IN THE TAX COURT
HIGH COURT OF FIJI
HBT No. 4 of 2012
IN THE MATTER of the Decision made
by the Tax Tribunal on 24th
2012 in dismissing the Appellant‟s Income
Tax Appeals No. 7, 8 and 9 of 2011
IN THE MATTER of Section 107 of the
Tax Administration Decree 2009 (Decree
50 of 2009)
BETWEEN : JRP (Hong Kong) Limited; SRP (Hong Kong) Limited; and ARP (Hong
AND : CHIEF EXECUTIVE OFFICER, FIJI REVENUE AND CUSTOMS
AUTHORITY, National Revenue and Customs Complex, Queen Elizabeth
Drive, Nasese, Suva.
Appearance : Ms Alexandra L., Counsel instructed by Cromptons, Solicitors & Barristers for
Mr Richmond M., (SC) with Mr Houston., Counsel instructed by the Legal
Division of Fiji Revenue and Customs Authority for the Respondent
Date of Judgment: 18 June 2015
 By the Notice of Appeal dated 17 October 2012, the Appellants sought the following
“THE APPELLANTS hereby give notice that they are aggrieved and
dissatisfied with the decision given by the Tax Tribunal on 24 September
2012 wherein the said Tribunal dismissed the Appellants’ Applications
for Review (Notice of Appeal) dated 8 July 2011 against the decision of
the Commissioner of Inland Revenue dated 9 June 2011, disallowing the
objections by the Appellants dated 31 August 2009 in respect of the
assessments for years of income ending 31 December 2001, 31 December
2002, 31 December 2003 and 31 December 2008 contained in the
Notices of Assessment dated 3 July 2009 AND THE APPELLANT
SEEKS AN ORDER that the said decision of the Tribunal be wholly set
aside AND FOR AN ORDER that the Assessments for income tax
payable on the disposition of certain shares held by the Appellants in RB
Patel Group Limited under Section 11(a) of the Income Tax Act, Chapter
201 Law of Fiji (the Act) be set aside, AND A DECLARATION that
such amounts are non taxable capital receipts and are therefore not
subject to tax under Section 11 of the Act AND THAT the costs of this
appeal by the Respondent to the Appellants AND FOR SUCH
FURTHER AND OTHER ORDERS as the Tax Court deems just”.
 The Appellants urged the following Grounds of Appeal in their Notice of Appeal:
(1) THAT the Learned Tribunal erred in law and in fact in disallowing the
Appellants’ Appeal to the Tribunal dated 8 July 2011 when the grounds
before the Tribunal stipulated that the provisions of Section 11 of the
Income Tax Act Cap. 201 had not been properly considered or applied.
(2) THE Learned Tribunal erred in law and in fact in that he failed to properly
apply binding authority, refer Californian Copper Syndicate (Limited and
Reduced) vs. Harris (Surveyor of Taxes) (1904) 5 TC 159 adopted in
Commissioner of Inland Revenue vs. C Roose (Fiji) Limited  FJCA
(3) THE Learned Tribunal erred in law and in fact in that he wrongly applied
the Tax Tribunal decision in Taxpayer “A” and Taxpayer “B” vs. FRCA
Income Tax Appeal No. 4 and 5 of 2007 [31 January 2012], which in itself
disregards the binding authority referred to at 2 above.
(4) THE Learned Tribunal erred in law and in fact in that he misdirected
himself by applying the general provision of Section 11 to all amounts
derived by a person carrying on any business carried on by them and not
first considering whether such amounts could properly be characterized as
(5) THE Learned Tribunal erred in law and in fact in wrongly applying the
principle derived from the Australian case Commissioner of Taxation vs.
vs. Whitfords Beach (1982) 12 ATR 692 which case allows the court in
limited circumstances to look to the owner of a business to determine the
purpose of the business, but does not allow the court to ignore separate
(6) THE Learned Tribunal erred in law and in fact in not having due regard to
the evidence before the Tribunal which evidence supports the conclusion
that the relevant receipts were not taxable capital receipts.
(7) THE Learned Tribunal erred in law and in fact in finding that the
Appellants had carried out an undertaking or scheme which was subject to
(8) THE Learned Tribunal erred in law and in fact in failing to consider or
determine whether the Appellants, in carrying out the undertaking or
scheme identified by the Tribunal (and referred to in 7 above):
(a) had been entered into or devised for the “purpose of making a
profit” in relation to that undertaking or scheme;
(b) (if the Appellants had such a purpose) that this was the
Appellants dominant purpose in relation to that undertaking or
(c) (if the Appellants had a dominant purpose of profit) that the
Appellants had this purpose at the time the undertaking or
scheme was commenced;
National Distributors Ltd vs. CIR (1987) 9 NZTC 6, 135; Rangatira Ltd
vs.CIR  1 NZLR 129 ; CIR vs. Shankar Lal, unreported Ct. App,
Civil Appeal No. 65 of 1976, 25/3/77; George Alexander Thompson vs.
CIR, Ct App, Civil Appeal No. 8 of 1979; CIR vs. Property Nominees Ltd,
Ct App, Civil Appeal No. 44 of 1986, 5/2/87; and Reddys Enterprises Ltd
vs. CIR, unreported, Ct App, Civil Appeal No. 10 & 16 of 1985, 21/7/86).
(9) THE Learned Tribunal erred in law and in fact in having regard to the
transfer of a Management Agreement by entities related to the Appellants,
which transfer occurred several years after the dates on which the relevant
test in Section 11(a) must be applied there being no evidence that this was
contemplated at the outset. The dominant purpose must be present at the
time the scheme or undertaking is commenced: Duff & Ors. vs. CRI (1979)
4 NZTC 61, 420 at 61426.
(10) THE Learned Tribunal erred in law and in fact in failing to consider the
application of the overriding exclusion to Section 11(a) which provides that
income is not taxable where the gain or profit derived from the transaction
of purchase and sale:
(a) does not form part of a series of transactions; and
(b) the transaction is not in itself in the nature of trade or business.
(11) THE Learned Tribunal erred in law and in fact in that he failed to properly
apply binding authority, refer Commissioner of Inland Revenue vs. C
Roose (Fiji) Limited  FJCA 94, which authority requires that the
circumstances giving rise to each sale must be considered individually on
(12) THE Learned Tribunal erred in law and in fact in that he did not consider
whether the practice of requesting clearances can be a return of income for
the purposes of Section 44 of the Act in respect of non-resident taxpayers
who are not otherwise required to file a return under the Act.
(13) THE Learned Tribunal erred in law and in fact in therefore considering
whether the time bar in Section 59(2) can apply to such clearances.
In the Alternative
(1) THE Learned Tribunal erred in law and in fact in determining, considering
the appropriate cost base, rather than considering the taxable profit derived
by the Appellants as he is required to do under Section 11.
(2) THE Learned Tribunal erred in law and in fact therefore in wrongly
distinguishing the cases of Rangatira Ltd vs. CIR  1 NZLR 129) and
Lowe vs. Commissioner of Inland Revenue (1981) 5 NZTC 61, 006 when
determining the annual net profit or gain derived by the Appellants.
 The Appellant filed application for review in the Tax Tribunal relating to a decision by the
Commissioner of Inland Revenue dated 9 June 2011 disallowing the objections by the
Appellants dated 31 August 2009 for the assessments made for the years 2001, 2002, 2003
and 2008 as stated in the Notices of Assessments dated 31 July 2009 (pages 78-80; 170-
172; 209-211 of the Copy Record).
 The Learned Tribunal delivered its decision on 24 September 2012 dismissing the
Appellant‟s application for review (page 18 to 31).
 The Appellants were assessed by the Respondent by letter dated 9 July 2009 under Section
11 & 11(a) of the Income Tax Act Cap 201.
 The Respondent on 28 August 2009 issued the objection decision (in response the Notices
of Objection to the assessments made on 28 August 2009) wholly disallowing the
 A summary of the relevant facts is set out in the judgment of the Tribunal at paragraph 7
 Facts and Findings by the Tribunal
(a) Mr R Patel and Mr K B Patel were two brothers who established a family
business in Fiji in the 1930‟s trading under the name R K Patel & Co.
(b) By the 1980‟s that business was operating through five companies which
were owned and controlled by Mr R Patel and his four sons.
(c) In 1988, Mr R Patel, his four sons and their family members migrated to
(d) As at 31 March 1999, the four sons owned all the shares in the five
operating companies through four New Zealand holding companies one for
(e) On 1 April 1999, five Fijian operating companies undertook a corporate
restructure under which the business and assets of those companies were
transferred to RBG (referred to as “Company AB”, in the Judgment) and
two of the operating companies held essentially all the shares in RBG.
Those two Fijian operating companies [RB Patel Ltd and RB Patel (Fiji Is)
Ltd] were owned by the four sons in equal shares through their individual
New Zealand holding companies.
(f) Around this time, the four sons established four Hong Kong holding
companies [“HK Companies”], one for each of them, because they decided
using a Hong Kong holding rather than a New Zealand holding company to
own the Fiji companies were preferable for New Zealand tax reasons. Three
of the HK Companies are the Appellants and the fourth was controlled by
one of the four sons who retired from the business in 2004.
(g) On 10 June 1999, RBG and RB Patel & Co (a partnership of the four sons
established in New Zealand) entered into a Management Agreement which
ensure that the family continued to maintain effective control over the
affairs of RBG for a term of 15 years plus a further 15 years if an option to
extend the agreement was exercised [“Management Agreement”].
Subsequently, the HK Companies became the partners of RB Patel & Co.
As the Tribunal noted in the Judgment, the evidence was unclear as to when
the HK Companies became the partners of RB Patel & Co., but it was
certainly some time before March 2008 when the Appellant‟s disposed of
the remainder of their shareholdings in RBG. The Tribunal inferred that it
occurred by April 2000 given that this was the date when the HK
Companies acquired their shares in RBG from the New Zealand holding
companies. I find no mistake made by the Tribunal on this finding.
(h) On 10 April 2000, the shares held by the New Zealand holding companies
in RB Patel and RB Patel (Fiji Is) Ltd were transferred to the four HK
Companies, one for each son, for no consideration. The Appellants are
three of those companies.
(i) In August 2000, the five Fijian operating companies [including RB Patel
Ltd and RB Patel (Fiji Is) Limited] were wound up and their shares in RBG
were distributed in specie to the four HK Companies giving each son a 25%
interest in the RBG through their HK Companies.
(j) In July 2001, RBG was listed on the South Pacific Stock Exchange with
(k) Consistently with Government policy and the need to maintain market
liquidity at a minimum of 10% of the issued shares, the four HK Companies
sold down part of their shareholding in RBG both before and after the listing
(l) A further quantity of shares were sold by the four HK Companies to key
suppliers and employees during the period from 4 February 5 to 26
(m) In April and May 2003, the four HK Companies made further sales of
shares in RBG.
(n) On 16 July 2004, all remaining shares in RBG held by HRP (Hong Kong)
Ltd (a HK Company controlled by one of the sons) were sold, and same
were acquired by the other three HK Companies now the Appellants in this
(o) On 14 April 2008, the Appellants sold their remaining shares in RBG to
FHL Retailing Limited for a price of FJD1.40 each.
(p) Notwithstanding the share sales in 2008, the Appellants continued to
manage RBG‟s business under the Management Agreement until October
2009 when FHL took a transfer of the management rights in consideration
for a payment of FJD$8.3 million to the Appellants.
 The Tribunal found that the sales of the shares in RBG by the Appellants in the 2001,
2002, 2003 and 2008 years amounted to a staged disposition of the shares by them which
were acts done in the carrying on or carrying out of the business of the Appellants and
therefore it is income according to ordinary concepts Judgment at Copy Record page 28
which states in paragraph 48:
“But in the context of their inter-relatedness to the Management Agreement
that governed the operation of Company AB and the centrality of that
arrangement to the staged disposition of shares, transformed the category
from mere sale of share into an act done in the carrying on and carrying out
of the business of taxpayers”.
The Learned Tribunal stated in the paragraph 49 of the Judgment the profit derived from
the sales covered under the Income Tax Act (Cap 201).
 It is clear from the evidence before the Tribunal that the decision to establish a listed entity
to hold the Patel families‟ business interest in Fiji (RB Patel Group Limited) was made in
1999. It is important to note from the evidence that establishing of RB Patel Group
Limited was before the execution of the Management Agreement and the acquisition by
the Appellants of their shares in RB Patel Group Limited.
 It was established in the evidence that the reason for this decision was the desire of Mr R
Patel‟s four sons who were in New Zealand wanted to broaden the share ownership of their
Fijian business interests held by 5 separate companies in order to include indigenous
Fijians. The evidence was that it was more urgent as a result of the civil unrest directed
against their business in 2000, the Fijian Government policies which responded to that civil
unrest and the fact that admitted the Patel families are now non-residents of Fiji.
 It was further submitted in the matter before Tribunal that several steps were taken by the
Appellant for corporate simplification. In order to achieve this objective, the following
steps were taken inter-alia:
(1) the transfer of the businesses of the give Fiji operating companies to
RBG (a new company) in return for shares in RBG;
(2) the execution of the Management Agreement to preserve control and
secure a significant management fee;
(3) the substitution of the HK Companies as holding companies in place
of New Zealand holding companies for the tax purposes;
(4) the winding up of the five Fiji operating companies and the
distribution in specie of their shares in RBG to the HK Companies for
no consideration thus shifting material value from the Fiji operating
companies to the HK Companies;
(5) the listing of RBG; and
(6) the sale of shares in RBG by the HK Companies to the public.
 This plan was clearly implemented for a profit making purpose, I agree with the Tribunal
ie. profit for the HK Companies as the ultimate owners of RBG through a combination of
share sales to new Fijian shareholders in RBG, dividends and management fees paid by
RBG. In totality the Appellants had taken steps to earn the profit of the trading in Fiji by
entering into the Management Agreement.
 The main contention by the Appellant was the Management Agreement was executed for
the purpose of the listing of RB Patel Group. However, on careful perusal of the
Management Agreement it reveals the objectives (page 116 of the Copy Record):
A. THE COMPANY (RB PATEL GROUP LIMITED) carries on
business of supermarkets and wholesaling and retailing of
merchandise in several centers in Fiji;
B. The Managers (RB Patel & Co. – Partnership in New Zealand) is a
firm of Professional Managers.
C. The company has requested the Manager to provide managerial
services for its said businesses and the Manager has agreed to do
so upon the terms and conditions hereinafter appearing”.
The paragraphs 1 to 6 clearly gives all powers to the RB Patel New Zealand Partnership in
Clause 10 of the Agreement further strengthen the Manager on the payments. The
conclusions made by the Tribunal that the partnership in New Zealand where the partners
are the Appellants had taken full control of the business for the purpose of taking the
profit. I reproduce the Clause 10 of the Management Agreement:
“10. (a) The Company shall pay to the Manager-
(i) Basic Management fee at the rate of not less than
15% and not exceeding 2.5% of the gross revenue
(VEP) as approved by the Directors of the
(ii) Incentive management fee at the rate of 10% of
opening profit before tax of any profits over $4
Million and 20% of any profits over $5million. This
incentive management fee shall be payable within 60
days of the completion of the audited accounts;
(iii) Out of pocket expenses reasonably incurred by the
Manager such as (but not limited to) travelling,
communication and accommodation;
(iv) Reimburse such reasonable fees as is paid to any
persons appointed or engaged pursuant to Clause 2
hereof to fulfill the Manager’s functions under this
Agreement and to protect or enhance the interest of
 It is abundantly clear that the Management Agreement was drafted on the basis and with a
view to repatriate the maximum profit to the New Zealand based Management Company
for the benefit of the partners. I draw the attention to the finding of the Learned Tribunal
in paragraphs 21, 22, 23 and 24 of the decision and agree with the Tribunal that the
Business of the Appellants were to operate the businesses of the RB Patel; without creating
any liability towards the Management Company in New Zealand.
I further state that the purpose of the Management Agreement was drafted in a way to take
out significant proportion of the pre-tax profit of the RB Patel Group Limited to RB Patel
Co. Partnership in New Zealand where the 4 partners are the Hong Kong based companies
It is also noted that the agreement was for a period of 30 years having absolute control by
the Management Company with regard with unfettered control over the RB Patel Group
Limited. In my view, the Appellants wanted to list the RB Patel Group in the stock
exchange without losing control and management of the business. It appears that the final
control was with the 4 sons of RB Patel through the management company in New
Zealand. I agree with the findings of the Tribunal that the rationale behind selling of the
shares to the public was to make a profit.
 I too agree that the Appellants were not adversely affected by diminution of the ownership
of RB Patel Group Limited, the Management Agreement gave them full control of the
business and to take out significant pre-tax profit as income by way of management fees
and other reimbursements. The sale of the shares had taken place in 2008 when the
Appellants were effectively operating the business and the Tribunals conclusion that
Appellants were conducting the business was correct.
 Although, Appellants had urged for several grounds of appeal all the grounds can be
summarized into two issues:
(1) As to whether the Respondent applied the Section 11 of the Income
Tax act correctly and as to whether the Tribunal erred in law or in
(2) As to whether the Respondent applied the principles in the case
authorities referred to in the grounds correctly and as to whether the
Tribunal erred in law or in fact when it considered the review?
Other grounds of the appeal are inter-related to the above two issues.
 Section 11 provides:
“11. For the purposes of this Act, “total income” means the aggregate of
all sources of income including the annual profit or gain
gratuity……as being profit from a trade or commercial or financial or
other business or calling or otherwise, howsoever, directly accrued to
or derived by a person…….from any trade, manufacture or
Provided that, without in anyway affecting the generality of this
section total income for the purpose of this Act shall include-
(a) any profit or gain derived from the sale or other
disposition of any real or personal property or any
interest therein, if the business of the taxpayer comprises
dealing in such property, or if the property was acquired
for the purpose of selling or otherwise disposing of the
ownership of it, and any profit or gain derived from the
carrying on or carrying out of any undertaking or scheme
entered into or devised for the purpose of making a profit;
but nevertheless, the profit or gain derived from a
transaction of purchase and sale which does not form part
of a series transactions and which is not in itself in the
nature or trade or business shall be excluded”.
 I refer to the Tribunal decision (in page 25 to 28 of the Copy Record) was that the sale of
the shares by the Appellants in RB Patel Group was income according to the Section 11
and not coming within the purview of the Section 11(a) of the Act. I agree with the finding
since the scheme the Appellants initiated was to have control of the company by way of the
Management Agreement and derive income of the business as the Managers. As such the
findings of the Tribunal are correct.
 Now, I will consider the case law with regard to the present matter.
 Both parties relied on the statement made by Lord Justice Clerk in Californian Copper
Syndicate vs. Harris  5 TC 159 at 165-166 that:
“It is quite a well settled principle, in dealings with questions of Income
Tax, that where the owner of an ordinary investment chooses to realize it,
and obtains a greater price for it than he originally acquired it at, the
enhanced price is not profit….assessable to Income Tax. But it is equally
well established that enhanced values obtained from realization or
conversion of securities may be so assessable where what is done is not
merely a realization or change of investment, but an act done in what is
truly the carrying on, or carrying out, of a business. What is the line
which separates the two classes or cases may be difficult to define, and
each case must be considered according to its facts; the question to be
determined being – Is the sum of gain that has been made a mere
enhancement of values by realizing a security, or is it a gain made in an
operation of business in carrying out a scheme of profit-making?”
The above statement is clear, that when the owner of an ordinary investment chooses to
realize it at the enhanced price for it that the original price the profit is not assessable for
income tax. However, the profit made by the Appellant in this case cannot be considered
as a capital gain considering the facts of the present case. The Appellants motive was to
have the control and derive income from the business and the Sale of the shares not to be
considered for income tax. As stated by Lord Clerk in the above statement “But it is
equally well established that enhanced value obtained from realization or conversion
of securities may be so assessable where what is done is not merely a realization or
change of investment, but an act done in what is truly the carry on, or carrying out of
a business…….”. This clearly in favour of the Respondent‟s assessment for the reasons
set out in the preceding paragraphs by analyzing the terms of the Management Agreement;
and the Appellants‟ acts are not merely realization or change of investments and it is for
the purpose of carrying on or carrying out of the business of RB Patel Group Limited. I
also considered the case of FCT vs. Myer Emporium Ltd (1987) 163 CLR 199 at 209 and
hold that Learned Tribunal correctly applied the principles enumerated in this case.
 The Appellants argued that they were not in the business of buying and selling of the
shares. This position cannot be simply applied to decide on a case where the taxpayers
conducting the business by themselves, under a cover of the subject Management
Agreement. Then it becomes ordinary income. As submitted by the Respondent‟s counsel
it derived from Californian Copper Syndicate vs. Harris which was later explained in
several other case authorities covering various situations:
(i) where the profit or gain was made from a transaction which formed part
of the ordinary course of the taxpayers business. FCT vs.Myer
Emporium Ltd (1987) 163 CLR 199 at 209;
(ii) where the profit or gain made by the taxpayer from a transaction that was
not part of the ordinary course of the business but was an ordinary
incident of the taxpayer‟s business (FCT vs. Cooling (1990) 22 FCR 42
at 56; and several other case authorities);
(iii) where the profit was made from an extra ordinary transaction which was
a business operation or commercial transaction for the purpose of profit
making by the means giving rise to the profit [FCT vs. Myer Emporium
Limited (1987) 163 CLR 199 at 210-213].
The Appellants transactions covers all of the above, situations and the Appellant‟s
submissions fail. The Appellants‟ counsel made lengthy submissions and stated Myer
Emporium case is contrary to Californian Copper; and Fiji case Roose. As submitted by
the Appellants‟ counsel referring to Myer Emporium and Commissioner for Inland
Revenue vs. C. Roose Fiji Limited  FJCA 94 stated that circumstances giving rise to
each sale must be considered individually on their merits. I do not see the Tribunal made
any mistake on this issue. The Tribunal had found the application of the principles depend
on the facts of the case. Certainly the decision of the Tribunal is in line with the
circumstances of this case for the following reasons:
(i) The realization of the assets in this case is not a mere realization or
change hands of the investment, since the Appellants carried out the
(ii) The gain made by the Appellants’ was income and cannot be
The Appellants‟ counsel submitted that Myer Emporium case was not followed in Fiji.
However, in number of cases in Fiji, the principles laid down in FCT vs. Whitfords Beach
(1982) 150 CLR 355 was followed in Samji vs. The Commissioner of Inland Revenue
 FJHC 41. The Myer Emporium principles are similar to Whifords and there is no
merits in the submissions of the Appellant that Myer Emporium principles are not referred
to in Fiji cases. As submitted by the Respondent‟s counsel the principles in Myer
Emporium is not disapproved by the Fiji Courts; as such there is no restrictions for the
Tribunal to make its findings referring to Myer Emporium and I find that the Tribunal had
not made any errors by considering the principles laid down in Myer Emporium, case.
 The Appellants further submitted that Myer Emporium has not been followed in New
Zealand in case of Wattie vs. Commissioner of Inland Revenue (1997) 18 NZTC 13 but I
agree with the submissions by the Respondent‟s counsel referring to page 211:
“……….is that a receipt may constitute income, if it arises from an
isolated business operation or commercial transaction entered into
otherwise than in the ordinary course of carrying on of the taxpayer’s
business, so long as the taxpayer entered into the transaction with the
intention or purpose of making a relevant profit or gain from the
I agree with the submission that in this matter the Tribunal found that the Appellants
entered into a management agreement to make profits by carrying on and carrying out the
business of RB Patel Group which constitute an income and it falls within the ambit of
Section 11 of the Income Tax Act.
 The Wattie‟s case was appealed to the privy Council  1 WLR 873 and the Privy
Council had referred to the decision of Myer Emporium and stated “……….the general
terms, the Court of Appeal’s interpretation of the Myer Emporium case as
contemplating a profit arising from what is commonly referred to as an adventure in
the nature or trade, of the kind illustrated by the decision in Californian Copper
Syndicate vs. Harris (1904) 5 TC 159”.
It is abundantly clear that the Privy Council made this observation since there is no
contrary of the principles in Myer Emporium and Californian Copper case. As such the
Tribunal‟s decision is in par with the principles adopted in both cases, I conclude. I further
conclude that as stated in preceding paragraphs in this case, the Appellants made profit on
the sale of the shares in RB Patel Group Limited which is ordinary income assessable
under the Section 11 of the Income Tax Act.
 It was further argued by the Appellants‟ counsel that Tribunal„s decision was correct if the
Appellants were only carrying on the business of dealing in shares, does not have merit
considering the facts of this case.
 The Tribunal decided the Appellants were each conducting the business of RB Patel Group
Limited and the Appellants argued it was not correct. This argument does not carry any
merits since the partnership is not a separate legal entity outside of partners. It is the
individual partners carry on the business, albeit in common with other partners as
illustrated in the case of Memec Pic vs. Inland Revenue Commissioners  STC 754
“The relevant characteristics of an ordinary English partnership are
these: (1) the partnership is not a legal entity; (2) the partners carry on
the business of the partnership in common with a view to profit….(3)
each does so both as principal and…..as agent for each other, binding
the firm and his partners in all matters within his authority; (4) every
partner is liable jointly with the other partners for all debts and
obligations of the firm….and (5) the partners own the business, having a
beneficial interest, in the form of an undivided share in the partnership
assets ….including any profits of the business”.
 The Appellants‟ argument that the Section 11(a) applied to the transaction independently is
not correct. The Section 11(a) is not a limitation to Section 11 since it was stated in the
section before 11(a) without in any way affecting the generality of the section. As such I
conclude the Tribunals decision that the income from Sale of shares to be applied to total
income including profits from a trade or commercial or financial or other business is well
 The first limb of Section 11(a) applies for the profit or gain derived from disposing of
property by person conducting and in the circumstances of this case, it is an ordinary
income and the Tribunal is correct in its decision.
 I agree with the Respondent‟s counsel that the 2nd
limbs of the Section 11(a) do not
affect the decision made by the Tribunal under Section 11.
 The Appellants acquired the shares in RB Patel Group Limited at FJD 0.52 per share for
the purpose of subsequent listing in 2001; thereafter, the Appellants acquired shares of
RBG Group just before listing in 2003. The price sold was FJD 0.80 per share making a
profit of FJD 0.30 approximately. It was 60% profit above the purchased price within few
years or some shares within a year. The Appellants argued they wanted to have 10%
public ownership and that was the reason Appellants were selling their shares. This is a
primitive baseless argument. The motive behind was to make a substantive profit in short
term by disposing the shares, whilst conducting the business between the period 2001 to
2003. If the genuine intention of selling the shares was to give 10% for the public then it
would have been more appropriate to issue new shares to the public which would have
increased the capital of the company to develop its business. The sale of the shares of the
Appellants clearly did not have any benefit to the company since it was done only for the
purpose of making profit by the Appellants. I conclude the sale in 2008 was the final stage
of selling of the investment of the Appellants and made the significant profit and had the
management and control over the business carry on and carrying out the business for the
purpose of enhancing the value of their shares. Accordingly, the Tribunal‟s finding that
the sale of the shares is part of the business is correct.
 The Appellants also argued that the sale of the shares to Fijian Holdings Limited was less
than the price it was traded. There is no basis for this argument since it was a private sale.
When large parcel of shares are sold, it‟s on a negotiated price and on various conditions.
There is no merit on this argument and I deny.
 I have already found the Tribunal‟s decision was on the basis of Section 11, treating the
sale of shares was ordinary business making profits which I agreed and I have already
concluded that the sale of the shares do not fall under Section 11(a) in favour of the
 The Appellants argued that the Respondent should reconsider with regard to the cost of the
shares acquired by the Appellants in RB Patel Group Ltd. The Respondent had made
submissions with regard to the calculation in terms of the evidence tendered and I agree
that cost of shares to be fixed at FJD 0.52 not at FJD 0.50 for the purpose of calculation.
 The argument on time bar has no relevance in this matter since the Commissioner carries
out the statutory duty to ascertain the amount on which tax is payable for that year and the
process is completed only after issuing of the Notice of Assessment; the tax clearance
certificate is not based on an assessment and the Appellants cannot rely on letters sent to
Reserve Bank of Fiji providing clearance to remit the funds.
 My final conclusions are:
(1) The Tribunal did not erred in law or in fact by applying Section 11 of the
Income Tax Act.
(2) The Learned Tribunal properly considered the Californian Copper
Syndicate vs. Harris (1904) 5 TC 159 adopted in Fiji case Commissioner of
Inland Revenue vs. Roose (Fiji) Limited  FJCA.
(3) Ground 3 of the appeal fails.
(4) Principles in Commissioner of Taxation vs. Whitfords Beach (1982) 12
ART 692 is correctly applied as I concluded in the preceding paragraphs.
(5) Having concluded that the Section 11 applies in this matter, Grounds 6, 7
and 8 fails.
(6) With regard to Ground 9 as concluded in preceding paragraphs the totality
of the evidence being considered by the Tribunal and found although the
transfer occurred after several years of the agreement the facts in totality
proves the main purpose of the Management Agreement was to derive
maximum profit for the Manager in New Zealand where the Appellants were
the partners who were actively involved in the business of the RB Patel
Group Limited and the income of sale of shares cannot be considered under
Section 11(a) and the Appellants fails.
(7) I have already made conclusion on Ground 10, and denied.
(8) The Tribunal had correctly applied the Commissioner of Inland Revenue
vs. Roose (Fiji) Limited  FJCA 94 and Ground 11 fails.
 The Grounds 12 and 13 fails as concluded in the preceding paragraphs of
 Having concluded that the Section 11 applies in this matter. Alternative
Grounds 1 and 2 fails and I hold in favour of the Respondent.
I will now answer the issues raised in the paragraph 17 of this Judgment:
(1) The Tribunal did not erred in law or in fact by applying Section 11 of the
Income Tax Act.
(2) The Tribunal did not erred in law and in fact by applying the case
authorities cited by the parties.
Orders of the court:
1. The Appeal is dismissed.
2. The three Appellants are ordered to pay $5,000.00 each, costs assessed
summarily totaling to $15,000.00 to the Respondent within 30 days of
Delivered at Suva this 18th
Day of June 2015.