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Cite as: [1997] IEHC 38, [1997] 1 IR 526

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Gilligan v. Criminal Assets Bureau [1997] IEHC 38; [1997] 1 IR 526 (26th February, 1997)

1THE HIGH COURT

No. 10273p 1996

BETWEEN

GERALDINE GILLIGAN

PLAINTIFF

AND

CRIMINAL ASSETS BUREAU, BARRY GALVIN, FRANK LANIGAN

AND THE REVENUE COMMISSIONERS

DEFENDANTS

Judgment of Mr. Justice Morris delivered the 26th day of February, 1997 .

This matter comes before the Court in the following circumstances:-

1. On the 28th November, 1996 the Plaintiff applied to the High Court by way of Notice of Motion seeking an interlocutory injunction restraining the Defendants from advertising for sale or taking any steps to dispose of the property of the Plaintiff seized by the Second named Defendant and his servants or agents on the 20th November, 1996 at Mucklon, Enfield, County Kildare and secondly, directing the Third named Defendant to return the plant property to the said premises and to make good any damage caused by them.

2. At that hearing, Mr. Justice Geoghegan refused this application and reserved the costs. From this Order the Plaintiff appealed to the Supreme Court who, having considered the case, sent it back to the High Court for the purpose of trying certain issues. These issues are:-

(1) For the chargeable period, the twelve months ending on the 5th April, 1995, was Geraldine Gilligan a chargeable person?

(2) If yes to (1), do the provisions of Part 9, Chapter 1 of the Income Tax Act, 1967 preclude the Inspector of Taxes from raising an assessment on Geraldine Gilligan (the Plaintiff)?

3. The case comes before the Court on an agreed set of facts. They are as follows:-

1. For the twelve months ending the 5th day of April, 1995 Geraldine Gilligan lived with John Gilligan as husband and wife.

2. In July of 1995 Geraldine Gilligan separated from John Gilligan and they ceased living together as husband and wife.

3. No election was ever made by Geraldine Gilligan and/or John Gilligan to be assessed in accordance with the provisions of Section 195 of the Income Tax Act, 1967.

4. No return of income for the 12 months ending the 5th day of April 1995 has been received from Geraldine Gilligan or John Gilligan.

5. In respect of the 12 months ending the 5th of April, 1995 (the relevant chargeable period) the date before which a return of income had to be made "the specified return date" was the 31st day of January, 1996.

6. By assessment dated 16th day of September, 1996 Geraldine Gilligan was assessed to tax on "miscellaneous income" of £1.6 million in respect of the 12 months ending the 5th day of April, 1995.

7. The assessment of "miscellaneous income" was raised by virtue of Section 19 of the Finance Act, 1983.

8. The miscellaneous income, the subject matter of the aforesaid assessment is not income in respect of which any assessment has been raised against John Gilligan.

9. It is the contention of the Inspector of Taxes who raised the assessment on Geraldine Gilligan that the sum of £1.6 million represents the receipts and/or income of Geraldine Gilligan.

10. On the 11th day of October, 1996 Geraldine Gilligan, through her Solicitor served Notice of Appeal on the Inspector of Taxes who raised the aforesaid assessment.

11. On the 15th day of October, 1996 the Inspector of Taxes notified Geraldine Gilligan that she was not entitled to make such appeal by reason of the provisions of Section 17 of the Finance Act, 1988.

12. No appeal was taken from the refusal of the appeal by the Inspector of Taxes by Geraldine Gilligan.

13. On the 14th day of November, 1996 a demand for payment, pursuant to Section 478 of the Income Tax Act, 1967 was sent to Geraldine Gilligan.

14. On the 19th day of November, 1996 a certificate was issued to the appropriate to levy the total sum due by way of tax.

15. The Sheriff duly executed against and seized the goods of Geraldine Gilligan with a value less than the sum certified due.

4. The issues that I am required to try are limited issues. Having read the affidavits that have been filed in this case, it is clear that significant consequences may flow from my determination of these issues. It is no part of my function to consider any such consequences and I confine my judgment entirely to the issues before me which are matters of law arising out of a consideration of the income tax code.

5. With regard to the first of these issues:-

"(1) For the chargeable period, the 12 months ending the 5th April, 1995, was Geraldine Gilligan a chargeable person?".

6. I now set out in summary form the principle submissions made on behalf of the parties on this issue.

7. On behalf of the Plaintiff it was submitted that Sections 194 and 195 of the Income Tax Act, 1967 create circumstances in which, in the case of a married couple, it is the husband and the husband alone who is the chargeable person within the meaning of the Income Tax code and that nothing in the Finance Act, 1988 has altered that position. It is submitted that these Sections apply to the present case and that the Plaintiff is not a chargeable person.

8. On behalf of the Defendants it is submitted that one looks at Section 105 of the Income Tax Act, 1967 to identify the persons chargeable and they are the "persons......receiving or entitled to the income in respect of which tax.......is to be charged". It is submitted that since the Plaintiff is the person who received or was entitled to receive the income she is by virtue of this definition a chargeable person within the meaning of the code. Moreover, it is submitted that Section 194 of the Income Tax Act, 1967 does no more than create a mechanism by which the Revenue is entitled to assess and charge a husband to tax in respect of his wife's income but that it does not interfere with the provisions of the Income Tax Act to which one must have regard in determining whether the wife is chargeable to tax.

Section 194 of the Income Tax Act, 1967 provides:-

(a) For a husband and a wife to elect to be treated in accordance with that Section.

(b) That Section 195 provides that if there is no such election by them then they "shall be deemed to have duly elected to be assessed to tax in accordance with the provisions of Section 194", see Section 195 (4)(a).

9. Accordingly, since no election was made in the present case the provisions of Section 194 apply.

10. This Section reads:-

"194 Assessment of husband in respect of income of both spouse.

(1) Where, in the case of a husband and wife, an election under Section 195 to be assessed to tax in accordance with the provisions of this Section, has effect for a year of assessment.

(a) The husband shall be assessed and charged to tax, not only in respect of his total income (if any) for that year, but also in respect of his wife's total income (if any) for any part of that year of assessment during which she is living with him, and for this purpose and for all purposes of the Income Tax Acts, that last mentioned income shall be deemed to be income of his.

(b) The question of whether there is any income of the wife chargeable to tax for any year of assessment and, if so, what is to be taken to be the amount thereof for tax purposes, shall not be affected by the provisions of this Section and

(c) Any tax falling to be assessed in respect of any income which, under this Section, is deemed to be income of a woman's husband, shall, instead of being assessed on her, or on her trustees, guardian or committee or on her executors or administrators, be assessable on him or, in the appropriate cases, on his executors or administrators".

11. The circumstances in which Sections 194 and 195 came to be enacted and introduced into the Income Tax Act, 1967 were the finding by the Supreme Court in Murphy & Another -v- Attorney General 1982 I.R. 241 that Sections 192 to 198 (inclusive) of the 1967 Act were repugnant to the Constitution. These Sections provided that by virtue of Section 192 of the Act, the Plaintiff's wife's income was deemed for income tax purposes to be her husband's income and not her own. Section 197 of the Act provided that either a husband or a wife might apply to have his or her income tax assessed, charged and recovered separately and not as a married couple. However, Section 193 provided that in such a case the applicant would not be entitled to any greater sum by way of personal relief than that to which they would have been entitled if no such application were made. Provisions of various Sections of the Finance Acts then in force resulted in an adverse differential been applied to married couples. These were lessened but not completely removed by subsequent amending legislation. There remained an adverse differential been applied to married couples. Sections 192 to 198 were declared repugnant to the Constitution and a necessity arose to replace them with new legislation. Section 194 and 195 came into existence as a consequence. They gave married couples the right to be treated as single persons for tax purposes and gave them the right to opt to be treated either as a married couple or as single persons. The new Sections reintroduced the concept of treating the wife's income as being that of the husband.

12. I am of the view that while the Respondents approach and construction of Section 105 of the Act is acceptable in other circumstances (this approach in effect is that one finds the source of the income, one finds the person enjoying or entitled to enjoy the income, and one thereby identifies the person chargeable). However, when one is concerned with a case for which "Special Provisions" have been made within the Income Tax code different considerations must be applied.

13. Part IX, Chapter 1 of the Income Tax Act, 1967 is entitled "Special Provisions as to Married Persons" and it seems clear to me that in so far as there may be a conflict between Section 105 and these special provisions in Chapter 1, then the special provisions must take precedence. Section 194 contains words which are clear and unambiguous. It provides that the husband is to be "assessed and charged to tax in respect of his wife's total income" and that the wife's income "for all purposes of the Income Tax Acts.......shall be deemed to be income of his".

14. And again at subsection (c) of Section 194 it is provided that the tax on the wife's income shall "instead of being assessed on her, be assessed on him". In my view, the submission that Section 105 prevails, in the light of these provisions, cannot be sustained.

15. It has been submitted that subsection (b) of Section 194(1) should be construed as constituting an exception to the overall provisions of the Section. I do not accept this. This subsection, in my view, does no more than to provide that the obligation thrust on the husband by the Section remains intact even if there is a dispute as to whether part of the wife's income is chargeable to tax.

16. It is further submitted by the Respondents that I should attach significance to the choice of word "assessable" in the latter part of subsection (c). The submission is that the use of the word "assessable" instead of, for instance, "only assessed on" indicates that it is or may be assessable also on the wife. I do not accept this submission. I do not consider such a construction is possible having regard to the earlier part of the subsection which provides that the tax falling to be assessed instead of being assessed on her (i.e. the wife) shall be assessed on the husband.

17. The second part of the Respondents submission relates to the obligation of a chargeable person to prepare and deliver to the Inspector a return in the prescribed form under the self assessment scheme introduced by Section 10 of the Finance Act, 1988.

18. The relevant dates, in so far as this part of the submission is concerned, are as follows:-

(a) The "chargeable period" is the twelve months ending of the 5th April, 1995.

(b) Mr. and Mrs. Gilligan lived as husband and wife for the twelve month period ending on the 5th April, 1995, i.e. during the entire of the "chargeable period".

19. It is the Respondents submission that, thereafter, Mrs. Gilligan was obliged, as the chargeable person, to prepare and deliver to the Inspector on or before the 31st January, 1996 a return in the prescribed form.

20. The definition of a chargeable person contained in the Finance Act, 1988 is "Chargeable Person means, as respects a chargeable period, a person who is chargeable to tax for that period whether on his own account or on account of some other person but, as respects income tax, does not include a person (exceptions of no relevance)".

21. It is clear, therefore, that one only becomes a chargeable person where one is chargeable for tax in the relevant period. In this context the relevant period was the period during which Mr. and Mrs. Gilligan were living together as husband and wife.

22. As I have already indicated I am of the view that Section 194 of the Act rendered

23. Mr. Gilligan the chargeable person for that period and accordingly I am satisfied that there was no obligation upon Mrs. Gilligan to comply with the obligations to prepare and deliver a return in the prescribed form to the Inspector.

24. Accordingly, in my view, question number 1 should be answered "No".

25. With regard to question number 2, in view of my answer to question number 1, this does not arise.