The Director General, Mauritius Revenue Authority v Chettiar and Others (Mauritius)
| Jurisdiction | UK Non-devolved |
| Judge | Lord Wilson |
| Judgment Date | 21 December 2015 |
| Neutral Citation | [2015] UKPC 48 |
| Date | 21 December 2015 |
| Docket Number | Appeal No 0054 of 2014 |
| Court | Privy Council |
[2015] UKPC 48
Privy Council
From the Supreme Court of Mauritius
Lord Mance
Lord Clarke
Lord Wilson
Lord Reed
Lord Hodge
Appeal No 0054 of 2014
Appellant
Philip Baker QC
Rajesharma Ramloll
Michael Firth
(Instructed by Royds LLP)
Respondents
Sir Hamid Moollan QC
Salim Moollan
Nandkishore Ramburn
Bishan Ramdenee
Peter Webster
(Instructed by Mr Omar Bahemia)
Heard on 28 October 2015
The question is whether the pension payable to a retiring Vice-President of the Republic of Mauritius pursuant to section 4 of the President's Emoluments and Pension Act 1992 ("PEPA") is exempt from tax.
Mr Angidi Chettiar began to serve as Vice-President on 1 July 1997. When, on 17 February 2002, he ceased to hold office, a pension began to be paid to him pursuant to section 4 of PEPA. But the Commissioner of Income Tax ("the Commissioner") caused income tax to be deducted from it and, when challenged on behalf of Mr Chettiar, he confirmed his decision that the pension was not exempt from income tax. Mr Chettiar asked the Assessment Review Committee ("the Committee") to review the Commissioner's decision but on 13 October 2005 the Committee upheld it. Thereupon Mr Chettiar filed notice of appeal to the Supreme Court. He again served as Vice-President from 25 August 2007 until his death on 15 September 2010. His appeal had remained pending throughout that period and, following his death, his heirs were substituted as the appellants. Equally the Mauritius Revenue Authority ("the Authority") had by then assumed the functions of the Commissioner and had become the respondent to the appeal. On 9 September 2013 the Supreme Court (Domah and Mungly-Gulbul JJ) allowed the appeal and declared that Mr Chettiar's pension had been exempt from tax. Against this decision the Authority appeals to the Board.
The British took control of Mauritius in 1810 and it remained a colony until 12 March 1968. During that period it had a Governor, who was appointed by the British government. On 12 March 1968 it became independent. A constitution was enacted under which The Queen was the Head of State and the Crown was to appoint a Governor-General. On 12 March 1992 Mauritius became a republic. The constitution was amended accordingly. Since that date ("Republic Day") the President has been the Head of State and he has been assisted by a Vice-President.
Among the amendments to the constitution which took effect on Republic Day was the replacement of its original Chapter IV by a chapter entitled "The President and the Vice-President of the Republic of Mauritius". The replacement was achieved by section 5 of the Constitution of Mauritius (Amendment No. 3) Act 1991 ("the 1991 Amendment Act"). Within the new Chapter IV was the following section:
"30A. Privileges and immunities.
(1) Subject to section 64(5) no civil or criminal proceedings shall lie against the President or the Vice-President in respect of the performance by him of the functions of his office or in respect of any act done or purported to be done by him in the performance of those functions.
(2) Subject to section 64(5), no process, warrant or summons shall be issued or executed against the President or the Vice-President during his term of office.
(3) The President or the Vice-President shall be entitled —
(a) without payment of any rent or tax, to the use of his official residence;
(b) to such emoluments, allowances and privileges, exempt from any tax thereon, as may be prescribed.
(4) No alteration to any of the entitlements specified in subsection (3) which is to the disadvantage of the President or the Vice-President shall have effect without his consent."
So section 30A(3)(b) of the Constitution, the terms of which have remained unchanged since Republic Day, provides that such of the Vice-President's "emoluments … as may be prescribed" shall be "exempt from any tax thereon".
The first task is to ascertain the meaning which should be given to the word "emoluments". It is not defined in the Constitution. Is the solution therefore to be found in the ordinary law about income tax?
The Income Tax Act 1974 ("the 1974 Act") was in force on Republic Day and remained in force until 1 July 1996, when it was replaced by the Income Tax Act 1995 ("the 1995 Act").
Section 7(1) of the 1974 Act provided as follows:
"The following income shall be exempt from income tax — the emoluments of the Governor-General, whether or not he is on leave …"
With effect from Republic Day the word "Governor-General" above was replaced by the word "President": see section 23(2)(a) of the 1991 Amendment Act. It is irrelevant for present purposes that for some reason the constitutional exemption from tax of the Vice-President's emoluments (which on any view included his salary) was not reflected in the ordinary law about income tax until the coming into force of the 1995 Act.
So what was the meaning of the word "emoluments" in relation to the President under the amended section 7(1)(a) of the 1974 Act? Happily it was defined in the Act itself. Section 2(1), which was the interpretation section, provided:
"In this Act —
…
'emoluments' means any advantage referred to in section 11(1)(b)
…"
Section 11(1)(b) referred to "any advantage in money or money's worth" which was:
"(i) salary, wages …;
(ii) superannuation, compensation for loss of office, pension …."
It is therefore clear that under the 1974 Act the word "emoluments" included "pension". It is unsurprising, therefore that, according to evidence accepted by the Committee, at least one Governor-General had not been charged to income tax on his pension; nor is there reason to think that the other Governors-General had been treated differently. More importantly there seems at first sight no reason to doubt that, in inserting section 30A(3)(b) into the Constitution to the effect that the prescribed "emoluments" of the President and Vice-President should be exempt from tax, Parliament in 1991 intended that the word "emoluments" should bear the meaning which it bore in the 1974 Act itself.
But where were the emoluments of the President and Vice-President "prescribed"?
They were prescribed in PEPA.
PEPA had its second reading in the National Assembly on 26 May 1992 (as to which see para 25 below); it became law on 29 May 1992 and was given retrospective effect back to Republic Day. It described its purpose as being to "provide for the emoluments of the President and the Vice-President and for pension to retiring Presidents". There was clearly a deliberate decision at that time not to pay a pension to retiring Vice-Presidents. Section 3, which was headed "Emoluments of the President and Vice-President", provided, by subsection (1), that the President should be paid "by way of emoluments" a salary of Rs 35,000 per month and a duty allowance of Rs 10,000 per month; and, by subsection (2), that the Vice-President should be paid "by way of emoluments" a salary of Rs 24,000 per month and a duty allowance of Rs 10,000 per month. Section 4, which was headed "Pension and other benefits to retiring Presidents", provided, by subsection (1), that a retiring President should be paid a monthly pension equivalent to two-thirds of his salary for the remainder of his life; by subsection (2), that he should not undertake any remunerative employment during the remainder of his life; and, by subsection (3), that he should for the remainder of his life also be entitled to the service of a clerk-typist and an office attendant free of charge and to the use of a state motor-car with chauffeur.
In 1997, by the President's Emoluments and Pension (Amendment) Act 1997, Parliament decided to provide for the payment of a pension to retiring Vice-Presidents. By section 5(b), section 4(1) of PEPA was replaced by a provision which entitled a retiring Vice-President, as well as a retiring President, to a pension equivalent to two-thirds of his salary; and, by section 5(c), section 4(2) and (3) of PEPA was enlarged so as also to impose upon a retiring Vice-President the prohibition against undertaking remunerative employment and to entitle him to the service of a clerk-typist and of an office attendant and to the use of a chauffeur-driven car.
Since 1997 PEPA has been amended on four further occasions but, on each occasion, only in order to increase the amount of the salaries and duty allowances of the President and the Vice-President.
It is important to note that PEPA says nothing in respect of the liability or otherwise of the President and Vice-President to income tax on the salaries, duty allowances, pensions and retirement perquisites for which it provides. Apart from in the Constitution itself, their liability or otherwise to tax in these respects has remained governed first by the 1974 Act and latterly by the 1995 Act.
The structure of the 1995 Act is different from that of the 1974 Act but at first sight it seems as clear under the 1995 Act that the pensions of the President and Vice-President are exempt from income tax as it was clear under the 1974 Act that the President's pension was exempt from income tax. There are terminological differences but at first sight they seem insignificant. Within the 1995 Act there are, in this respect, the following four provisions around which to navigate:
(a) First, section 7(2) provides:
"Any income specified in Part II of the Second Schedule shall be exempt from income tax."
(b) Second, item one of the second schedule specifies:
"Emoluments derived from the office of the President or Vice-President."
These words are to be contrasted with the words "the emoluments of the President …" in section 7(1)(a) of the 1974 Act as amended.
(c) Third, section 2, which, as in the...
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