Commissioner of Inland Revenue v. Sanford Yung-tao Yung
Read the full judgment text of HCIA 3/1977 on BabelCite. This HCIA judgment.
1. This is an appeal by the Commissioner of Inland Revenue by way of a case stated from the decision of a Board of Review under the provisions of section 69 of the Inland Revenue Ordinance (Cap. 112), (hereinafter called 'The Ordinance').
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HCIA000003/1977
Coram: Briggs, C. J. Date of Judgment: 28th October, 1977. ----------------- JUDGMENT ----------------- 1. This is an appeal by the Commissioner of Inland Revenue by way of a case stated from the decision of a Board of Review under the provisions of section 69 of the Inland Revenue Ordinance (Cap. 112), (hereinafter called 'The Ordinance'). 2. The taxpayer claimed various sums as allowable deductions under section 42B (1) (e) of the Ordinance for the year 1975-76. We are here only concerned with one of the sums, viz. a sum of $3,000 paid by him to the Community Chest of Hong Kong in 1975. 3. It is agreed that the Community Chest of Hong Kong is an approved charitable body, for the purposes of the Ordinance and as such is exempt from taxation under the provisions of section 88 of the Ordinance. 4. The taxpayer claimed that this sum of $3,000 paid by him to the Community Chest was a "donation to an approved charity" within the meaning of that phrase as is contained in section 2 of the Ordinance. 5. This reads, in part, as follows:-
6. The Assessor disallowed the taxpayer's claim. On objection before the Commissioner of Inland Revenue the decision of the Assessor was upheld. The taxpayer appealed from the decision of the Commissioner to a Board of Review, which allowed the appeal, holding that the sum in question was an allowable deduction. The members of the Board were equally divided but the Chairman cast a second vote in favour of allowing the appeal, under section 65 (4) of the Ordinance. 7. The Commissioner applied to the Board to state a case on a question of law to the High Court. 8. The facts are simple, and clearly set out in the case stated. In March 1975 the Community Chest held a Gala Premiere of a film in order to raise funds. The taxpayer purchased ten seats for the performance at $300 per seat, and it is this sum of $3,000 that is the subject matter of this appeal. It is the case for the taxpayer that the sum was a donation to the Community Chest. 9. At the performance of the film there was a reception. And the occasion was important socially. It is in evidence that the taxpayer purchased the tickets to entertain his wife and certain business clients. He also attended himself. After the performance the Community Chest published an account in which the amount received for the sale of tickets for the performance is shown as a separate item from the amount of donations to the Community Chest made on that occasion or in connexion therewith. 10. It seems to me that this is a simple matter. In order to succeed the taxpayer must show that the $3,000, the cost of the tickets, was a donation to the Community Chest. "Donation" in its ordinary sense means a gift. But the taxpayer did not give the Community Chest $3,000. The $3,000 represented the purchase price of the seats for the performance. The transaction was a contractual transaction not a gift. The taxpayer paid a huge sum for his tickets it is true, and almost certainly did so in order to benefit the Community Chest. But he did receive a material benefit for his $3,000. It is not absolutely clear on the facts as set out in the case stated who was the exact party with whom the taxpayer was contracting for the purchase of the tickets. But what is clear is that he paid the money to the Community Chest who received it and gave him a receipt and he received his tickets and indeed attended the performance. These facts clearly to my mind show that the sum was not a donation. 11. Mr. Airey for the Commissioner drew the attention of the Court to a useful Australian authority: The Commissioner of Taxation of the Commonwealth of Australia v. McPhail (1). The material portion of the headnote reads as follows:-
It is unnecessary to set out the facts but in his judgment, Owen, J. has this to say:-
12. Though the court in that case was dealing with the word 'gift' and not the word 'donation', and with a different piece of legislation from that with which we are here concerned I think that the passage quoted above accurately represents the law. 13. Counsel suggested to the court that if this was so, when a person gave a street collector a sum of money for a poppy on November 11th, the receipt of the poppy would disentitle the donor to claim that he had made a donation or gift. These facts are not before the court but I do not think that one can be said to 'purchase' a poppy in those circumstances, rather the handing over of the poppy is analogous to a receipt, an acknowledgment that a sum has been given. And in any event it cannot be said that the receipt of a flag is, in the words of Owen, J. quoted above an "advantage of a material character". 14. In the proceedings before the Board of Review, the taxpayer relied upon two cases: The Overseers of the Poor etc. v. The Art Union of London (2) and the Institution of Mechanical Engineers v. Cane (3) 15. These cases were brought under certain Rating Acts which gave advantages to institutions or other bodies which were wholly or in part supported by "voluntary contributions". In each case the matter to be decided was what the phrase "voluntary contributions" meant in the circumstances of the case, and this centred on the benefits received by a member of the institution in question upon him paying his subscription or contribution; what in fact did a contributing member get out of the institution for his membership? 16. It is clear from the case stated that the Board of Review relied on these decisions by way of analogy: that "voluntary contribution" was analogous to 'donation' for the purpose of the present case. I do not think that that is right. I do not think that it is proper to draw such an analogy. The two cases cited above deal with quite different facts and with legislation concerned with rating and not taxation. They are concerned with payments of subscriptions by members of institutions and not with a single transaction in which the taxpayer received a material benefit for his donation. It is a far cry from the payment of a subscription to an institution to the purchase of tickets for a film. 17. In my view this appeal must be allowed. And the question for the opinion of this court must be answered in the affirmative with the result that I hold that the sum of $3,000 is not an allowable deduction for the purposes of the Ordinance. The Commissioner is to have his costs of the appeal.
Representation: Airey for the Crown/Appellant. Andrew Li (Hastings & Co.) for Respondent. (1) (1966) 117 C.L.R. 111. (2) (1869) A.C. 296. (3) (1961) A.C. 696. |