S & J Registrars (Pty)ltd v The Controller of Taxes (SCA 9 of 1985) [1986] SCCA 2 (5 September 1986)

.c IN TIIECOURT OF APPEAL OF SEYCHELLES CIVIL APPEALNO.9 OF 1985 S & J R:ffiISTRAHS (pty) LTD. . . . . . • • APPELLANTS THE CONTROLLER OF T. UES. • . . . . . - . • RESPONDENT VERSUS JUDGMENTOF ltiUSTAFA, P. The appellant, a limfted liability companyincorporated in Seychelles, had its accounts audited bya firm of auditors resident in England, in 1~81 and 1982. The auditor's paid by the appellant. The respondent (the Controller of Taxes) was of the fees were Ra. 4,000 per year, which fees were d~ view that the auditors were liable to pa;ytax upon such fees as royalties in terms of Section 104 of the IncomeTax Decree 1978, and assessed the appellant to tax at Rs, 600 for each year as the appellant was the person on whomsection 105 of the Decree imposes the onus of withholding taxes. The appellant maintainec that it was not liable tq. wit9hold any tax as the fees paid to its auditors were not royalties within the ,definition of that word in Section 2(1) of the Decree. ~ . The appellant's objections were disallowed b,y the respondent and the appellant unsuccessfully appealed to the SupremeCom.t(Seaton, .. C. J.). It ia now appealing to this Court. The appeal, in TIIY view, turns on the meaning~f the word royal ties as defined in Section 2(1) of .the Tax Decree which readS: royalties to which they "includes pB¥mentsof a:nyIq.ndto the extent are paid as consideration ror the use or, or the right use any copyright, patent, design or model, plan, secret formula or process, right, or industrial com::tercialor _ . ...:;= scientific or for the supply of scientific knowledge, information or assistance and includes royalties or other amountspaid in respect of the operation of mines or quarries or the extraction or removal of natural resources". trade mark, or other like property or technical to equipment industrial or co~ercial The Chief Justice held tha.t the definition of royalties in the Decree maybe broken downinto three parts. Royalties (1) is ~nt for the right to such things as copyright patents etc. (loosely called intellectual property) (2) paymentfor such things as services supplied b,y co~ercial,technological, expertise or assistance and (3) paymentfor or in industrial or scientific consideration of the extraction of mines and minerals. He stated that the first and third categories in the definition are the usual and familiar ones found in dictionaries and in commonusage, and the second category clearly gives •••••/2• .~--~--~--- ..-.-.--.-.-.-.-.-- .. --.- ..' ..~.--~-.-- .. ~.:; a wider meaningto the word "royalties II as generally understood. He seemedto hold that the definition in Section 2(1) maybe complex,but it was not amb~ous. Mr. Georgesfor the appellant submitted that the rd. royalties should have the normal or ordinary meaningattached to it, and not t e extended meaninggiven it by the Chief Justice. By that I think he meant that he first and third categories of the meaningreferred to abovewouldbe app icable, but not the second category. AndeVenif the second category did ap ly, Mr. Georges contended that there is a difference and distinction betweenscien ific and industrial and commercialknow-howand that of services rendered. He that know-how ,~ which pre-supposes a pre-existing asset wouldbe royalty while services, whiqh would have.no pre-existing assets, wouldnot be. Thesu ply of know-howwould be royalty, not the supply of services. Andlegal fees, uditors fees and Boon wouldbe supplies of services, and wouldnot be royaltie. On this point ~~. Georgesrelied heaVily on an article from the June, 1 78 publication IITaxationin Australia". In the article the Commissionerof IncomeTax in Australia in an administrative direction, interpreted IIro Australian tax legislation. It aeemathat the de1"inition 01"royalties in the Tax Decree 1978 vas practically a carbon copy of that e ted in the Australian Tax Law. In the practice direction the dist~ctiona put orward by Mr. Georges betweenknow-howand services rendered were first mooted•. It was stated that the definition of royalty has not been subjected to any t st by an appellate tribunal in Australia. 'i'hefollowing passages occur: "Thepresence in the definition of "royalties'; of the words "pCo/lllentfor ••••••••• the supply of scientific, technical, or commercial••••••••• assistance", considered 'isolation. expression a very wide meaningand many~en standards could not be classed as "royaltiesll s which by ordinary ould fall within them. industrial gave the It becamenecessary, therefore, to consi er the extent -,•."; ..... .' ~. . I ; to which paymentsof this kind should not be r falling within the statutory meaningof "royal So far as paymentfor personal services are co fo has not been the practice to treat ~nts fees or professional fees to a non-resident la as royalties within the definition. arded as er or accountant This pract ce will continue". lir. Georges had urged this Court to follow the Austr ian Tax Commissioner's interpretation of "royalties", especially as the Tax Decre 1978 was modelled on the Australian-leJo~t"' ~lr. Georgesalso submitted that in Section 2(1) of the Tax Decree should not be literally' the d-efinition of royalty terpreted. He argued that the intention of the Legislature should be considered and he seemedto su,;.~est that the Legislature had intended that royalty sho d be construed in the way it was done by the ~trali?n Tax Commissioner. It •••••• ./3. ...----..--.-------. -+-.-----~------ - 3 - ~~. Amaranathfor the respondent contendedthat the wordroyalties mustbe interpreted as it is defined in the TaxDecree and not ac~ordine to its usual or commonusage~ He stated that the meaninggiven to the wordin Section 2(1) is quite clear and not in any way ambiguousor uncertain. The appellant is liable to withholding tax for any royalty it paid to a non-resident person in terms of Section 102 (b) of the TaxDecree. That would be in the wordsof Secti~ 2(1) "supply of••••••••• technical or commercialknowledge•••••. or assistance ••• ". Part IV of the TaxDecree deals with the liability to pay withholding tax and Section 106(1) provides that "incomeupon which withholding tax is payable shall not be included in the assessable incomeof a tax payer". The person liable to tax is the non-resident whoreceives a paymentin the form of royalties from a resident, but the resident is responsible for the deduction and collection of the withholding,tax before p~m~nt of such royalty sumto the non-eesadent, , -·lie fails to do so at his peril. This is simply a device to collect tax from a non-resident. Thenon-resident is out of the jurisdiction of the Tax authorities and it could be difficult if not impossible otherwise to collect such tax. Mr. Amaranathsubmitted that of the TaxDecree is so clear'that , the definition of royalties in Section 2(1) in the Australian PrQ. CticeDirection it was - thought necessary that clear instructions had to be given to exemptfees paid for services from withholding tax, otherwise such fees would automatically be within the meaningof the term royalties as so defined. In ~ view the definition of royalty in section 2(1) of the TaxDecree is clear and explicit. It has an extendedmeaningand connotes morethan is usually and commonlyassociated with the word. l>ut that is the meaninggivm to that wordby the Legislature. I amsatisfied that the audit fees paid by ~the appellant to the non-resident auditors wouldfall within the meaningof royalties as defined in Section 2(1). That is the clear intention of the .- Legislature. Whena piece of legislation is unclear or uncertain and can bear more than one meaning, or can give rise to conflicting ~terpretations, I agree it is the duty of a Court to try to ascertain what the intention of the legislature really is, and in order to do 50, the Court ~ study the'circumstances in which such legislation was passed, the mischief it was aimedat and so on and so forth • .. :-.... /4. - - But where the meaning of the legislation is clear and unambiguous, as it is here, there is no need at all to enter into what is now perhaps called "purposive" The Court must give effect to the legislation as passed and will interpretation. construe the words in their plain and ordinary meaning. an extended meaning deliberately which it would not otherwise bear and I can see no reason or ground for believing that the court can or ought to cut down or restrict its plain meaning. Here royalty is given I do not think that the Practice direction given by the Income Tax That was purely an administra.tive Commissioner of Australia is of help. direction and was probably designed to perp~tuate the w~ had been dealing with the administration of withholding tax matters. that department; I agree with the decision of the Chief Justice. I would·dismiss the As the parties have requested, I would make no order as to oosts. appeal. DATED a.tVICTORIA this ~ d.ayof •••.•.__ 1986. a~~,-_ A. I4USTAFA PRESIDENT. ~'::' .~ :' .'-- IN THE SEYCHELLES C. OURT OF APPEAL. c±vi1 Appeal N~.9 Of 1985. BETWEEN - S.& J. Registrars (Prop) Ltd. ••• Lppell.an:t and TlLe Controller of Taxes Re spondent r; \o,. J' Mr. Georges Mr. Amarnath for the appeJ.lant. for the respond.ent. JUDGMENT OF LAW J. A. The appellant is a ~ted liability coapa~ ~ncorporated .~ Seychelles. The respondent is the Controller of Taxes. In 1981 and 1982 the appellant I s accounts were audit.ed by. a firm of accountants in EngIand. The accountants were paid in each year a fee of R.4.000 as reauneration for their services by the appellant. Th& respondent considered those fees to be "royalties""witlLin the m.eaning of that :/i.~ ~. ';":':1',_,,' 4:;~~ expression Decree, as defined in section (lithe Decreell) and assessed of the Decree under sectionl04 auditors 2 (1) of the Incoae Tax Asses~ent the tax payable thereon by the at·R.600 for each year. LiabiIity i.n Seylilielles to a non-resident. ("the withholding tax due on a royalty to withhold paid. by a person resident tax!1) is,. U:li.der section 104 of tlLe Decree,. placed on ·the tax-p~er": The appellant was accordingly assessed in the above aaountsp which he then had to pay to the respondent. He did. not do so, but. objected to th~ asses~ents an the ground that tlLe payments to tlLe auditors were not royalties 'as defined in section 2 (1) of the Decree. These ohjections were considered and disa110wed by the respondent, whereupon the appelIant appealed. against tlLe asses~ents to the Supreme Court. The appeal was lLeard and dismissed by Seaton C. J. The question for decision in the Supreme Court and 1n tlLis Court is whether fees paid by a resident taxpa.,:er to a non-resident by way of audit. fees are royalties within the m.eaning of section 2 (1) of tlLe Decree" and therefore liable to withholding tax. The learned Chief Justic.e answered' this question. in the affirmative. confirmed the asses~ents, and dismissed the appeal. From. that decision the appeIlants appeal to this Court. -2- The definition of IIroyaltiesll so far as is material to this appeal reads as follows - .'--, I "royalties" includes payments of any kind to the extent to which they are paid as con.siderat1on •••. for the supply of scientific, techn.ical~ industrial or commercial knowledge,. information. or assistance ...•. I The Chief Justice held as follows, in the last paragraph of his judgment - lilt seems to me clear that an audit company carrying out an audit of a client's accounts, books, and recDrds, uses its tech.n1.cal and CDmmerc1.al knowledge and when it supplies this knowledge to a clien~, it is of assistance to the latter. In exchange for this knowledge and assistance~ the audit c.ompallJ'is accordingly remunerated. I would therefore agree with the submission of Miss Tirant that the audit fee being a payment for technical' services rendered to a company must nec.essarily fall within the second part of the definition. of "royalties" •. For th.ese reasons the,appeal Mr. Georges for the appellant in. this Court, appea~,. stated :in his memorandum as 1:0110ws - is dismissed ....• " urged three grounds af II The learned Chief Justice erred ilL finding that payment for the auditing of a set of the Appell~n.t's accounts by an English firm amounted to a royalty in terms of the Income Tax A~sessmen± Decree. 1978, and was. assessable to withholcling tax in. that : (a) He failed to c.onsider whether the definition. of "royalty" if it was, to apply that con.struction which favoured was ambiguous the taxpayer. and, (b) He failed to con.sider whether of accounts in1:ormation or ass.istance. amounted the auditing to a supply Of knowledge, -3- (c) He failed to cons~der the intent~o~ of the def~t~o~in giv.e sufficient weight to the AUstralian definition. of a siJJU.larsec.t1.on.1I entirety and to its The Decree is based on the IncomeTax Assessment Act, 1934, of AUstralia, as from.time to time am.ended,and both in the Decree and in the Australian Act the expression tlroyaltiest! is defined as' including payment.for the. supply. of scientific, technical, 1.ndustrial or commercial knowledge or informat~on- The Decree adds the words "or assistancell which do not appear in the. Aus~al.i.an. section:.. The learned Chief Justice, construing those words 1.n their ordinarJ' aenae and giving thellLtheir ordinary lIlean,ing,.was satisfied that payment to an auditor of a fee for carrying out an. audit of the taxpayer Is books involved the use by th.e audit.or of its tec.hllical and commercial knowledge. and in so doing was of assistance to the taxpayer. He held that this fell within the definition: of "royalties" in section 2 (2) of the Decree, and that as the auditor was non-l!es:iden.t the taxpayer was properly assessed to withholding tax 1.nrespect of the payments made to the auditor in the J'eara ~98~ and 1982. Mr. Georges did not press groun.ci1 of appeal. beyond. subm.it.ting that the definitio~ was.complex and amhiguous. As:regards ground 2.,. he subllLitted that the aud:Lt1..ngof accounts did not amoun.t to a supply of knowledge and inforaation. As·regards ground 3. he referred to an, authoritative Australian pu.bJ.icat1.o~(IITaxation 1.n A ustral.ia II) J..nwhich the fol~owing appears - " It has; now.been decided that p~en.ts made:to non- residents as "royaltiesll• for servic.es rendered should not. be' regarded •••. Muchof couzae will depend oa, the· facts of th.e particular case. So :rar as pa~s :ror personal services are concennad.; i.t. has not been, the practice: to treat payments for prof'ess:Lonal.fees to a non-resident accountant. as ro;yalt.ies withi-n the de.f1.n1tion. That practice will continue.u -4- That is an administrative direction. but Mr. Georges submits that it represents a logical interpretation 01: the words of the de.1:inition. which should be adopted and followed in Seychelles. so that pa;ym.ents to non-resident auditors should be held to be not liable to wi.th- holding tax. Mr. Amarnath for the Republic submitted that Australian practice cannot affect the literal interpretation th~ • of the definition adopted by the Chief Justice. As Mr. Amarnath.submitted. we do not know the reasons which prom.ptedthe making of the Australian direction. One implication,. he· submitted, could. be: that if the direction had not been made. the liability to tax would not be open to question. Th.e very fact that the direc:ti.on. was.made at all indicates that if it had not. been. made the liability to ~ clearl~ existed and was enforceable. Mr. aeorges maintained that the practice direction. reflected the intention of tne legislature in Australia and should be followed"'here, and. submitted that the strict interpretation. of def~tion. sections was no. an. outdated - notion. He referred to Notbman.-v:- Barnet Council (1978) W.. L. R.225 and in particular to passages. from:the judgmen.tof Lord Denning K. R. 'v who said - "Faced with. glaring injustice. the ,judges are, it is said. 1lJI..potent.,:incapabl.e and statile. us in this ca ae; The lit.eral; method ia now ~omple.te:lJ' out of date •••• Whenev.erthe strict of a statute .gives rise situation. sense to remedy it so as to do what Parliamen.t would have done, had they had the situation the. judges can, and. should use their good to an. absurd and unjust - by reaciin.g words :iJ:L" interpretation Not. so w;ith if neaessary - :in... IIdnd.."' It must be remembered that concerned. no question of injusti.ce in the case with whi~ we are no. arises. Withhol<ling ~ax retained b~ the pay.er of a royalty and remitted by h1a to the Commissioner is not considered part of that person.'s assessable income for income-tax purposes, by section 106(1) of the Decree. Furthermore Nothman's case (supra) was not a revenue case. The rule in revenue cases :is as stated in. Cape Bram stz!f!.icate, -~ I. R. C.• 91921) ll. B.64 - -5- "In a Taxing Ac.t one has to l.ook. lII.erell:at what :i.s clearly stated. There is no z-oom. There is no equ~ty about a tax. There is no pre- sumpt~onas to a tax. NbtlUJ::tgis to 00 read 1.n., nothing is to be ~plied. One can onl~ l.ook r~ll at the language used•." :tor any in.t.endlll.en.t•. Look~ngfairly at the language used ~n the de~in.1.tion.in. the Decre~. I am of the opinion that the fe.es paid t.o the auditor in. this case clearly fall vcitUn the definition. of "z:oyal.t1.es". as ba:i.ng.relll. Wl.e:t'- at1.on for the use or t.echnical and c.ommerciaJ..knowledge and the . prOVision of assistance. By section. 102(b.) or the De~ee •. such. a payment.made to a non-resident is liabJ.e to withholding tax. By section 106(1) such a paym.entis not 1n.c1uded:i.)l..t.heassessahl.e incom.eof the taxpayer. I see no a.m)J;lguity,..and c.ertainly no absurdity or :inJustice. in. a1~ this. For these reasons I agree at the conc. Iuaaon.arri'led at. b¥ the Chief Justice. I woul.ddis~ss tUs appeal.•. Costs were not asked for. I would make no' order as to costs. Dated at Vic.toria this •.••••••.••• day of ~~ (E •. J. E. Law) J'OST. ICEOF'.tPPEA:L •. ~ q, a ' IN THE SEYCHELLES COURT OF APPEAL S. & J. Registrars (Proprietary) Limited A;epellant vis The Controller of Taxes Respondent Civil Appeal No. 9 of 1985 Mr. B. Georges for the appellant Mr. A. ~aranath for the respondent JUDGMENT This is an appeal from a decision of the Supreme Court under section 141(2) of the Income Tax Decree, 1978, here- inafter referred to as "the Decree". The appellan~, a private company incorporated in Sey- chelles, paid the sum of R.4,OOO to a firm of accountants, Messrs. Elsey Perera & Company, for auditing its accounts Messrs. Elsey in the year 1981 and again in the year 1982. Perera & Company, hereinafter referred to as "the auditors", are resident in the United Kingdom and the audit was carried out there. The respondent raised an assessment against the appel- lant for withholding tax in respect of both payments aS,is permitted under section 105 of the Decree. The respondent based his assessmen~ on the proNisions of sections 102(b), 104 and 105('1) of the Decree. The appellant objected to such ass~ssment and its There was then an appeal to the obje~tion was diSallowed. Supreme Court which dismissed the appeal and upheld the decision of the respondent that Withholding tax must be paid on the audit fees that were ~aid for the years 1981 and 1982. Sec- Part IV of the Decree deals with withholding taxo tion 102(b) provides that Part IV applies to income that consists of "a royalty that is paid by any person.to a non- residen~" 0 It is the contention of the respondent that the~8.yliI.ent' of audit fees by the appellant to the auditors, a non-resr~ dent, amounts to the payment of a royalty under section 102(b) of the Decree. nition of royalty in section 2(1) of the'Decree. part of that section runs as follows:~ 2(1) "Interpretation otherwise requires "... In this Decree, unless the context Such contention is based on the defi- 0•• 00. ... ,The relevant . .-.- .---~.,-..• -2- - of any kind includes payments "royalties" to the extent to which they are paid as consideration •••••••••••• of scientific' , technical, commercial assistance for the supply industrial or or information knowledge, ... •• o •• knowledge contends that the audit fees or In other words the respondent were paid as consideration commercial ment of a royalty within the meaning of section c(1) aboveo contends that the audit fees the ap- for the supply "for the supply of technical amounting for services rendered which required On his part the appell~t but were not payments or assistance" of knowledge to the pay- were payments plication of knowledge. "- The real point at issue is whether in section 10c(b) for services rendered or work done which of the Decr-ee' the terIl!"royalty" includes payments made to a non-resident requires trial or commercial plies the supply of scientific, commercial or information technical, indus- or which im- t~e application of scientific, assistance. industrial technical, knowledge or To simplify matters in this judgment I shall refer to a royalty as a payment for the supply of technical However what I shall say on that limited part of the defi- nition applies equally to the full definition 2(1) of the Decree as set out above. in section knowleage That definition It has to be considere~n whole. cannot be considered in isolationo the context of the Decree as a material points emerge. From the Decree the following There are two distinct types or taxes levied under 1. the Decree both of which are taxes on income. type is levied under Part III and may be referred "Income Tax" and the second type under Part IV and called "Withholding 2. person, whether a resident 3. ducting from the assessable tions (section 2(1)). Income tax is levied on the taxable income of any Taxable income means the gmount remaining (section 11). after de- deduc- The first to as income all allowable or a non-resident Tax". The assessable 4. income. derived or deemed to be derived from a source in Seychelleso income of a person includes the gross (section 19(1))0 "') -3- 5. For the purposes of the Decree income is deemed to be derived by a taxpayer from a source in Seychelles where it is so derived in respect of - (1) any service rendered or work done by the taxpayer in Seychelles, made by a resident of Seychelles whether the payment therefor is or a non-resi- dent and wherever payment is made; (Sec~ion (2) 19(2)(b» any service rendered or work done by the taxpayer outside Seychelles under a contract of employment with the Government. (Section 19(2)(c». includes any amount The assessable The' assessable income of a taxpayer 6. received as or by way of royalty (section 20(e». 7. the income',or the taxpayer upon which withholding payable. section 106{1»o Withholding 8. income of a taxpayer is dis~inct from tax is (Definitio?- of "taxpayer" in section 2(1) and tax is payable on income that consists of Seychel~es, Income tax is levied at a flat rate of 35% on the whole a royalty that is p~id by any person, including the Govern- mentof to a non-resident. "person" in section 101(1), sections 102(b) and 104.) 9. of the taxable income of a non-resident tax is levied at a flat rate of 15% on the gross royalty (The Income Tax (Rates) vecree paid to a non-residento 1978) • whereas withholding (Derinition of Let us now consider the app~ication of the Decree to concrete cases. In this case it is con~ended by the responden~tnat section 102(b) app~ies because the payment of the audit fees to the auditors, a non-residen~, of a royalty as it was a payment 1·or the supp Ly of t ecnnf.car knowledge. outside Seyc~elles If royalty is to be given the meaning cont~ndea ror by the responaent, The fact that the audit work was carried out did not influence the taxpayer's i~ must have the same meaning whether the audit was ~ayment ~'iability. Seychelles or outside Seychelles. The ap- of section 102(b) to this case depends only on work is don~n plication two factors:- ('1) a payment to a non-resident; the meaning of royalty. (2) and Let us therefore assume for one momen'(;that the audit work was' carried out in Seycnelleso -4- · In such a situation it is clear tnat the taxpayer would The audit fees would be assessable income. be liable to income tax, as opposed to withholding tax, as the audit fees would fall within the application of sec~ion 19(2)(b}. If the audit fees are held to be a payment for the supply of technical knowledge, then the audi~ors would also be liable ~o withholding tax as they ?re a non-residen~. cannot be §. S by virtue of section 106(1) of the Decree, income upon which withholding taxis payable shall not be included in the assessable income of a taxpayer. But this This inconsistency or conflict only arises if the ctefinition of royalty is extended to include all payments for service rendered and work done where such service or work requires the application of technical knowledge. The" same inconsistency or coriflictwould arise if the auditors were bound by a contract of emplQyment with the Government of Seychelles and did their work outside Seychelles, cas was done in this caseo (Sec~ion 19(2)(c)). From a consideration of the Decree as a whole it is clear that the legislator intended tax on income derived in respect of s~rvice rendered or work done to be levied only in cases falling within the ambit of paragraphs (b), (c) and(f) of Section 19(2) of the Decree. I.am of the opinion that the term "royalty" in section 102(b) of the Decree as read in the context of the whole Decree does not extend to cases where a paymen~ is made primarily for service rendered or work done and inciden~al to such service or work, SCientific, technical, industrial or commercial knowledge is applied. The same c.onstructionwould apply to the term "royalty" in section 20(e) of the Decree a1though tnis is outside the purview of the decision in this case. that the legislator intended that the t~ayer technical knowledge to his service or work and receives payment therefor would be mad~iable section 20(e). would be receiving salary or wages as distinct from royalty. to income tax under If this were the case, very'few workers I do not believe who applies How does that interpretation of the term "royalty" in the Decree fit in with the canons of legal interpretation? (a) The definition of "royalties" in the Decree is made subject to the context. That is clear from the opening words of section 2(1). (b) is very wide and yet it is not exnaust Ive, cludes" and not the word "means" has been used to introduce the definition. "Ro!alties" is not strictly defined. The definition The word "in- -5- The following two pronouncements (c) tax cases, cite~ith Bernard ~ool vis The Controller on the 21st January 1978, lay down principles applicable approval by this Court in this case:- of Taxes, of Lord Reid in income in the case of judgment delivered which are Luke vis I. R. C. (1963) A C 557, 577:- nThe general principle where the words are absolutely incapable truction which will accord with the apparent tion of the provision and will avoid a wholly unrea- sonable result, that the words of the enactmen~ must prevail. It of a cons- inten- is well settledo It is only I. R. C. vis Henchy (1960) A C 748, 76'7:- contention. of Parliament of Parliament, that Parlia- "\fuat we must look. for is the intention and. I also find it difficult to believe ment eyer really intended the consequences But we can only from the appellants' from the words which take the intention they have us'ed iIf the Act, and therefore the question is whether these words are capable of a more limited construction. they stand, however unreasonable quences, was not the real intention In this case there is no question If not, then we must apply them as and however strongly we may suspect that this or unjust the conse- of interpolating of Parliament." which flow The intention above. to the words used. appear-s clearly from section 19(2)(b), words or doing violence of the legislator (c) and (f) of the Decree as explained .used are capable of a more limited construction effect to the apparent intention deed, as has been explained above, to give effect to the contention consequences and conflicts "royalty" 'a more limited construction. stated in. paragraphs ~ay be given such limited construction. and the only way to avoid the inconsistencies pointed out above would be to give the wora (a) and (b) above the word "royalty" would lead to unreasonable The words to give of the legislator. of the respondent For the reasons In- To sum up, I am of opinion that when service is rendered or work done by a taxpayer who applies technical in rendering received royalty within the meaning-of knowledge such service or doing such work, the payment service or worK is not section 2(1) of the Decree. in consideration fO~UCh I would therefore allow the appeal and order the to the appellant restitution respect 1981 and 1982 including . The respondent of withholding of all sums paid by him in tax levied on the audit fees for all surcharges • shall pay the appellant's costs in this Court and in the Court below. A.~~?-:u A. Sauzier ~ Justice of Appeal APPENDIX The following sections of the Income Tax Decree 1978 are reproduced for ease of reference. 2. (1) 'In this Decree, unless the contex~ otherwise requires - teIpre :.;..• tion 0 •• "assessable illcomell means all the amounts which under the provisions of this necree are included in the assessable income; ... 00 • , ( "income tax" or "tax" means income tax payable under this Decree; "roya~ties" includes payments of'any kind to the ex- tent to which they are paid as consideration for the use or, or.the right to use, any copyright, patent, design or model, pLan , secret formula or proc ess, trade mark, or other like property or right, or indus~.., trial, commercial or scientific equipment or for the supply of sc i.entLr.i.c , technica..l,industrial or com- mercial knowledge, informatio~ or assistance and in- cludes royalties or other amo~nts paid in respect of the operation of mines or qu~ries or the extraction or removal of natural resourc~s; I 00. ~ •• I 00. 00. "taxable income" means the amobnt rema~n~ng after deducting from the assessable income all allowable deductions; ... ... 00. 00_ "taxpayer" means a person deriv~income assessable income or income upon which he is liable to pay tax under this Decree; ... whicn is 0 •• "withholding tax" means income tax payable in accordance with Part IV of this Decree. PART III - Liability to Taxation of income Division 1 - General Subject to this Decree, income tax a~ the rates 11. declared by the Income Tax (Rates) Decree 1978 is levied, and shall be paid, for the tax year that com- menced ,on the 1st January, 1978, and for each succeed- ing tax year, upon tne taxable income uroiveaduring the tax year by any person, whe~her a resident or a non- resident. ~ross Lnc ome ~rom certain 30urces •• ( Gertain items of assessable income. Iu~erpretation . DIVISION 2 - INCOME SUBDIVISION A. - ASSESSABLE INCOME GENERALLY 19. ('i) The income of a ta::q>ayershall include the gross income derived or deemed to be derived, from a source in Seychelles or indirectly, (2) by the taxpayer, which is not exempt income~ of this De.cree, income shall be deemed to be derzi, ved by a taxpayer .from a source in Seychelles where it is so derived For the purposes whether directly in respect of - (b) (c) (f) or work done by tne Seychelles, whether is made by a resident and wherever the payment of Seychelles payment is any service rendered taxpayer,in therefor or a non-resident made; any service rendered or work done by the ( .taxpayer outside Seychelles under a contract with the Government; or work done outside of emfloyment any services rendered Seyc.heUes of Seychelles) the crew of any ship or aircraft referred in paragraph (being a resident as an officer or a member of payment is made. by the taxpayer to (e), wherever income of a taxpayer shall include - 20. The assessable (e) any amount received as or by way of royalty; 101. (1) require:> PART IV - WITHHOLDING TAX In this Part, unless the context otherwise ... "person" includes the Government of the Government an agent or trustee. constituted or an authority under an Act, or to Liability withholding tax (a) 102. Subject to this Part, this Part applies to of" - income that consists a dividend that is paia by a company out of income tnat is derived Seychelles; a royalty that is paid by any person to a non-resident; interest that is paid by any person. from a source in (c) (b) or Rate of" Tax 104. A person who derives income to which this Part applies is liable to pay tax upon that income at the rate declared by the Income ~ax (Rates) Decree 19780 ... '':'- • • " of tax Deduction (AllIendedin Act 12 of 1';!CS4) income Certain not included. in assessable income, etc. Subject to this section, 105. (1) is liable to pay income to which shall deduce before paid an amount of withholding termined Decree 1978. in accordance or at the time the income is de- tax therefrom, with the Income Tax (Rates) the person who this Part applies ... (7) The ascertainment of the amount of any tax shall be deemed to be an assessment of this of any of the provisions withholding within the meaning Decree. 106. (1) payable income of a taxpayer. Income upon which withholding tax is shall not be included in the assessable