Southern Pacific Insurance Company (Fiji) Ltd v Commissioner of Inland Revenue (Fiji)
| Jurisdiction | UK Non-devolved |
| Judgment Date | 24 February 1986 |
| Date | 24 February 1986 |
| Court | Privy Council |
Privy Council.
Mr. K.R. Handley Q.C. and Mr. G.M.G. Johnson (both of the Fijian Bar) for the taxpayer.
Mr. M.J. Scott (of the Fijian Bar) for the Commissioner of Inland Revenue.
Before: Lord Templeman, Lord Ackner, Lord Oliver of Aylmerton, Lord Goff of Chieveley and Sir John Stephenson (Judgment delivered by Lord Templeman).
The following cases were referred to in the judgment:
Edwards v. Bairstow & Anor. ELR[1956] A.C. 14
Southern Railway of Peru Ltd. v. Owen ELR[1957] A.C. 334
Income tax - Company - Total income - Allowable deductions - Treatment for tax purposes of sums set aside in accounts of insurance company for unreported claims - section 19 subsec-or-para (g)Income Tax Act (Cap. 201) (Fiji), sec. 19(g).
This was an appeal by the taxpayer company against a decision of the Court of Appeal of Fiji whereby it disallowed a deduction from the company's profits in respect of certain insurance claims.
The company was in the business of underwriting general insurance, including the provision of compulsory third party motor insurance policies. The company's accounts ran from 1 July to 30 June each year. In its accounts and tax returns for the year ended 30 June 1979, the company deducted $85,000 for claims incurred but not reported in that year. That figure was reached from detailed calculations made in the light of claims experienced during the four-year period since 1974. The Commissioner disallowed the deduction. The Court of Review dismissed an appeal by the company on the grounds that on the evidence, 17.94% of claims were unsuccessful because the third party claimants could not prove negligence on the part of the insured driver.
The company appealed to the Supreme Court and Madhoji J. allowed the deduction to the extent of 82.06% of $85,000. The company accepted the reduction of 17.94% for unsuccessful claims.
The Commissioner of Inland Revenue appealed to the Court of Appeal (Fiji) which disallowed the deduction on the ground that the company's calculations lacked reliability. The Court of Appeal would also have disallowed the deduction on the alternative ground that the sum of $85,000 claimed as a deduction constituted income carried to a reserve fund which was not deductible under section 19 subsec-or-para (g)sec. 19(g) of the Income Tax Act (Cap. 201). The company appealed to the Privy Council.
Held, allowing the taxpayer's appeal:
1. The Court of Review and the Supreme Court, the sole judges of fact, accepted the evidence of the company's witnesses and the reliability of the company's calculations and forecasts. An appeal to the Court of Appeal and to the Board lay only on a question of law, so that the findings of the Court of review and the Supreme Court could not be disturbed unless they were findings which no reasonable tribunal,...
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