
• The MRA assessed him for undisclosed income of Rs 4 million for the years of assessment 2008/2009 to 2011.
• This was based on a capital computation showing a mismatch between declared income and bank lodgements.
• The Applicant objected and claimed the funds were business-related and used for company expenses or came from family contributions.
• The MRA maintained the assessments due to lack of documentary evidence and inconsistent explanations.
• A property worth Rs 4.7M was purchased during the relevant period, and the MRA questioned how it was financed.
• The ARC eventually heard the case and reviewed the capital computation.

Issue

Whether the Applicant had undisclosed income of Rs 4 million justifying the MRA’s additional tax assessment, and whether his explanations and evidence were sufficient to rebut the assessment.

Held

• The ARC found that the Applicant failed to discharge the burden of proof regarding the source of funds.
• However, it accepted that an additional Rs 300,000 should be included in the opening capital.
• The Committee held that rounding up the computation to Rs 4M was unfair, and the correct figure of Rs 3,910,025 should be used.
• The MRA was directed to recalculate the tax based on this revised figure.

MR. DHOOBALSINGH DABEESINGH v THE DIRECTOR-GENERAL, MRA, ARC/IT/89-20;163-18 – FINDING

Facts

• The Applicant claimed interest relief on a secured housing loan under S. 27A of the Income Tax Act for the income years 2017/18 – Rs 267,221 and 2018/19 – Rs 785,813.
• The loan was contracted in March 2017 from a Bank and was categorized as a “Home/Equity Loan”.
• The purpose of the loan was to acquire 100% shares in a company called Deenad Investment Ltd (hereinafter referred to as ‘the company’), a company that holds the title to a residential property located at Trianon, which is also the Applicant’s domicile.
• The MRA disallowed the relief, arguing the loan was not used exclusively for the purchase or construction of a house, as required by Section 27A.
• The MRA further relied on the Salomon principle, arguing that owning shares in a company does not amount to legal ownership of the property held by the company.
• The Applicant argued that the substance of the transaction was a purchase of a residence, even if effected through share acquisition, and he was the sole shareholder and resident of the property.

Issue

Whether the interest on a loan used to acquire shares in a company that owns a residential property qualifies for interest relief under Section 27A of the Income Tax Act, which provides relief on housing loans used exclusively for the purchase or construction of a house.

Held

• The ARC found in favour of the Applicant. Interest relief was allowable, and the Applicant satisfied the conditions under S. 27A.
• In reaching this decision, the Committee considered that although the loan was used to acquire shares, the purpose and effect of the transaction was the acquisition of a residential property.
• The Committee highlighted the fact that the Applicant resided in the property, fully owned the shares, and was solely responsible for repaying the loan.
• The Committee further explained that S. 27A does not explicitly preclude acquiring property through share acquisition and that form should not override substance.

CUSTOMS

FOOD PARADISE CO LTD v THE DIRECTOR-GENERAL, MRA, ARC/CUS/009-23 – RULING

Facts

• The Applicant received a notice of underpayment from the Respondent, which prompted them to file an objection.
• However, this objection was filed beyond the stipulated 28-day deadline, as required under S. 15(2)(a) of the Customs Act.
• Specifically, the objection was received by the Objections, Appeals, and Dispute Resolution Department (OADRD) 53 days after the date of the notice, which resulted in a notice of refusal from the MRA.
• Interestingly, there is a previous ruling which granted the Applicant leave to make late representation under similar circumstances involving a 25-day delay.

Issue

The core question was whether the Applicant’s delay in filing the objection should be excused under the applicable provisions of the Customs Act, especially in light of a ruling by a previous panel that had already permitted a late representation by the Applicant.

Held

• The Committee ruled that objection lodged by the Applicant should be admitted and considered by the OADRD.
• The Committee was persuaded that the Applicant had demonstrated a reasonable cause for the delay within the meaning of S. 15(2)(c) of the Customs Act.
• The Committee considered that the evidence adduced confirmed that the Applicant did not receive a formal Notice of Assessment, and reasonably awaited such a assessment in good faith before lodging an objection.

SECULOGIX CO LTD v THE DIRECTOR-GENERAL, MRA, ARC/CUS/12-21 – FINDING

Facts

• This was a matter concerning the correct classification of a “Network Cabinet” under the Harmonised System (HS) Codes.
• The Applicant is an exclusive distributor of a wide range of fire and security equipment for the Indian Ocean.
• On 16 September 2020, the Applicant imported one consignment of “Network Cabinet”.
• The product was declared and classified under HS Code 8517.70.00 (Telephone sets and other apparatus for the transmission & reception of voice, images or other data/Parts) attracting only 15% VAT.
• The MRA then reclassified the product under HS Code 9403.20.90(other metal furniture) which attracts customs duty at 30% and 15% VAT, and a notice of claim dated 11 January 2021 was issued to the Applicant claiming an amount of Rs 24,089.
• Feeling aggrieved by this, the Applicant lodged an objection before the OADRD which was disallowed. The Applicant lodged representation with the ARC.

Issue

The issue to be considered by the Committee was under which HS Code the product imported by the Applicant should be classified.

Held

• The Committee was of the firm opinion that the “Network Cabinet” had been correctly classified under HS Code 8517.70.00 by the Applicant.
• In reaching this decision, the Committee had regard to the nature and functional intent of the product.
• The Committee stated that while the cabinet may superficially resemble traditional furniture in both form and function, its fundamental purpose is distinctly technical.
• The Committee then explained that while conventional furniture are primarily designed for decoration or comfort, the Network Cabinet is specifically designed to protect and house networking device in environments such as data centers, server rooms, and corporate offices, making it an IT equipment.

REGISTRAR GENERAL

MESSRS M. Z. AMEER & F. AMEER v REGISTRAR-GENERAL, ARC/RG/216-19;217-19 – FINDING

Facts

• This matter concerned the valuation of a residential property situated at Impasse Serang, Port-Louis.
• The property was sold for a declared consideration of Rs 800,000.
• However, the Registrar General reassessed the transaction at Rs 2.9 million, thereby triggering additional registration duties payable by the purchaser (Mr. Z. Ameer), and land transfer tax obligations on the part of the vendor (Mr. F. Ameer).
• The Registrar General’s office later revised the assessment to Rs 2.2 million.

Issue

Both, the purchaser and the vendor, contested the assessed value of the property and the related tax and duty.

Held

• The Committee took the view that a valuation of Rs 1.5 million is appropriate and that the applicants are liable to pay Registration duty and Land Transfer Tax based on this market value.
• In reaching this decision, the Committee reasoned that the appropriate basis for duty assessment should be the revised valuation of Rs 2.2 million, considering: Exclusion of the first floor; Acceptance of market comparables; Estimation of fair market value as of 2018; and Acknowledgement of the sibling relationship (between Mr. Z. Ameer, Purchaser and Mr. F. Ameer, the vendor), though not qualifying for a statutory exemption.
• However, the Committee was of the opinion that a valuation of Rs 1.5 million would be more appropriate based on the limited access to and from the property. The figure, the committee said, incorporated applicant’s evidence along with equitable consideration.

SELECTED JUDGMENTS OF THE SUPREME COURT

DG-MRA v Mauritius Freeport Development Co. Ltd & Anor 2025 SCJ 153

Facts

• This is an appeal case against a decision of the Assessment Review Committee (ARC) delivered on 9 March in Mauritius Freeport Development Co. Ltd v Director-General, Mauritius Revenue Authority, ARC/IT/677-15; ACR/IT/441-16 where the ARC ruled in favour of the first respondent, allowing it to claim annual capital allowances under section 24 of the Income Tax Act (ITA) and Regulation 7(1)(b) of the Income Tax Regulations 1996 in relation to assets acquired in 1995to 2005.
• The Appellant contended that annual allowances must be claimed in the income year in which the asset is put to use, and deferral was not permitted under the law.
• The first Respondent maintained that s.24 ITA provides flexibility, allowing a taxpayer to choose when to claim allowances, as part of tax planning.
• The ARC accepted the first Respondent’s position, holding that claiming the allowance was optional. [emphasis is ours]
• The Appellant, aggrieved by the decision, appealed to the Supreme Court.

Issue

Whether s.24 ITA provides a taxpayer with the discretion to claim annual allowances in any income year of their choosing, or whether the allowance must be claimed in the specific income year in which the capital expenditure was incurred and in each of the succeeding years as prescribed.

Held

• The Court allowed the appeal.
• In reaching this decision, the Court relied on the plain and literal wording of s.24 ITA, which provides that allowances shall be allowed “in that income year and in each of the succeeding years.”
• The Court emphasised the statutory phrase “in that income year” rather than “any income year”, thereby rejecting the view that taxpayers can choose when to claim.
• It held that s.24 ITA imposes a requirement to claim allowances in a prescribed sequence, starting from the year the expenditure was incurred.
• The Court rejected the Committee’s reliance on interpretive principles as the statutory language is clear and unambiguous.

GRYNS TRADING CO LTD v DRYMIX LTD 2025 SCJ 142

Facts

• The parties had a first agreement in 2011, and a revised agreement was drawn in October 2018. By October 2018, the applicant owed Rs 9,820,345 to be repaid in instalments over a period of 36 months. In September 2022, a statutory demand was issued, and in November 2022, a winding-up petition followed.
• Despite ongoing negotiations, no agreement was signed. The respondent issued a second statutory demand in September 2023 for Rs 4,994,466.03.

Isssue

Whether the applicant could establish a genuine and substantial dispute over the existence of the debt claimed in the statutory demand under section 181(4) of the Insolvency Act.

Held

• The Court dismissed the application to set aside the statutory demand.
• The Court found that the applicant failed to show a genuine, substantial dispute.
• The Court held that the statutory demand was properly served as per the requirements of s.180 Insolvency Act on the applicant.
• The applicant was ordered to pay the debt by July 2025, failing which the respondent would be entitled to apply for liquidation.