REPUBLIC v. COMMISSIONER OF INCOME TAX; EX PARTE MAATSCHAPPIJ DE FIJNHOUTHANDEL N.V. (FYNHOUT) [1971] 1 GLR 213

DIVISION: IN THE COURT OF APPEAL

DATE: 7 DECEMBER 1970

BEFORE: APALOO, SOWAH AND ARCHER JJ.A.

CASES REFERRED TO

(1) R. v. Commissioner of Taxes for St. Giles and St. George, Bloomsbury; Ex parte Hooper [1915] 3 K.B. 768; 85 L.J.K.B. 129; 113 L.T. 1015; 31 T.L.R. 565; 7 T.C. 59, D.C.

(2) London County Council v. The Attorney-General [1901] A.C. 26; 70 L.J.Q.B. 77; 83 L.T. 605; 17 T.L.R. 131; 4 T.C. 265, H.L.

(3) Sulley v. Attorney-General (1860) 5 H. & N. 711; 157 E.R. 1364; 2 T.C. 149; 2 L.T. 439; 29 L.J. Exch. (N.S.) 464.

(4) Grainger & Son v. William Lane Gough [1896] A.C. 325; 65 L.J.Q.B. 410; 74 LT. 435; 12 T.L.R. 364; 3 T.C. 462; 60 J.P. 692, H.L.

(5) Martin v. Lowry [1927] A.C. 312; 96 L.J.K.B. 379; 136 L.T. 580; 43 T.L.R. 116; 71 S.J. 18; 11 T.C. 297, H.L.

(6) Rutledge v. Commissioner of Inland Revenue [1929] S.C. 379; [1929] S.L.T. 296; 14 T.C. 490.

(7) Bennet v. Marshall [1938] 1 K.B. 591; 107 L.J.K.B. 319; 158 L.T. 75; 54 T.L.R. 320; [1938] 1 All E.R. 93; 22 T.C. 73; 82 S.J. 74.

(8) MacLaine & Co. v. Eccott [1926] A.C. 424; 95 L.J.K.B. 616; 135 L.T. 66; 42 T.L.R. 416; 10 T.C. 481, H.L.

NATURE OF PROCEEDINGS

APPEAL from the decision of Coussey J. sitting at the High Court, Accra delivered on 2 December 1969, digested in (1970) C.C. 28, dismissing the appellant’s application for an order of certiorari to quash an assessment made by the respondent under the Income Tax Decree, 1966 (N.L.C.D. 78).

COUNSEL

E. A. K. Akuoko for the appellants.

J. W. Blankson-Mills for the respondent.

JUDGMENT OF ARCHER J.A.

Archer J.A. delivered the judgment of the court. This is an appeal from the decision of the High Court, Accra, which refused to grant leave for the issue of an order of certiorari to quash an assessment made by the Commissioner of Income Tax.

The facts of the case are briefly as follows: The appellant is a foreign company registered in Holland and has its principal place of business at Amsterdam. The company buys timber from various countries outside

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Holland through its branch offices in these countries including Ghana where it maintains one of these branch offices. The branch office in Ghana buys locally produced timber of all kinds and ships the timber to Holland. The branch office in Ghana does not re-sell the timber in Ghana. The timber is re-sold abroad after the head-office in Amsterdam has concluded contracts of sale with purchasers throughout the world. The Ghana branch office does not accept orders from purchasers and does not take any decision to re-sell. In 1951 when the company commenced buying timber, it sought an assurance from previous Commissioners of Income Tax that it would not be liable to Ghana income tax for buying timber in Ghana. This assurance was consistently given and the company carried on buying locally produced timber without paying income tax under the understanding that the company was a non-resident company and not carrying on trade or business in Ghana.

In 1969, the present Commissioner of Income Tax, who it may be said, is not bound by previous opinions and decisions of his predecessors, visited the company’s offices on a statutory inspection under the Income Tax Decree, 1966 (N.L.C.D. 78), and thereafter intimated to the company his intention to assess the company. The company in a series of correspondence indicated its position as a non-resident foreign company and maintained that it was not carrying on business in Ghana. Notwithstanding these protestations, the commissioner proceeded to assess and did serve the company with a provisional notice of assessment for the years 1959-60 to 1969-70 in a total amount of N¢123,500.00 covering exactly ten income-tax years, including a demand for the payment of 50 per cent. of the total pending the consideration of objections to be raised by the company.

The company thereupon applied to the High Court for an order of certiorari to quash the assessment. The High Court after hearing the parties ruled that the Commissioner of Income Tax had jurisdiction to decide whether the company was liable to pay income tax and that as the Income Tax Decree, 1966, had made provision for appeals against assessment, the company should follow the procedure laid down by the Decree. Accordingly, the High Court held that certiorari did not apply and the rule nisi was discharged. The company then appealed to this court against the ruling. The arguments which were advanced in the court below were repeated in this court by learned counsel for both parties. The first question to be answered in this appeal is whether certiorari lies against the Commissioner of Income Tax? The question can be answered without relying on the multiplicity of English decisions on the matter. Paragraph 51 of the Income Tax Decree, 1966, (supra) provides:

“(1) Where any person is dissatisfied with a decision made by the Commissioner on an objection to him under paragraph 49, such person may, within fifteen days after the notice of the decision being served on him, appeal, where the amount of tax chargeable on the disputed portion of the income does not exceed four hundred and eighty cedis, to the Board of Appeal, whose decision shall be final:

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Provided that any person including the Commissioner, aggrieved by such decision may appeal on a question of law to the High Court and the decision by the High Court thereon shall be final.

(2) Where any person is dissatisfied with a decision made by the Commissioner on an objection to him under paragraph 49, such person may, within fifteen days after the date of such decision, appeal, where the amount of tax chargeable on the disputed portion of the income exceeds four hundred and eighty cedis, to the High Court; and such person or the Commissioner may appeal from the decision of such Court to the Court of Appeal.”

The above-quoted paragraphs of the Decree stipulate the circumstance under which an appeal may be lodged either with the Appeal Board or with the High Court depending on the amount involved in the dispute. There is no express provision in the Income Tax Decree excluding any other remedies open to an aggrieved party in prosecuting his objections. When the motion came before the High Court on 20 November 1969, the Constitution of the Second Republic of Ghana was in force and nearly two months old and the High Court was bound by the provisions of the Constitution.

Article 114 of the Constitution provides as follows:

“The High Court of Justice shall have supervisory jurisdiction over all inferior and traditional Courts in Ghana and any adjudicating authority and in the exercise of its supervisory jurisdiction shall have power to issue such directions, orders or writs including writs or orders in the nature of habeas corpus, certiorari, mandamus, prohibition and quo warranto as it may consider appropriate for the purposes of enforcing or securing the enforcement of its supervisory powers.”

Article 113 (1) also provides that the High Court shall have jurisdiction in civil and criminal matters and such other original, appellate and other jurisdiction as may be conferred upon it by the Constitution or any other law. It follows therefore that the supervisory jurisdiction of the High Court is in addition to the appellate jurisdiction of the High Court. An aggrieved party is at liberty to take advantage of one or the other jurisdiction provided that jurisdiction is applicable although it may not be possible to invoke both jurisdictions at the same time. The procedural appellate remedy in paragraph 51 of the Income Tax Decree is therefore not exclusive and exhaustive. It is in addition to the constitutional remedies provided for in article 114 of the Constitution.

Certiorari will always lie not only against decisions of inferior courts but also against any body of persons which has to act judicially but does not lie against purely administrative acts. What are the duties of the Commissioner of Income Tax? Does he act purely in an administrative capacity or at some stage in his activities does he have to act judicially?

Section 46 of the Income Tax Decree provides:

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“(1) (a) As soon as may be after the commencement of each year of assessment, the Commissioner may proceed to make a provisional assessment, computed to the best of his judgment, on every person chargeable with tax.

(b) A provisional assessment shall not affect any liability otherwise incurred by such person by reason of his failure or neglect to deliver a return.

(2) Where a person has delivered a return, the Commissioner may-

(a) accept the return and make an assessment accordingly; or

(b) refuse to accept the return, and to the best of his judgment, determine the amount of the chargeable income of the person and make an assessment accordingly.”

It follows that the commissioner has power to make an assessment, computed to the best of his judgment, with or without the presence of a return filed by the person liable to be assessed. His role at this stage is purely of an administrative character because he may or may not have all the relevant materials before him and he is enjoined by paragraph 46 to do so to the best of his judgment thus allowing him sufficient latitude and amplitude to exercise his discretion as he thinks fit.

But that is not the finality of his statutory assignment. Paragraph 49 of the same Decree provides: “(2) If any person disputes the assessment made upon him he may apply to the Commissioner, by notice of objection in writing, to review and to revise the assessment. Such application shall state precisely the grounds of his objection to the assessment…”

Sub-paragraph (3) also provides:

“(3) On receipt of the notice of objection referred to in subparagraph (2) of this paragraph, the Commissioner may require the person giving the notice of objection to furnish such particulars as the Commissioner may deem necessary with respect to the income of the person assessed and to produce all books or other documents in his custody or under his control relating to such income, and may summon any person who, he thinks, is able to give evidence respecting the assessment to attend before him and may examine such person on oath or otherwise.”

It may be observed that although this sub-paragraph uses the permissive verb “may” throughout, the import of the whole sub-paragraph is to the effect that the commissioner should consider the objections raised. In other words, he cannot refuse to consider the objections; he cannot shut his eyes or close his ears to them. This means that he must act judicially once the objections have been brought to his notice. His earlier role of an administrative agent computing assessment to the best of his judgment is transformed into an entirely different role as an adjudicator who must act judicially after objections have been raised and brought to his notice.

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As an adjudicating authority, he is caught by the provisions of article 114 of the Constitution and his decisions are subject to the supervisory powers of the court Including the power to grant an order of certiorari to quash his assessment on grounds known to the law.

Did the commissioner of Income Tax have jurisdiction to make the assessment in dispute and to serve the notice of assessment on the company? As already pointed out, the commissioner has power under paragraph 46 of the Income Tax Decree, 1966, to make provisional assessment on every person chargeable with tax. It follows that he has jurisdiction to make assessment on persons chargeable with tax and it also follows that he had jurisdiction to determine whether any person is chargeable with tax or not. The commissioner may through ignorance or inadvertence decide that a person not chargeable to tax is liable to be assessed. But once the assessment has been challenged and the objection can be sustained, then the commissioner cannot demand the tax. But that does not affect the jurisdiction of the commissioner. The Ghana Decree is based on the English Income Tax Acts and in R. v. Commissioners of Taxes for St. Giles and St. George, Bloomsbury; Ex parte Hooper [1915] 3 K.B. 768, it was held that a person chargeable under section 48 of the Act of 1842 cannot mean a person whose liability is not in dispute. It includes a person who is in fact not chargeable but is believed by the assessing authorities to be chargeable. Otherwise it would be extremely difficult for the commissioner to carry out his statutory duties. He has power to call for books of accounts. He has power to make local inspections. These powers are to enable him to decide whether a person is chargeable or not.

The submissions of the company can be epitomised as follows: The company is a foreign company and it is not resident in Ghana. The company is not carrying on business in Ghana because mere buying in Ghana is not trading. The company is therefore not liable to income tax. If mere buying in Ghana is not part of the operations of the company, then full gains and profits accruing to the company cannot be deemed to be derived from Ghana by virtue of paragraph 6 (1) of the Decree.

The counter-arguments of the commissioner may also be paraphrased as follows: The company is a non-resident company but it has established a branch office here in Ghana. It buys locally produced timber in large quantities and exports them to Amsterdam to be sold for profit or gain. The buying of timber in Ghana is therefore part of the trading operation of the company. In the alternative, the company is in receipt of payments derived from transactions affecting directly or indirectly the natural resources in Ghana and it is therefore caught by paragraph 5 (f) of the Income Tax Decree, 1966.

At first glance, the counter-arguments put forward by the commissioner, look formidable indeed but a close scrutiny of the relevant provisions of the Decree makes the counter-arguments evanescent. Who is liable to pay income tax in Ghana? Paragraph 5 of the Income Tax Decree provides as follows: [p.219] of [1971] 1 GLR 213

“The tax shall, subject to the provisions of this Decree, be payable at the rate or rates specified in this Decree, or in a rule or regulation made thereunder, for each year of assessment upon the income of any person accruing in, derived from, brought into, or received in, Ghana in respect of

(a) gains or profits from any trade, business, profession or vocation, for whatever period of time such trade, business, profession or vocation may have been carried on or exercised;

(b) gains or profits from any employment or pension including any allowances or benefits paid in cash or given in kind to or on behalf of an employee or a pensioner other than in respect of medical or dental costs or of any passage from or to Ghana;

(c) dividends, interest or discounts;

(d) any charge or annuity;

(e) rents, royalties, premiums and any other profits arising from property; and

(f) receipts including royalties or periodical or deferred payments of any kind, other than those referred to in the immediately preceding clause of this paragraph, derived from any transaction wherever and whenever made, affecting directly or indirectly land or any natural resources in Ghana, and not withstanding whether such receipts are paid within or without Ghana.”

It can therefore be said with confidence that in Ghana, there are six classes of income specified in the Income Tax Decree which are subject to tax. If any income or payment falls within one of these classes then the person who receives the income or payment must pay tax in accordance with the Decree. If the income or payment is derived from a transaction or relationship which does not fall within any of these six classes, no tax is payable. This is a fundamental principle in the Income Tax Decree which must be borne in mind. In London County Council v. Attorney-General [1901] A.C. 26 at page 35, Lord Macnaghten was constrained to say that: “Income tax, if I may be pardoned for saying so, is a tax on income.” But as Mr. C. N. Beattie in his textbook Income Tax at page 6 has suggested, “Lord Macnaghten’s dictum that income tax is a tax on income must now be modified by saying that income tax is a tax on income and on that which is deemed to be income by virtue of the Income Tax Acts.” It follows that in Ghana, tax is paid on income which is deemed to be taxable by the Income Tax Decree and no more.

When the company filed its affidavit in support of the motion in the court below, the following paragraphs were deposed to:

“(1) I (Paul John Van Aken of Takoradi) am the representative in Ghana of Maatschappij de Fijnhouthandel N.V. a company incorporated in and under the laws of Holland and which has its head office in Amsterdam, Holland.

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(2) The company’s business consists in the purchase of timber from many tropical countries and the sale of the same in Europe and North America both as round logs and also after sawmilling them in the company’s sawmills in Holland.

(3) That for the purpose of securing timber for its business the company has opened buying offices in the countries where the timber is produced.

(4) That all orders for the purchase of timber for the company are determined by the company’s head office in Amsterdam aforesaid. Similarly all decisions for the sale of timber by the company are made in Amsterdam where also all orders on the company for purchase of timber are received.

(5) No buying office outside Holland is empowered to receive or execute orders placed on the company for the purchase of its timber.

(6) That since 1951, the company has opened and operated one such buying office at Takoradi through which it purchases timber from Ghana.”

When the Commissioner of Income Tax was served with copies of the motion and affidavit, all that he did was to file an affidavit in opposition, paragraph (2) of which stated: “That I (George Kofi Ofosuhene Turkson, Commissioner of Income Tax) am not in a position to admit or deny paragraphs (1), (2), (3), (4),

(5) and (6) of the applicant’s affidavit.” If the commissioner is not in a position to admit or deny the company’s assertions then what is the basis for the assessment? The commissioner in paragraphs (4) and

(5) of his affidavit stated:

“(4) That I admit paying a visit to the applicant’s office at Takoradi but deny that I threatened him with the payment of income tax as alleged.

(5) That this visit was undertaken by me under paragraph 82 (1) of the Income Tax Decree, 1966 (N.L.C.D. 78), with the view to ascertaining the magnitude of the applicant’s business operations in Ghana and to arrive at reasonable figures in raising provisional assessments against him under paragraph 46 (1) (c) of the Income Tax Decree, 1966 (N.L.C.D. 78). The allegation therefore that the assessments were arbitrarily raised is without justification.”

The Commissioner of Income Tax therefore relied on the magnitude of the business operations of the company in Ghana. The company denies that it is carrying on trade in Ghana. The issue therefore is whether the company is carrying on trade or business operations in Ghana. Mr. Akuoku, learned counsel for the company, relied on two English decisions.

The first case is Sulley v. Attorney-General (1860) 5 H. & N. 711; 157 E.R. 1364. In that case, an American firm carried on a business in New York, which consisted in the re-sale there of goods purchased on their account in England. One of the partners, who resided in Nottingham, bought the goods required by his firm, and paid for them with money remitted to him from New York. It was decided in the Exchequer Chamber

[p.221] of [1971] 1 GLR 213 by no less than six eminent judges, Cockburn C.J., Williams J., Crompton J., Willes J., Byles J. and Blackburn J. that, in those circumstances, the firm did not exercise its trade in the United Kingdom in such sense as to bring its profits within the scope of the Income Tax Acts.

The following passage from-the judgment of Cockburn C.J. reported in 29 L.J Exch. (N.S.) 464 at p. 466 is very relevant in this appeal:

“It is perfectly true that wherever a merchant is established the details of his trade must necessarily extend over various places. He buys in one country and sells in another; but he has one given place of business in which he may be said to trade, and where his profits always come home to him. He carries on his trade where he is established as his principal place of business. That I take to be the place where he exercises his trade, within the true meaning of the expression ‘exercising trade’, in this Act of Parliament. The contrary conclusion would lead to very bad results. It would render a merchant liable to the income tax, if there was one, of every foreign country with which he dealt …

If the legislature had made such an enactment they would have done what is considered most impolitic — taxed those who come here as customers.”

When one looks at the facts in the Sulley case and compares them with the contents of the affidavit of the company, it is difficult to say that there are distinguishable factors which make the decision arrived at in Sulley’s case inapplicable. Indeed, the present facts are on all fours with those of Sulley. The second case is Grainger & Son v. William Lane Gough [1896] A.C. 325, H.L. There, a foreign merchant, Louis Roedeser of Rheims, a wine merchant and champagne shipper with his chief place of business in France, canvassed through agents in the United Kingdom for orders for the sale of his goods to customers in the United Kingdom but all contracts for the sale and all deliveries to customers were made in France. It was held that the foreign merchant Roedeser was not trading in the United Kingdom within the meaning of the Income Tax Acts.

Lord Herschell enunciated the following principle at page 335:

“It has been sometimes said that it is a question of fact whether a person so exercises his trade. In a sense this is true; but in order to determine the question in any particular case, it is essential to form an idea of the elements which constitute the exercise of a trade within the meaning of the Act of Parliament. In the first place, I think there is a broad distinction between trading with a country and carry on a trade within a country.”

Is the company carrying on business or trade in Ghana? The answer must be in the negative. Their principal place of business is in Holland where they have their sawmills, all orders are dealt with in Holland, all contracts are executed there and their sawn timber is re-sold abroad.

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There is no evidence that they have sawmills in Ghana or that they have timber concessions in Ghana. There is no evidence that they re-sell any timber in Ghana. What the company has done here is to establish a branch office which purchases the round logs of timber and ships them to Holland. The company is therefore trading with Ghana and it is not trading within Ghana. Indeed the company is a customer of Ghana.

Mr. Blankson-Mills, learned counsel for the Commissioner of Income Tax, cited the cases of Martin v. Lowry [1927] A.C. 312, H.L.; Rutledge v. The Commissioner of Inland Revenue [1929] S.C. 379; Bennet v. Marshall [1938] 1 K.B. 591 and MacLaine & Company v. Eccott [1926] A.C. 424, H.L. These cases do not help the commissioner because the facts in each case were different and the decision rested on those facts respectively. In the Martin v. Lowry case, it was found that Martin did sell the linen in the United Kingdom although the sale was an isolated one from which he made huge profits. In Bennet v. Marshall, the assessment was in respect of the remuneration received by a vice-president of an American company, who was resident in the United Kingdom but arranged for his pay to be paid to a bank account in Canada. It was held that the source of the income was Canada and the respondent was not liable to pay income tax. Rutledge v. The Commissioner of Inland Revenue was another case in which it was found that Rutledge did sell a very large quantity of paper at a considerable profit in England although he had bought the same very cheaply in Germany. Here too a single transaction was urged on behalf of the tax-payer but as Lord Sands said in 14 T.C. 490 at pp. 497-8, “From beginning to end the intention was simply to buy and to re-sell.” In this case the re-sale was effected in England and therefore Rutledge was held chargeable with income tax on the profit he made. It is obvious that all these cases are distinguishable and do not assist the commissioner’s case in this appeal.

Indeed in MacLaine & Company v. Eccott, Viscount Cave L.C., stated as follows at pp. 574-5: “The question whether a trade is exercised in the United Kingdom is a question of fact, and it is undesirable to attempt to lay down any exhaustive test of what constitutes such an exercise of trade; but I think it must now be taken as established that in the case of a merchant’s business, the primary object of which is to sell goods at a profit, the trade is (speaking generally) exercised or carried on (I do not myself see much difference between the two expressions) at the place where the contracts are made.” It is therefore safe and correct to conclude that the company is not carrying on trade in Ghana because the contracts are made outside Ghana.

Paragraph 5 (a) of the Income Tax Decree refers to:

“. . . the income of any person accruing in, derived from, brought into, or received in, Ghana in respect of: — [p.223] of [1971] 1 GLR 213

(a) gains or profits from any trade, business, profession or vocation, for whatever period of time such trade, business, profession or vocation may have been carried on or exercised.”

This paragraph could only mean trade, business, profession or vocation carried on or exercised in Ghana and not elsewhere. The income of the company does not accrue in Ghana. The income is not derived from sales in Ghana. The income is neither brought into or received in Ghana. Having, by a process of elimination, rendered the verbs and propositions in paragraph 5 (a) of the Decree inapplicable to the company, no other verb remains which can be relied on by the commissioner. The commissioner nevertheless, has attempted to seek refuge in paragraph 6 (1) but as will be shown in due course, paragraph 6 (1) cannot be a refuge because the commissioner is unwelcome there. The attempt is nothing more than a subterfuge.

Paragraph 6 (1) provides:

“Where a non-resident person carries on any trade, business, profession or vocation in Ghana, part of the operations of which may be carried on outside Ghana, the full gains or profits of that trade, business, profession or vocation shall be deemed to be derived from Ghana.”

It has been submitted by Mr. Blankson-Mills that paragraph 6 (1) is a charging provision. This submission is clearly untenable. The paragraph is nothing more than a guide in computing the full gains or profits of a non-resident person who carries on trade in Ghana and part of its operations are carried on outside Ghana. The emphasis is on the words “carries on any trade, business, profession or vocation in Ghana.” This means that the non-resident person must be carrying on trade in Ghana as a condition precedent. If the non-resident person is not carrying on trade in Ghana, then the operations outside Ghana are of no consequence and paragraph 6 (1) is inapplicable. The company is a non-resident company because the control and management of the business are exercised outside Ghana. The company is also non-resident person because it resides outside Ghana. Resident in Ghana when applied to a company or body of person, means a company or body of persons the control and management of whose business are exercised in Ghana. See the definitions in paragraph 83 of the Decree.

In construing paragraph 6 (1), great care must be taken in reading the words of the paragraph. Before the paragraph can apply, it must be demonstrated that the non-resident person carries on business or trade in Ghana. When that factor has been established, then it must also be shown that part of the operations takes place outside Ghana. If that is also established, then the full gains and profits of the operations both in Ghana and outside Ghana are deemed to be derived from Ghana. Where the non-resident person does not trade in Ghana, then the paragraph is inapplicable. It follows that if mere buying in Ghana as a customer is not trading in Ghana, then the paragraph is inapplicable. The proviso to

[p.224] of [1971] 1 GLR 213 the paragraph sheds greater light on the meaning of the paragraph. Thus mere supply of goods or services to Ghana if the activities are carried on entirely outside Ghana, shall not be deemed to be trade or business in Ghana. Also where branches, subsidiaries or associated companies of non-resident companies operate in Ghana, that is, trade or carry on business in Ghana, then the profits are computed by reference to the total consolidated profits of the whole group taking into account the proportion which the turnover bears to the total consolidated turnover of the group. Under the proviso the commissioner has power to disregard the total consolidated profits of the whole group.

It is clear that paragraph 6 (1) cannot be a charging provision. The paragraph merely explains how profits or gains derived from Ghana under paragraph 5 (a) are to be computed in certain situations. It is therefore a misconception to say that paragraph 6 (1) imposes a tax. It does not. There are six classes of charges; they are contained in paragraph 5 (a), (b), (c), (d), (e) and (f). In England, they are known as Schedules. Mr. Blankson-Mills further submitted that paragraph 6 (1) was passed to circumvent the decision in Sulley v. Attorney-General (supra) which was decided in 1860 in construing the United Kingdom Income Tax Act of 1842. An attempt will now be made to find out whether this proposition is borne out by the wording of income tax legislation in Ghana. Income tax was first imposed in 1799 in the United Kingdom to finance the Napoleonic wars. Income tax in Ghana was also first introduced in 1943 during the second World War by the Income Tax Ordinance, 1943 (No. 27 of 1943). Section 8 read:

“In the case of a trade or business of which all the operations are not carried out in the Gold Coast the gains or profits of the trade or business shall be deemed to accrue in or be derived from the Gold Coast to the extent to which such gains or profits can definitely be ascertained as being attributable to that part of the operations carried out in the Gold Coast.”

This section was amended by section 4 of the Income Tax (Amendment) Ordinance, 1947 (No. 17 of 1947), as follows:

“Where a non-resident person carries on a trade or business of which only part of the operations are carried on in the Gold Coast the gains or profits of the trade or business shall be deemed to be derived from the Gold Coast to the extent to which such gains or profits are not directly attributable to that part of the operations carried on outside the Gold Coast.”

The Income Tax (Amendment) Ordinance, 1947 (No. 27 of 1947), deleted the word ‘directly’ from the section. It may be observed that although the 1943 legislation did not refer to non-resident person, the 1947 legislation made the provision applicable to non-resident persons only.

When the Income Tax Decree, 1966, was passed the relevant provision was re-worded in paragraph 6 as follows:

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“6 (1) Where a non-resident person carries on any trade, business, profession or vocation in Ghana, part of the operations of which may be carried on outside Ghana, the full gains or profits of that trade, business, profession or vocation shall be deemed to be derived from Ghana. . .” It is impossible to find anything in this string of legislation from 1943 to 1966 which suggests that the legislature intended to neutralise or decapitate the principle in Sulley v. Attorney-General (supra) which is still good law in the United Kingdom. The question may be put: Why should a customer who comes to Ghana to acquire or purchase stocks of roundlog timber for his sawmills abroad be requested to pay income tax? Is it the income derived from the working of the sawmills abroad or income derived from the profits of the sale of the timber abroad which is taxable? It is obvious that the nature of the work which the branch office of the company is doing at Takoradi makes it extremely difficult to support the proposition that the company is carrying on a trade or business in Ghana, and that part of the operations is carried on outside Ghana. There is a clear distinction between operating as a customer in Ghana and operating as a trader in Ghana. If the company had not established a branch office at Takoradi but had been importing timber from Ghana through resident exporters of timber, the commissioner could not have served the company with the notice of assessment. It is the establishment of the branch office at Takoradi to deal on the spot with resident timber merchants which has compelled the commissioner to take his present stand. But is the presence of the representative at Takoradi enough to justify the assessment? In his affidavit, the commissioner did rot state that on his inspection, he detected that the company had been felling or sawing timber in Ghana or that it had been selling timber as a wholesaler or retailer in Ghana. It is erroneous to rely solely on the magnitude of purchases in Ghana as a basis for assessment. From the armoury of the commissioner was produced another missile which completely failed to fire. It was contended that even if the company was not carrying on trade in Ghana, then the company was caught by paragraph 5 (f) of the Income Tax Decree which provides that tax shall be payable on the income of any person accruing in, derived from, brought into or received in, Ghana in respect of — “receipts including royalties or periodical or deferred payments of any kind, other than those referred to in the immediately preceding clause of this paragraph, derived from any transaction wherever and whenever made, affecting directly or indirectly land or any natural resources in Ghana, and notwithstanding whether such receipts are paid within or without Ghana.”

Mr. Blankson-Milis agreed that a tax-payer pays income tax only once in respect of one of the six classes. In other words, the classes are in six separate compartments. Accordingly, a timber merchant who buys and sells timber in Ghana, that is, trades in Ghana, will be expected to pay tax on his income from the profits or gains of his trade or business. The

[p.226] of [1971] 1 GLR 213 timber merchant will not be expected to pay income tax again by virtue of his business or trade on his receipts merely because the profits are derived from transactions affecting timber, which is a natural resource in Ghana. If classes (a) and (f) of paragraph 5 are mutually exclusive, then what is the basis for the commissioner’s argument that the company is liable because it is in receipt of money derived from timber, a natural resource in Ghana. There is no basis whatsoever. In the first place, the company is a non-resident person. It does not trade in Ghana, and no profits are sent to Ghana except money sent here for the purchase of timber. If that is the case, the position of the company can be equated with that of a diamond dealer resident in Moscow who purchases diamonds from Ghana through local dealers who are not his agents. He sells the diamonds in Moscow and receives payment. The payment he receives is no doubt derived from mineral resources or natural resources from land in Ghana. In such a case, would the commissioner serve this Moscow resident dealer with notice of assessment under paragraph 5 (f) of the Income Tax Decree? The answer is definitely not. The reason is that the Moscow resident is not resident in Ghana. Paragraph 5 (f) cannot be found in any legislation previous to the time the Income Tax Decree, 1966, was passed. It is therefore a new provision. When one reads the paragraph carefully, one can see that it has a definite purpose. The words “other than those referred to in the immediately preceding clause of this paragraph” are very important. The immediately preceding clause refers to “rents, royalties, premiums and any other profits arising from property.” Thus rents from houses, royalties from gramophone records or premiums from leases are all covered by this paragraph 5 (e).

One would have thought that paragraph 5 (f) applied to residents in Ghana or to companies operating in Ghana who are entitled to such receipts from transactions wherever made affecting land or the natural resources in Ghana, whether the payments are made in Ghana or abroad. If the company is not a resident person in Ghana and it is not operating in Ghana, then it is impossible to imagine how the commissioner can stretch his hand to demand income tax from the company. Here again it may be asked whether the presence of the branch buying office in Takoradi is the determining factor.

There has always been a clear distinction between tax evasion and tax avoidance. A person or a company may arrange his or its affairs in such a way so as to avoid the imposition of income tax and such conduct cannot be condemned as heinous or unpatriotic. Evasion of income tax is another matter. It means deliberate attempt to conceal matters which would necessarily attract the imposition of tax. The existing arrangements of the company are perfectly legitimate and if it is intended by the legislature to drag companies which set up purely buying offices in Ghana into the income tax net, then the relevant legislation must be drafted in clear terms. No bill was published before N.L.C.D. 78 was passed and it is not easy to say what paragraph 5 (f) of the Decree was meant to cover. An attempt can only be made to ascertain the meaning.

[p.227] of [1971] 1 GLR 213

If the company closed its office at Takoradi, it could continue to purchase timber from local residents in Ghana and still carry on business outside Ghana. In such case, paragraph 5 (f) of the Decree would be inapplicable because there would be no basis for assessing the company although some of its receipts would have been derived from the natural resources in Ghana. But does the mere presence of the representative in a branch office at Takoradi attract income tax under paragraph 5 (f) ? If it is agreed that the company is non-resident and it is not also trading or carrying on business in Ghana, then the mere presence of the representative in Ghana cannot affect or alter the company’s non-chargeability to Ghana income tax.

In the present appeal, the commissioner has not shown by his affidavit the evidence on which he relied for the assessment. It is settled law that where a finding is not supported by evidence, it then becomes a question of law and certiorari will lie to quash the finding. That is exactly the case before this court. The question whether a company is carrying on trade or business in Ghana is a question of fact. But that fact, if found, must be supported by some evidence on record.

In conclusion, we hold that:

(1) The Commissioner has jurisdiction to determine whether or not a person or company is chargeable with income tax.

(2) Although the Income Tax Decree, 1966, makes provision for appeals against assessment, yet the machinery for appeals is co-existent with the machinery provided by the Constitution for the supervision by the superior courts over all adjudicating authorities through the use of the prerogative writs or orders.

(3) In the present appeal, certiorari will lie because the finding that the company is carrying on business or trade in Ghana is not supported by evidence and certiorari therefore lies to quash the assessments made by the commissioner.

DECISION

Appeal allowed.

N. A. Y.