Decisions Delivered by the Assessment Review Committee

1. MR AZIZE MOHAMMAD MAMODE ALLY V/S DG, MRA V/S DIRECTOR GENERAL-MRA ARC/IT/247-18

This case concerned the lapsing of an Objection to an Assessment by virtue of S. 131B(4) of the Income Tax Act (ITA). It shows how, in very exceptional circumstances and for valid reasons, the ARC will exercise its discretion in the interest of justice and in all fairness to the taxpayer.

The Applicant in this case had been taxed on his share of income from three Sociétés. An assessment was issued claiming an amount of Rs 4,935,160 and Notice of Objection was subsequently lodged by the Applicant. The Respondent then requested the Applicant to submit information and documentary evidence to deal with the objection. When the latter failed to do so, the Respondent considered that the objection had lapsed by virtue of S.131B(4) ITA.

The ARC allowed the Applicant one month time to submit the requested documents for the Respondent to determine the objection. In reaching this decision, the Committee noted that the Applicant was unable to submit the requested documents due to an unanticipated event (a fire) but requested for additional time to submit same. The Committee thus explained that since the assessment was of an important amount and there are existing documents in the Applicant’s possession, it was only fair and in the interest of justice to allow the Applicant additional time to submit same for the Respondent to consider.

• BIJAY COOMAR GREEDHARRY V/S DIRECTOR GENERAL-MRA ARC/IT/07-21

This case sheds light on the standard to be complied by the MRA when raising an assessment under the Income Tax Act.

The Respondent in this case issued Notices of Assessment of tax due to the Applicant, a bookmaker. The latter objected to the assessments considering that the Respondent had computed a loan repayment of Rs 3,000,000 as turnover. Upon submission of documents and explanations by the Applicant, the Respondent admitted only part of the amount (Rs 950,000) was a repayment (because it was refunded by cheque) and revised down the tax payable accordingly. The Respondent then issued a Notice of Determination for the remaining amount. Feeling aggrieved by the Respondent’s decision, the Applicant lodged representations before the ARC on whether Repayment of loan from a company called Solid Waste Recycling Ltd (SWRL) amounting to Rs 2,050,000 represented income.

The ARC upheld the Applicant’s ground of representation and set aside the Respondent’s Notice of Determination. In reaching this decision, the Committee first considered the “best of judgement” standard under S.129(1) of the Income Tax Act to be complied with by the MRA in raising an assessment. Citing Supreme Court cases of Porlo Taco Co. Ltd v Commissioner of Income Tax (1975) MR 220 and Casa Florida Ltd. & Ors v The Director-General, Mauritius Revenue Authority (2012) SCJ 43 as well as Judicial Committee of the Privy Council cases of Bi-Flex Caribbean Ltd v. The Board of Inland Revenue (1991) Tax Cases Vol. 63 and Argosy Co.Ltd. v Commissioner of Inland Revenue (1971) UKPC 5, the Committee explained that “best of judgement” means that the Respondent must fairly consider all material placed before it and, and on that material, come to a decision which is one which is reasonable and not arbitrary as to the amount of tax which is due. Applying this, the Committee considered that the Respondent’s Assessment did not satisfy the “best of judgement” as the Applicant had provided sufficient materials to establish that the assessed amount did not reflect what the Respondent believed to be a fair estimate of the income in question. Moreover, the Committee observed that the Applicant was not merely relying on a letter by the Ex-Director of SWRL, but that the latter was called as a witness for the Applicant and subjected to a cross-examination.

• MRS VEENA RUBA IMRIT V/S DIRECTOR GENERAL-MRA ARC/IT/374-22

This case confirmed that the ARC does not have jurisdiction to deal with issues which were not the basis of any determination by the Objection Directorate.

The Applicant in this case had objected to the Respondent’s Notice of Assessment by way of Notice of Objection with the only ground of objection being on an issue of “Housing interest relief”. The Objections made by the Applicant were then considered by the Objection Directorate and the Notice of Assessment was maintained upon determination of the Grounds of Objection.

Despite this clear determination, the Respondent filed a Revised Computation allowing the claim for housing loan relief. The ARC accepted the Revised Computation as disposing of the litigious issue of “Housing interest relief”.

However, the Applicant also insisted, in her representations, on the issue of “Income Exemption Threshold (IET)” claim in respect of her son, despite that this was not a ground in her Notice of Objection and hence not determined by the Objection Directorate. The ARC, referring to its previous decisions – Essar Capital (Mauritius) Ltd. V. Director General, Mauritius Revenue Authority ARC/IT/129-20; Asterizk Foods Ltd V. Director-General, Mauritius Revenue Authority ARC/VAT/080-21; and Jabil (Mauritius) Holdings Ltd V. Director-General, Mauritius Revenue Authority ARC/IT/38-21, found that it simply does not have jurisdiction to delve on issues which had not been raised before the Objection Directorate of the MRA and which were not determined.

The Committee thus set aside the Representations.

• MR SANDRASEGAREN CAROOPPUNNEN V/S DIRECTOR GENERAL-MRA ARC/IT/248-16

In this case, an Assessment was raised on the Applicant who was alleged not to have declared income derived from private tuitions. The Applicant then duly filed a Notice of Objection, and when same was determined in favour of the Respondent, the Applicant made representations to the ARC.

The issue for the Committee to determine was whether the Respondent could adduce the bank statements of Applicant’s spouse who was not a party to the matter at hand.

After a thorough analysis of the facts, the Committee concluded that it was appropriate for the Respondent to do so in order for the Committee to ascertain as to whether money was actually deposited by the taxpayer in the spouse’s bank accounts.

• KATAR LTD V/S DIRECTOR GENERAL-MRA ARC/IT/514-18, 317-19 & 226-20

This was quite an interesting case on the issue of whether an officer who raised an assessment on an Applicant can also appear as representative of the MRA in light of ARC/IT/1-14, VAT/12-14 which clearly set out that an Officer who raised the assessment cannot also step in the shoes of the Enquiry Officer.

The ARC was of the view that it was not appropriate for an Officer to both represent the MRA and at the same time be called as a witness to depone and adduce evidence (as the Assessing Officer). The Committee explained that this would not only frustrate the independence of the MRA which has the responsibility to raise assessments in a fair and transparent manner, but it would also mean bypassing the objection stage on which the appeal was made.

Decisions Delivered by the Supreme Court of Mauritius

Christopher Peter Van Zyl & Ors v The Registrar of Companies 2023 SCJ 473

Square Rock Ltd is a company that was wound up and dissolved. The Applicant made an application to the Supreme Court for the company to be revived.

The Respondent was resisting the application on the ground that section 320 of the Companies Act provides for the restoration of a company that had been removed from the register and does not provide for the restoration of a company that had been would up and dissolved.

The Court concluded that section 320 of the Companies Act did not provide for the restoration of a company that had been would up and dissolved. However, after making reference to New Zealand case law (given that the Mauritian Companies Act was comparable to the New Zealand Companies Act), the Court concluded that there was sufficient basis to exercise its discretion to revive Square Rock Ltd.

The Respondent was therefore ordered to put the company back on its register.

Important Legislative Amendments

1. The Financial Intelligence and Anti-Money Laundering (Mauritius Revenue Authority)(Exemption) Regulations 2023.

The section 2 of the Financial Intelligence and Anti-Money Laundering Act (FIAMLA) defines the term “exempt transaction” and the definition includes a transaction between persons as may be prescribed.

The above-mentioned Regulation, with effect as from 04 November 2023, prescribes that a transaction between the Mauritius Revenue Authority (MRA) and another person is an exempt one.

Payments in cash exceeding RS500,000 made to the MRA will therefore not be an offence under the FIAMLA.

• Financial Services (Framework for the Imposition of Administrative Penalties)(Amendment) Rules 2023

The paragraphs 3 and 4 of Note 2 of Part III of the Schedule to the Financial Services (Framework for the Imposition of Administrative Penalties) Rules 2022 has been deleted and replaced by the following new paragraphs:

(3)          Where  the  breach  lasted  for  more  than 12  months, the  amount  of  administrative  penalty  will  be calculated on the “relevant gross income” of the licensee for that specific period.

(4)          Where the licensee was in existence for less than 12months, its “relevant gross income “will be calculated on a pro-rata basis. The amendment is effective as from 18 November 2023.