Director-General, Mauritius Revenue Authority v Sudhoo O. & Ors [2019 SCJ 315]
Facts
This was an appeal against a decision of the Assessment Review Committee (ARC) on the interpretation of section 27 (4) of the Income Tax Act (hereunder referred to as ‘the Act’), where it was found that both divorced parents could claim income exemption threshold (hereunder referred to as ‘IET’) for their dependant children.
As such, the Court had to decide the question as to who can claim IET for a dependant.
Held
The Court predominantly based itself on section 27 of the Act and the Civil Code. During the marriage, both parents are responsible for the child, following article 371-1 of the Civil Code. This explains the limited entitlement given to a spouse under section 27 (4) of the Act. The rule was that only one spouse can claim IET for one or more dependants, notwithstanding the fact that both could exercise “l’autorité parentale” at that time.
However, in the event of a divorce or separation of the parents, the exercise of “l’autorité parentale” is devolved to only one of the parents – in particular, the one who has “la garde” of the child. This is provided under Articles 372 and Art. 373-2 of the Civil Code. Section 27 (7) of the Act extended the term of this “dependency” for a child above 18 years where he is pursuing full time education or training for IET purposes.
The Court did not agree with the reasoning that a person who was not vested with the parental authority could claim entitlement for IET for that child in full time education or training. This was buttressed by the definition of “child” as provided for in section 2 of the Act wherein “child” is defined as –
(b) an unmarried child whose guardianship or custody is entrusted to the person by virtue of any other enactment or of an order of a Court of competent jurisdiction;
Consequently, the Court was satisfied that the right and appropriate interpretation of section 27 (4), viewed in the general context of section 27 and the provisions of our Civil Code, is that only one person or one of the parents could claim IET for one or more dependants.
Accordingly, the Court set aside the decision of the ARC, and the appropriate course was to remit the matter back to the ARC for a fresh determination in the light of all the relevant factors highlighted above.
Case commentary
It flows from this case that even when both parents are exercising parental authority over a child, only one of the spouses would be entitled to claim IET in respect of that child. The Court confirmed the same standing with regards to divorced parents. Hence, the law does not confer a double entitlement to IET.
Reference
Revenue Law – income tax act – income exemption threshold – spouse – divorce – parental authority
