Commissioner of Income Tax v Nisbet (Civil Appeal No. 23 of 1951) [1952] EACA 69 (1 January 1952)

## COURT OF APPEAL FOR EASTERN AFRICA

## Before SIR BARCLAY NIHILL (President), SIR NEWNHAM WORLEY (Vice-President) and Sir Hector Hearne, C. J. (Kenya)

## COMMISSIONER OF INCOME TAX, Appellant (Original Appellant) ν

## JOHN GRAY NISBET, Respondent (Original Respondent) Civil Appeal No. 23 of 1951

(Appeal from the decision of H. M. Supreme Court of Kenya, Windham, J.)

Income Tax—Order, section 24 (1) $(a)$ —Husband claiming deductions in respect of wife wholly maintained but permanently separated.

The respondent claimed to be entitled to deduct from his total income $£350$ under section 24 (1) (a) of the Income Tax Ordinance, alleging that during the year of assessment he had wholly maintained his wife from whom he had been separated for a number of years. On assessment, he appealed to the local committee who allowed his appeal. The appellant appealed to the Supreme Court, which dismissed his appeal subject to the determination of a question of fact.

Hearne, C. J. (Kenya), dissentient.

Held (8-5-52).—There was no conflict between section 24 (1) (a) and section 34 (4) of the Ordinance and the respondent was not entitled to any deductions either under section 24 (1) (c) or under section 34 (3) $(d)$ .

Cases cited: Baker v. Baker, (1949) 66 T. L. R. Pt. 1, 81, Papadopoulos v. Papadopoulos, (1930) P. page 55, Bjordal v. Commissioner of Income Tax, E. A. C. A. Civil Appeal 77/51, Cape Brandy Syndicate v. I. R. C., (1921) 1 K. B. 64, Canadian Eagle Co. Ltd. v. The King, (1946) A. C. 119, Nugent-Head v. Jacob, (1948) L. R. A. C. 321.

Appeal allowed.

Newbold, with Bechgaard, for appellant.

Schermbrucker for respondent.

JUDGMENT (delivered by SIR HECTOR HEARNE, C. J. (Kenya)).—This is an appeal from the judgment of a Judge of the Supreme Court of Kenya dismissing, subject to the determination of a question of fact, the appeal of the Commissioner of Income Tax from a decision of the "local committee" allowing the appeal of the respondent in respect of Income Tax assessment No. 3624 of 1947. The only question for decision is whether the respondent is entitled to a deduction of £350 under section 24 (1) (a) of the Income Tax Ordinance for the purpose of the assessment.

It was agreed that the respondent and his wife had been separated for a number of years "in such circumstances that the separation is likely to be permanent" but, alleging that his wife had been wholly maintained by him during the period to which the assessment related, namely the year preceding the year of assessment, the respondent claimed that he was entitled to deduct from his total income, in order to arrive at his chargeable income, the sum of £350 under section 24 (1) (a) of the Ordinance. This claim which was contested in point of law by the appellant was upheld by the learned Judge who remitted "the case to the Commissioner to decide, upon evidence, the question of whether during the relevant period the respondent's wife was wholly maintained by him". He then made the following order: $\rightarrow$

"If the Commissioner finds that she was so maintained then, this appeal will be dismissed; if he finds to the contrary then it will be allowed on the ground that the respondent had failed to prove to the satisfaction of the Commissioner that he had a wife living with or wholly maintained by him in the year preceding the year of assessment."

In a carefully reasoned judgment the learned Judge expressed the view—

- (a) that the words "or wholly maintained by him" in section 24 (1) (a) are entirely nugatory for the reason that even if a wife is wholly maintained by her husband, she would not be regarded as a wife, unless she was living with him, by reason of the provisions of section 34 (3) (a); and - (b) rejected the submission that the deduction which the respondent could claim fell under section 34 (3) (b). He then held that the words "for all purposes of this Ordinance" in section 34 (3) (a) must be read "as being subject to an implied exception in cases where the context manifestly otherwise requires, in particular in the case of section 23 (1) (a)".

Section 24 (1) (a) reads: $-$

"In the case of an individual resident in the Colony in the year immediately preceding the year of assessment who proves to the satisfaction of the Commissioner that in the year immediately preceding the year of assessment—(a) he had a wife or wives living with or wholly maintained by him, there shall be allowed a deduction of three hundred and fifty pounds."

Section 34 (3) reads: $-$

"34 (3) (a). When a married woman is not living with her husband each spouse shall for the purposes of this Ordinance be treated as if he or she were unmarried.

(b) Any amount payable by way of alimony or allowance under any $\frac{1}{2}$ judicial order or written agreement of separation or under any decree of divorce shall be returned as the separate income of the person to whom it is paid and shall be allowed as a deduction in computing the total income of the person by whom such amount is paid."

Section 34 (4) reads: $-$

$(4)$ For the purposes of this Ordinance a married woman shall be treated as living with her husband unless—

- (i) they are separated under an order of a court of competent jurisdiction or by deed of separation; or - (ii) they are in fact separated in such circumstances that the separation is likely to be permanent; or - (iii) she is resident in the Colony and her husband is not resident in the Colony or another East African Territory."

Section 18 (1) of the Finance Act, 1920, to which reference will be made is as follows: -

"18 (1). The claimant, if he proves that for the year of assessment he has his wife living with him, or that his wife is wholly maintained by him during the year of assessment, and that he is not entitled in computing the amount of his income for that year for the purposes of the Income Tax Acts to make any deduction in respect of the sums paid for the maintenance of his wife, shall be entitled to a deduction of one hundred and eighty pounds and in any other case to a deduction of one hundred and ten pounds."

Regarding (a), if section 34 (3) (a) was the only section in the Ordinance which was required to be read with section 24 (1) $(a)$ and if the combined effect of these two sections made the words "or wholly maintained by him" entirely nugatory, that is to say nugatory in all circumstances where a husband and a wife were not living together, then it would be necessary to resolve the conflict in some way as the Judge sought to do. But there is another section which requires to be considered. I refer to section 34 (4). In contra-distinction to section $34$ (3) (a), which deals negatively with a woman who though married is not included in the term "married woman", section 34 (4) provides that a married woman shall be treated as living with her husband unless she and her husband are separated in certain specified circumstances which are set out in (i), (ii) and (iii) of the section. If, therefore, referring to (ii) a husband and a wife are not separated in such circumstances that the separation is likely to be permanent, but in such circumstances that the separation is in fact temporary, the latter shall be treated as living with the former. It follows, as section 34 (4) operates "for the purposes of this Ordinance", including the purpose of section 24 (1) (a), that even if a wife is not living with her husband she would still be regarded as a wife, and assuming the husband was wholly maintaining her, he would be entitled to a deduction from his total income of £350, if they were separated in such circumstances that the separation was not likely to be permanent but in such circumstances that the separation was in fact temporary. It would, therefore, appear that the view taken by the learned Judge that the words "or wholly maintained by him" in section 24 (1) (a) are nugatory in all circumstances where a husband and a wife are not living together is incorrect.

Regarding $(b)$ , section 34 falls within the sub-title A (husband and wife) of Part VIII (persons assessable). Its primary purpose is to lay down when, in the case of a husband and a wife, there shall be a single assessment and when there shall be separate assessments, and it follows from the provisions of Part VIII A that in the case of a husband and a wife who are separated under an order or by deed of separation or in circumstances which are likely to be permanent there shall be separate assessments. Section 24 (1) $(a)$ falls within Part VI of the Ordinance which is entitled "Personal Deductions" and yet, strangely enough, the deduction that may be claimed for payments made to wife separated from a husband under an order of court or by deed of separation is contained in Part VIII, viz. section 34 (3) (b). Reading section 24 (1) (a) with Part VIII A as a whole, I have come to the conclusion that the intention of the legislature was to provide: $-$

- (1) that, where in the case of a husband and wife, there is one assessment, as for instance where they are living together or are only temporarily separated, section 24 $(1)$ $(a)$ applies; and - (2) that, where in the case of a husband and wife, there are separate assessments, as for instance where they are separated under an order of court or by deed of separation or in such circumstances that the separation is likely to be permanent, section 24 (1) (a) does not apply but section 34 $(3)$ $(b)$ does.

I have come to the conclusion in $(2)$ for these reasons.

The omission from section 24 (1) $(a)$ of any provision similar to the provision "and that he is not entitled... shall be entitled... one hundred and ten pounds" appearing in section 18 (1) of the Finance Act, 1920 (*supra*), which was no doubt before the draftsman, appears to have been a deliberate omission due to the fact that relief, where there is not a single but separate assessments, has been provided in section 34 (3) (b): again the words "any amount payable by way of alimony..." in section 34 (3) (b), by reason of their proximity to section 34 (3) (a) which makes provision in general terms for separate assessments when a husband and a wife are not living together, and by reason of the use of the phrase "by way of" of which one of the meanings given in dictionaries is "in the character of", are capable in my view of being construed to include all payments made when the assessments are separate, including payments made when a husband and a wife are separated in such circumstances that the separation is likely to be permanent: and finally if in the last-mentioned case the amount paid to a wife is in excess of £350, the limitation of the deduction to £350 under section 24 (1) (a) would be to the disadvantage of the taxpayer.

For the reasons I have given I hold that the deduction to which the respondent is entitled is governed by section 34 (3) (b). This was in fact conceded at the hearing of the appeal by the appellant on whose behalf it was only argued that section 24 (1) (a) had no application. It is, therefore, on the basis of the concession made by the State to the taxpayer, as well as on the basis of my own views, that I would direct that a deduction under section 34 (3) (b), subject to determination of a question of fact by the Commissioner to which I have referred, should be allowed for the purposes of assessment No. 3624 of 1947.

SIR NEWNHAM WORLEY (Vice-President).—The material facts in this appeal are set out in the judgment prepared by the learned Chief Justice of Kenya and I need not repeat them.

I also have found difficulty in construing this legislation which is yet another instance of the difficulties which so frequently confront this Court when called upon to construe enactments modelled upon English Acts but with some of the original provisions modified or omitted.

I have found it helpful to bear in mind that section 24 is one of a group of charging sections while section 34 is one of a group of collecting sections, the distinction being that the former group defines what income is chargeable for tax while the latter group defines what persons are liable to pay tax on their chargeable income as previously defined. Confining myself to consideration of the respective liabilities to tax of a husband and wife in respect of their incomes, the fundamental position is that the income of a married woman living with her husband is to be deemed his income and charged in his name (section 34 (1)). That is to say, there is to be only one assessment in respect of the incomes of both and that assessment is on the husband. Section 24 (1) $(a)$ is intended to deal only with that case and can have no application to a case where the wife is separately assessed (except perhaps where there has been an apportionment of tax under section $34$ (2)).

Section 34 (3) lays down the rule as to when a married woman shall be liable for tax on her chargeable income, namely, when she is not living with her husband; and sub-section (4) of that section prescribes the only three cases in which a married woman is to be treated as not living with her husband. It is conceded that the respondent and his wife come within the second case, namely that they are in fact separated in such circumstances that the separation is likely to be permanent. The case therefore falls within sub-section $(3)$ $(a)$ and, if the wife were liable to Kenya income tax, she would be separately assessed and her income would not be charged in the name of the husband. (In the present case, she is not liable, being a non-resident, but that does not affect the argument.)

The first question then to be decided is whether the respondent should be allowed to deduct from his total income the payments which he is making to her for her maintenance. He can only do so if they are "amounts payable" within the meaning of paragraph $(b)$ of section 34 (3). In my opinion they are not and on this point I am in agreement with the learned judge in the Court below. It was suggested by counsel for the appellant that the words "payable by way of" are used to show that the categories which follow, namely alimony or allowance under any judicial order or written agreement of separation or under any decree of divorce, are merely illustrations of the type of payments

which can be allowed as a deduction under the paragraph. My answer to that is that if the legislature intended to include voluntary payments by way of maintenance under an informal agreement between the spouses that they will not live together it would have been perfectly simple for them to say so. I use the term "voluntary payments" because where the separation is consensual, the husband is not in law responsible for the wife's maintenance, unless he has accepted a liability, express or implied, to maintain her (Baker v. Baker, (1949) 66 T. L. R. Part 1, 81; Papadopoulos v. Papadopoulos, (1930) P. p. 55 at page 69).

I am well aware that this suggestion was made in the supposed interest of the respondent and that the result of rejecting it will be that, unless the respondent can establish a right to the deduction allowed under section 24 (1) $(a)$ , he will get no allowance at all for the payments he is in fact making to his wife. That may work hardship in the present case and this case may reveal a casus omissus in the Ordinance, but in my view the Courts cannot strain the construction of a section to avoid hardship in a particular case. As I have said in Civil Appeal No. 77 of 1951 (Bjordal v. Commissioner of Income Tax, the proper canon for construction for a taxing statute is, in my opinion, that it must be construed either against the taxing authority or the person sought to be charged with perfect strictness-so far as the language of the statute enables the judges to discover the intention of the legislature. "In a taxing Act one has to look merely at what is clearly said. There is no room for any 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" (per Rowlett, J. in Cape Brandy Syndicate v. I. R. C. (1921) 1 K. B. 64, 71, cited with approval by Viscount Simson, L. C. in Canadian Eagle Co. Ltd. v. The King (1946) A. C. 119, 140). Moreover, it has been said more than once that where there is ambiguity the principle that a taxing statute should be construed in favour of the taxpayer does not apply to a provision giving the taxpayer relief in certain cases from a section clearly imposing liability.

There is also the interest of the wife to be considered. The effect of allowing a deduction for amounts paid by the husband under section 34 (3) (b) is that they are deemed to be income in the hands of the wife and she will be separately assessable for tax in respect of them. In the present case the wife is not liable for Kenya income tax but we have to consider the matter on principle and there may well be cases, now or hereafter, in which the wide construction of paragraph $(b)$ now contended for would work hardship on a wife.

If I am right so far, then the next question is can the respondent claim the deduction allowed under section 24 (1) $(a)$ ? He clearly cannot do so on the ground that his wife is "living with" him, because by definition in section 34 (4) she is not. He therefore relies upon the words "or wholly maintained by him", his contention being that if his wife comes within that description it is wholly immaterial whether she is living with him or not. The learned judge in the court below accepted this contention: he thought that there was an irreconcilable conflict between section 24 (1) $(a)$ and section 34 (3) $(a)$ and that the only way he could give any meaning or effect to the expression "or wholly maintained by him" was to read section 34 (3) (a) as subject to the exception of section 24 (1) (a).

With respect there are in my view two serious objections to this construction: firstly, it is contrary to the general rule that if there is an irreconcilable conflict the later provision should prevail and, secondly, it runs counter to what I consider to be the fundamental purpose of section 34 (3) $(a)$ , namely that when a married woman is living apart from her husband the spouses are to be treated for the purpose of the Order as two separate persons. The wife is assessable as if she

where a feme-sole and the husband may deduct from his total income any payments he is making to her which come within section 34 (3) (b). Clearly he cannot deduct these payments and at the same time claim that he is "wholly maintaining a wife" for the purposes of the deduction under section 24 (1) $(a)$ which would be the logical result of the construction contended for by the respondent.

In my view once it is established that the wife is living apart from her husband within the definition in section 34 (4), it becomes quite unnecessary to consider section 24 (1) (a) at all: the two sections deal with contrasting situations which cannot both exist at the same time.

But I am not myself convinced that there is necessarily an irreconcilable conflict between these two provisions of the Ordinance, if one keeps clearly in mind their different purposes and has regard to the change of language. Section 34 (3) merely enacts that a married woman not living with her husband is to be treated for the purposes of the Ordinance as though she were unmarried: but she is still in law a wife (unless there has been a divorce) and I think it is quite understandable that when the draftsman was using the term "wife" in section 24 (1) $(a)$ , he thought it advisable to add words of limitation which would show clearly the circumstances in which the deduction could be claimed.

It may be that even the words "living with" in section 24 (1) (a) are on a strict construction tautologous as the learned Judge thought. But, in my view, it would be wrong to pay so much attention to the grammar as to lose sight of the substance: the grammarian's logic must sometimes yield to the lawyer's good sense. I think we are entitled to consider that the draftsman of a statute sometimes inserts words which are strictly unnecessary in order to make his meaning immediately clear so that he who runs may read. The Income Tax Ordinance is one which directly affects and is closely studied by many laymen and it is, I think, permissible to suppose that the draftsman may have been influenced by this consideration when drawing this provision.

If this much is conceded then any apparent conflict between the sections is resolved and the scheme of these sections is seen to be a logical whole providing for three contrasted situations, no two of which can exist at the same time. In seeking to set them out I shall borrow largely from the language of Viscount Simon in Nugent-Head v. Jacob (1948) L. R. A. C. 321:-

1. The first is the case where there has been no rupture of marital relations and the parties are living together in the ordinary way of husband and wife. The fact that one of them is physically away from the other for a time, even a long time, whether from duty, illness or other cause, is no reason for saying that the wife is not "living with her husband". This case comes within the scope of section 24 (1) $(a)$ .

2. The second is the case where there has been a rupture in normal matrimonial relations, arising from a decree of judicial separation or from the parties executing a deed of separation (section 34 $(4)$ (i) or from a more informal agreement between the spouses that they will not live together but which is intended to be permanent (section 34 (4) (ii)). This case comes within the scope of section $34$ (3).

3. The third is the case "in which a husband and wife, who have not been getting on well together, agree that they will live separate from one another for a time, say a couple of years, and will then see whether it would not be better to come together again and live in a common home as an ordinary man and wife", the husband in the meantime performing his legal obligation to maintain the wife.

Such a case is, I should think by no means uncommon. Lord du Parcq said in Nugent-Head v. Jacob (supra at p. 331): $-$

"Few judges who have had to deal with cases in which marital relations have come under review can have failed to observe that separations which are caused by a rift in the marriage are by no means inevitably permanent. Not every 'desertion' (for instance) endures for the full three years which make it a sufficiently grave matrimonial offence to be ground for a divorce. As for allowances and remittances, I should have thought that nothing was more common than for a husband who has agreed with his wife that she should live separate and apart from him to perform his legal obligation and maintain her."

Such a case would, I venture to think, come within the scope of section 24 (1) (a) and is the type of case which the draftsman envisaged when he used the expression "or wholly maintained by him". Nor does it present any conflict with or contradiction of section 34 (4), for that sub-section merely provides that every married woman who does not come into one or other of the three prescribed cases is "to be treated" as if she were living with her husband and the consequence of so treating her is that there is one and only one assessment on the husband, unless special application is made under section 34 (2) for separate assessments.

In my opinion, therefore, this appeal should be allowed, the judgment of the Supreme Court set aside and the assessment as originally raised be confirmed. As the appellant has not asked for costs, each party should bear his own costs of this appeal and of the appeal to the Supreme Court.

SIR BARCLAY NIHILL (President).—Before writing this judgment I have had the advantage of studying the judgments which have just been delivered by the Vice-President and the learned Chief Justice of Kenya. Like my learned brothers, I have not found it easy to construe these sections of the Kenya Income Tax Ordinance.

After careful consideration, however, I have come to the same view as the learned Vice-President that in law the respondent is not entitled to any deductions at all. I base this conclusion on the following reasoning.

Admittedly the respondent's wife was not living with him either actually or fictionally. Not actually because the appellant lives in Kenya and his wife in the south of France, and not fictionally, because it is admitted that the two are separated in such circumstances that the separation is likely to be permanent. Therefore, by reason of section 34 (4) (ii), the wife cannot be treated as if she were living with her husband. Now by section 34 (3) $(a)$ , when a married woman is not living with her husband, "each spouse shall for all the purposes of this Ordinance be treated as if he or she were unmarried". Applying this provision back to section 24 (1), the only construction I feel able to place on the subsection is that the appellant's wife "in law" is not, for the purposes of the subsection, treatable as a wife at all. Accordingly the allowance the appellant has made his wife "in law", which is the subject-matter of appeal, whether it did in fact wholly maintain her or not, was not an allowance made to his "wife" as that word is artificially limited by the provisions of the Ordinance. The appellant is therefore not entitled to the deduction of £350 referred to in section 24 (1) (c) under any circumstances.

Is he, however, by reason of the provisions of section 34 (3) (b), allowed to deduct from his total income the amount he has paid over to his wife "in" law" during any year of assessment? Here I find myself unable to agree with the learned Chief Justice of Kenya. I think that it would be adding something to the sub-section which is not there, to hold that the appellant's payments to his wife came within the phrase "any amount payable by way of alimony or allowance under any judicial order or written agreement of separation, or under any decree of divorce". We know the facts in this case. The parties are not divorced nor are they separated by any judicial order or written agreement of separation. The words "by way of" cannot in my view in this sub-section be read as if they were in fact "in the nature of", but must be construed as pertaining strictly to the words "alimony or allowance under any judicial order or written agreement of separation, etc.". "Alimony" in law according to Webster's Dictionary is "an allowance made to a woman for her support out of the estate or income of her husband, or of him who was her husband, upon her legal separation or divorce from him, or during a suit for the same". It was necessary here therefore for the draftsman to add the words "or allowance" to cover payments from the husband under a written agreement of separation for such payments would not fall under the term of "alimony".

As the payment made by the respondent in this case is neither "alimony" nor an allowance paid in pursuance of a written agreement of separation he is not in my view entitled to deduct under this sub-section. The appeal is allowed, each party to bear its own costs in this Court and in the Supreme Court of Kenya.

The judgment of the Supreme Court will be set aside and the additional assessment No. 3624 of 15th August, 1947, be confirmed. The effect of this order will be that the respondent will not be entitled to the deduction of £350 claimed under section 24 (1) (a). In strict law, in the view of the majority, he is also not entitled to any deduction under section 34 (3) $(b)$ .

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