IN THE TAX COURT OF THE HIGH COURT OF FIJI
AT SUVA

Action No: HBT 02 of 2014

BETWEEN	:	SCIPIO INVESTMENT LIMITED
										Applicant

AND		:	CHIEF EXECUTIVE OFFICER, FIJI REVENUE &
					CUSTOMS AUTHORITY

										Respondent

Coram				:	The Hon. Mr Justice David Alfred

Counsel			:	Mr. W. Clarke for the Applicant
Mr. S. Ravono for the Respondent

Date of Hearing		:	18 and 19 May 2015

Date of Decision 		:	28 April 2017

DECISION

1.	This is the Applicant’s Application for the determination of the following preliminary questions of law:

(1.)	The legal effect of section 7CA (1) and (2) of the Income Tax Act (ITA).

(2.)	The meaning of “reinvest” in the context of section 7C (5) of the ITA.
(3.)	Did the Applicant invest profit for the year ended 30 June 2009 when that profit was utilized for payment of its expenses and settling debts, thus entitling it to relief from taxation under s.7C (5) ITA.

(4.)	The meaning of the phrase “paid or credited for remittance” within the context of s7(5) ITA.

2.	This summons was filed under O.33 r 3 of the Rules of the High Court and is supported by the affidavit of Elizabeth Morris. She deposed that the matter, on the application of the Applicant, was transferred from the Tax Tribunal to the Tax Court. The dispute between the Applicant and the Respondent (Revenue) relates to branch profits made in 2009. The Applicant contends those profits were never remitted to its head office in Singapore or abroad but were reinvested towards its business operations and activities and kept for meeting its commitments and debt repayments.

3.	A. 	The Agreed Facts include the following: 
(1)	The Applicant is a registered Fiji Brand of Scipio Investments Limited which is incorporated in New Zealand.

(2)	The Applicant had a profit of $5,055,178 for the year ended 30 June 2009.

(3)	The said profit was applied towards meeting its operating and business expenses and its commitments and settling its debts.
               B.	The Issues to be determined are:
(1)	The legal effect of s.7CA (1) and (2) of the ITA.

(2)	The meaning of “reinvest” in the context of s.7CA (3) (sic) of the ITA.

(3)	Did the Applicant reinvest profit for the year ended 30 June 2009 when that was utilized as stated in A (3) above thus entitling it to relief from taxation under s.7C(5) of the ITA.

4.	The hearing commenced with the Applicant’s Counsel submitting that something needed to be done before the Branch Profit Remittance Additional Normal Tax (BPRANT) is triggered. Profits are to be taxed only if they are to be remitted abroad. The net should not be cast too widely to catch branches which paid tax, but only those which avoided paying any tax. The Revenue was interpreting investments as capital investment which is not justified. The object of the Government was to keep money within the country and the Applicant used the money within the country. The tax is on the remittance abroad not as the Revenue says that it catches any profit the moment it earned. The ITA treats the branch as separate from the head office for tax purposes.

5.	Counsel for the Revenue submitted that the Revenue could change its position. In the eyes of the Revenue, the branch and the head office is one entity. The Revenue says the Applicant’s investment has to be of a capital nature.

6.	Counsel for the Applicant in his reply said that the decision in: Punjas Ltd v. Commissioner of Inland Revenue [2006] FJCA 66 (Punjas) could not be authority for the Commissioner to change his mind or his decision as he pleases. The branch and the head office are separate under company and tax laws.

7.	At the conclusion of the arguments, I informed I would take time to consider my decision. Having done so I now deliver my Decision.  At the outset I will say that the Revenue C.E.O. is free to change his position, his view and his judgment in an unfettered manner. The authority for this principle is the decision of the Court of Appeal, Fiji in the Punjas case (see paragraph 47).

8.	Having disposed of that issue, I shall turn to the substantive issue here. It is whether there has to be a payment or a crediting of profits for remittance, before the BPRANT is triggered. 

9.	Depending on the answer, the next question would then be whether that profit has been reinvested to preclude it from coming into the net of the tax gatherer. 

10.	At the beginning, I shall repeat the words of Lord Simonds in: Russell (Inspector of Taxes) v. Scott [1948] AC 433. He said: “There is a maxim of income tax law which, though it may sometimes be overstressed, yet ought not to be forgotten. It is that the subject is not to be taxed unless the words of the taxing statute unambiguously impose the tax upon him”. 

11.	With the above in mind, I turn now to the legislative provision which is the pivot on which the issue turns. This is section 7C of the ITA, which is the charging section for BPRANT. The relevant operative words therein are paraphrased below. Subsection (1) provides that notwithstanding any other taxes imposed, BPRANT shall be paid at the rate of 15% of any branch profits derived in Fiji by a non-resident. 
In my opinion the clearly expressed intention of the lawmaker is that inspite of other taxes, there shall be an additional tax imposed on the branch profits made by a non-resident. Although “remittance” is part of the appellation of this tax, the definitive word is the word “additional” which means “extra”. This is because if indeed “remittance” were the definitive term, then “additional” would not have been included. 

12.	Thus the legislative tax regime here did not contemplate nor envisage any requirement that there be any remittance at all, in the first place, for it to be imposed. It was in reality an additional tax which had to be paid when there were branch profits. However the lawmaker provided an exemption, from this tax, in subsection (5).

13.	Subsection (5) states the profits (on which BPRANT is imposed) applies to the after tax earnings which the head office does not reinvest to the Fiji Branch. Thus the lawmaker’s intention was, if the profits from the business are reinvested into that same business, then the earnings will not be pulled into the extended net of the tax gatherer. In other words the lawmaker laid down that the profits to be subject to BPRANT are the after tax earnings that are not reinvested to the Branch. 

14.	The Oxford Dictionary defines “reinvestment” as “the action of putting the profit made on a previous investment back into the same scheme”. Merriam Webster defines “reinvest” as “to invest (earnings) in a business rather than distribute as dividends or profits”. Black’s Law Dictionary (Tenth Edition) defines “invest” as “to make an outlay of money for profit”, “reinvest” as  “to use (money that one has earned from investments) in order to buy additional investments”; and “reinvestment” as  “a second, additional or repeated investment”. 

15.	It is the duty of the Court to give effect to the lawmaker’s intention. In this I am fortified by the words of Rowlatt J in Cape Brandy Syndicate v Inland Revenue Commissioners [1921] 1 K.B at page 71 where he said “It simply means that in a taxing Act one has to look merely at what is clearly said. There is no room for intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used”. 

16.	It is the Applicant’s case from start to finish that they consider using the profits for the operating and business expenses of the Applicant as the necessary reinvesting that exempts them from having to pay BPRANT on their after tax earnings.  
It is to be noted that BPRANT is levied on the actual earnings (profits) that remain after other taxes have been paid.

17.	But the Applicant did not engage in any reinvestment. What they engaged in were truly using profits to pay operational expenses which are ongoing costs for running the Applicant’s business.

18.	This is made crystal clear from the following paras of the Applicant’s Notice of Objection which state at:

(a)	Para 2.5:  The operating profit for the year 30 June 2009 “was applied                                           toward meeting its operating and business expenses....”

(b)	Para 3.14: The 30 June 2009 after tax profits have been used up to support ongoing business operations and activities.

19.	I turn finally to the words “paid or credited for remittance” within the context of s. 7C (5). These refer to 2 different situations. This is because I construe “or” disjunctively. If I do not do so, it would mean the lawmaker has engaged in tautology. Therefore where, as in this case, the profits were paid for the operational expenditure of the Branch and not reinvested, there was no requirement for any actual remittance to the Head office in Singapore before BPRANT is triggered.  “Credited for remittance” means the earnings (profits) have been received by the Head Office.  It therefore follows that BPRANT has been triggered.

20.	At the end of the day I am of opinion that the intention of section 7C(5) has been expressed clearly and unambiguously, i.e. BRANT is based on profits and profits are after tax earning which are not reinvested. 

21.	In the light of the decision I have reached it is inexpedient to consider the other authorities that Counsel on both sides have cited. It was also not necessary to considers.21(1) (zg) which I consider to be irrelevant and a distraction.  I have of course disregarded the red herrings drawn across the path of the court.

22.	In the event, there being no other issues for the Court to decide, I am able to pronounce my determination on the questions of law in the Summons as follows:

(a)	The legal effect of section 7C (1) and (2) of the ITA is that BPRANT is an additional tax imposed on branch profits derived in Fiji by a non-resident, and  BPRANT is payable by the Applicant. 

(b)	“Reinvest” within the context of section 7(5) of the ITA entails the after tax earnings (profit) being reinvested into the same business of the Branch and not utilized for its operating expenses. 

(c)	The Applicant had not reinvested its profit for the year ended 30 June 2009 and was therefore not entitled to relief under section 7C (5) of the ITA.

(d)	 Nothing turns on the meaning of the phrase “paid or credited for remittance” as defined by the court above, because in my view, BPRANT is payable in either situation.  

Delivered at Suva this 28th day of April 2017. 

________________________
David Alfred
                                              JUDGE
                                                 High Court of Fiji.