Total Mauritius Limited v Mauritius Revenue Authority (Mauritius)

A refundable deposit taken to secure the return of a supplier-owned bottle or container is not, merely because the supplier permits its use or uses the money as working capital, consideration for a supply or a trading receipt. For VAT, use of the container may itself be a supply of services, but a security deposit repayable in full is not consideration. A charge for loan, hire, use or maintenance may be consideration. For income tax, sums held and ultimately repaid without reduction retain their character as customer money and are not trading receipts. Correct commercial accounting is ordinarily applied, and the tax authority must show that audited accounts treat such sums improperly.

Total Mauritius Limited v Mauritius Revenue Authority (Mauritius) concerned assessments of VAT and income tax on refundable deposits paid by customers for liquefied petroleum gas bottles and containers owned by the supplier. The Assessment Review Committee found that the deposits were security deposits and not taxable. The Supreme Court of Mauritius allowed the Revenue’s appeal, holding that the deposits were consideration for services and trading receipts. The central issue before the Privy Council was whether the deposits’ contractual purpose, refundability and accounting treatment made them consideration for a supply or income derived from business.

Appeal allowed. In the joint judgment delivered by Lord Phillips and Lord Mance, the Board held that the Supreme Court had erred on both the VAT and income-tax issues.

1. VAT. Under the Value Added Tax Act 1998, the supply of the use of bottles or containers was a supply of services under section 4(2)(b) and the Third Schedule. It was ancillary to the supply of gas. The relevant question was whether the deposits were consideration for that service.
2. The contractual 5 per cent maintenance deduction in Form D was never enforced, had been waived in practice, and was absent from the accounts and previous assessments. The Assessment Review Committee was therefore entitled to disregard it. The deposits were taken simply to encourage customers to return Total’s containers and were repayable in full on return. They were security deposits, not consideration for goods or services, and were not subject to VAT. Charges specifically made for loan, hire, use or maintenance could have a different character. Elson v Prices Tailors Ltd [1963] 1 WLR 287 and Calor Gas Ltd v The Commissioners [1973] VATTR 205 were distinguishable.
3. Income tax. The deposits were received on the basis that they were refundable when customers returned and did not replace the containers. Their use as working capital, and the fact that few refunds were claimed, did not make them trading receipts. Sums held for customers and ultimately payable to them without reduction were to be treated as customer money. There was no identifiable point at which these deposits changed into trading profits. Morley v Tattersall [1938] 3 All ER 296 was applied. Jays The Jewellers Ltd v Inland Revenue Commissioners [1947] 2 All ER 762 and Anise Ltd v Hammond (Inspector of Taxes) [2003] STC (SCD) 258 were explained by the possibility of a statutory event creating a new asset. The Board questioned the contrary reasoning in Gower Chemicals Ltd v Revenue and Customs Commissioners (Note) [2008] STC (SCD) 1242.
4. The Revenue bore the burden of showing that Total’s audited accounts improperly treated the deposits. It had produced no expert evidence that the accounts failed to comply with the Companies Act 2001 and International Accounting Standards. Costs here and below were payable by the Revenue, subject to written submissions within three weeks.

• Privy Council — In [2011] UKPC 40, the appeal was allowed. The deposits were held not to be subject to VAT and not to be trading receipts for income tax.
• Supreme Court of Mauritius — Allowed the Revenue’s appeal from the Assessment Review Committee and held that the deposits were VATable consideration and trading receipts.
• Assessment Review Committee — Found that the provision of cylinders was not a supply of services and that the deposits were refundable security deposits, not trading receipts.