CITATION: Bhatti and ors v Chief Commissioner of State Revenue [2008] NSWADT 205 DIVISION: Revenue Division APPLICANTS Surjit Kaur Bhatti Harpreet (Harry) Bhatti PARTIES: Anupreet Kaur Bedi Shivinder Gill RESPONDENT Chief Commissioner of State Revenue FILE NUMBER: 076096 HEARING DATES: 12 November 2007 SUBMISSIONS CLOSED: 12 November 2007 DATE OF DECISION: 25 July 2008 BEFORE: Greenwood J - Judicial Member CATCHWORDS: Land tax - assessment of interest MATTER FOR DECISION: Principal matter Administrative Decisions Tribunal Act 1997 LEGISLATION CITED : Land Tax Management Act 1956 Taxation Administration Act 1996 Prager v Chief Commissioner of State Revenue [2007] NSWADT 23 CASES CITED: Chief Commissioner of State Revenue v Ferrington [2004] NSWADTAP 41 Chief Commissioner of State Revenue v Aldridge and anor [2003] NSWADTAP 50 APPLICANTS H Bhatti, agent REPRESENTATION: RESPONDENT A Tsekouras, barrister ORDERS: Chief Commissioner's determination is affirmed. REASONS FOR DECISION The application and the legislative scheme 1 The applicants have sought a review of the disallowance of an objection by the Chief Commissioner of State Revenue against an assessment to land tax issued in respect of the property known as 135 Avon Road, Bringelly ("the Bringelly property") pursuant to section 10(1)(r) and Schedule 1A of the Land Tax Management Act 1956 as the principal place of residence. 2 The application for review was initially made by Mr Harpreet Singh, only ("Mr Bhatti") for and on behalf of his mother and co-owner Mrs Surjit Kaur Bhatti ("Mrs Bhatti, Senior"), in relation to 2005 land tax year (which relates to land owned as at 31st December 2004). The applicants position is that Mrs Bhatti Senior used the property as her principal place of residence and is entitled to the principal place of residence exemption provision exempting land tax. 3 On the 31st August 2007 the Tribunal made orders that the remaining co- owners of the property be joined as Applicants and that the applicant Mr Bhatti file and serve consents of the other co-owners to be joined as applicants. A document purporting to be a joint letter of consent for dated 31st August 2007 was filed with the Registry in triplicate on 26th October 2007. The same document also consented and authorised Mr Bhatti to represent all of the co-owners, who are named as Shivinder Gill, Surjit Kaur Bhatti (Mrs Bhatti Senior), Anupreet Bedi and Mr Bhatti (all applicant parties hereinafter referred to as "the applicants"). 4 The administrator of the Act and the respondent, the Chief Commissioner of State Revenue ("the Commissioner"), has now required the applicant to pay Land Tax plus interest because the applicant, in the opinion of the Commissioner, has failed to satisfy one of the preconditions to attract the exemption from land tax for the relevant year. In this instance the Commissioner has found that the applicant Mrs Bhatti failed to occupy the property as her principal place of residence in accordance within the requirement of the Act, principally on the material available to the Respondent. 5 On the day of the hearing, Mr Bhatti sought to proceed with an interim application for a stay filed on the 6th November 2007 seeking: (a) the running of interest currently sought in the sum of 14.37% be stayed (b) the accrued interest accumulated to date "to be written off". Mr Bhatti had not served the application for stay on the Respondent prior to the hearing date and he had not served notice of the application on the Respondent on the morning before the hearing had commenced, until handing it to them at the bar table on the morning of the hearing. Ruling on the Application for stay of interest By Applicant 6 The applicants had not filed any supporting statement with the application for stay in writing. The Applicant made oral submissions to the effect that, the Commissioner was not entitled to charge interest against the applicants, because there was no corresponding allowance for the applicant to receive interest in their favour and that primarily the interest charging provision was unfair. 7 The Chief Commissioner submitted that the penalty and interest provisions of the Act itself provided the statutory right to the Commissioner to claim interest in the usual course and that right would be contingent upon the decision of the Tribunal in hearing this case. Secondly the applicants had not established any special grounds or reasons, nor had they provided any relevant evidence which was placed before the Tribunal which satisfied any order for a stay in the terms requested by the Applicant. The Respondent properly claimed insufficient notice, service, legal standing and no evidence of special grounds or damage or convenience and therefore the Tribunal had no special grounds before it for making an order for a stay in the manner and form sought by the applicant, when the substantive matter was to be heard on the day. The Tribunal agreed with those submissions and disallowed the stay and dismissed the application for a stay of the interest orders sought by the applicant. The Facts 8 (a) The material originally supplied to the Respondent for its initial consideration by the applicants and in particular by Mrs Bhatti senior was sparse and indeed was the principal basis upon which the Commissioner of State Revenue made its decision. Upon the filing of the application for review by the Applicants, various summons to produce documents were issued to the telephone service provider, Integral Energy and employer by the Respondent to investigate the circumstances and obtain material which they had not been provided by the applicants. (b) The provision of the documentation by summons and the ultimate production of Mrs Bhatti, Senior as a witness to provide information verbally uncovered a series of circumstances and matters for consideration by the Tribunal. These circumstances are set out in detail, because they are unusual. 9 The Bringelly property was acquired by Transfer on the 5th November 2004 for $950,000.00 by: a) Mrs Bhatti Senior (the mother of Mr Bhatti) as to 49% - changed on the 14/2/05 to 49.99% b) Mr Bhatti and Mrs Shavinder Gill (Mr Bhatti's wife) acquired their interest in the Bringelly property as joint tenants to 1% as between them - this changed to 50% on the 14/2/07. c) Ms Anupreet Kaur Bedi (a friend and co investor in the acquisition of the Bringelly property) as to 50% which changed on the 14/2/07 to 0.01% 10 Documents and evidence in chief tendered by both Applicants and Respondent described the property as about 5 acres, located in rural setting and isolated from transport and isolated in the social context, in that it was far from Mrs Bhatti Senior's son and family members and from Mrs Bhatti Senior's employment at Concord Repatriation Hospital. The improvements consisted of a garage, stables dwelling house consisted of the usual amenities in good working order. Services to the property were electricity, a hot water heater, stove, domestic lighting. The property had tank water. Mrs Bhatti Senior did not connect the telephone service and she used her mobile telephone. 11 A large amount of evidence was produced by both parties, subpoena material produced and tested in cross-examination was the account given by Mrs Bhatti Senior, and evidence given by Mr Bhatti. Broadly the evidence placed before the Tribunal may be grouped as follows: a) The circumstances of the acquisition of the property, the management of it and chronology of dealings affecting the property. b) The circumstances surrounding Mrs Bhatti Senior's personal circumstances and immigration status and her life style. c) The actions of Mr Bhatti and his status in initiating and effecting the acquisition of the Bringelly property, his primarily position in influencing , initiating and making all principal decisions as to all dealings affecting the, Bringelly property. d) The circumstances affecting the actual occupation of the Bringelly property. 12 The property was acquired in the names and amounts set out in paragraph 9. Evidence was given by Mrs Bhatti Senior that her son located and found the property, chose it because of its location and expected capital gain. Mr Bhatti, the son, negotiated the purchase, arranged the mortgage on an interest only basis. Mrs Bhatti Senior gave evidence that one of the co-owners Ms Anupreet Bedi who was friend of the family, also wanted an investment property and wanted to claim negative gearing for her own taxation purposes. The loan was described as an investment loan in the loan application. Completion of the purchase of the Bringelly property was effected on or about 5th November 2004. 13 A rental management agreement was signed with an agent trading as United Realty Pty Ltd which indicated the period of the agency agreement commenced on the 1st December 2004 and the agent was authorised to find a residential tenant, after completion of the purchase. 14 Landlord insurance cover was effected over the Bringelly property with the NRMA for the 2005 to 2006 period. 15 Other documents produced by Sydney South West Area Service supplied information that Mrs Bhatti Senior was aged in her mid 60's and married to a husband who resided in India. Mrs Bhatti Senior was employed as a nurse subject to a limited work visa, which was due to expire on 20th October 2008. Various correspondence issued to Mrs Bhatti senior from her employer, the Department of Immigration and Multicultural are addressed to her at her son's Hammondville residence and to her at the Concord Hospital Nurses quarters. All Mobile telephone accounts for the period 11th July to 11th April 2005 show her Hammondville address. Significantly, an extension of employment form for the period 25/10/2004 to the 20/10/08 is signed on the 26th October 2004 by Mrs Bhatti and records summons from the employer show consistent weekly charges for occupation of the nurses quarters as from 28/10/2002 to 28/10/2007 expressed as board and lodging. 16 Integral Energy electricity accounts were produced for the previous quarter July 2004 to 9th November 2004 relating to the use and occupation by the vendor of the property showing usage of $199.95. The next quarter account features in the names of all applicants addressed to the Bringelly property address for the period 9/11/04 to 6/01/05 for the sum of $35.19 and the next period issues as from 6/1/2005 in the name of a tenant for a significantly larger amount. 17 Mrs Bhatti Senior's current passport identifies her as an Indian national with a residential address in India. Under cross examination, Mrs Bhatti Senior gave direct evidence that she left some of her belongings in a bedroom at her sons home at Hammondville (located near Liverpool) and some at the nurses quarters, that she could not drive and relied on public transport and her son for transport generally and to get to and from work at the Hospital, which was located at Concord. 18 The Bringelly property was rented to a residential tenant pursuant to a residential lease commencing 5/1/2005. The Applicants case 19 The Applicants case was that the Bringelly property was occupied by Mrs Bhatti Senior for the period 7th November 2004 to 4th January 2005 as her principal place of residence. She asserted her occupation commenced with moving into the property, a bed, a camp type gas cooker with two hotplates and a gas bottle, a bar refrigerator, a two seater lounge and some clothing. It was asserted that Mrs Bhatti senior lived a modest lifestyle, similar to that she experienced in India. The property had tank water only and did not have connected a telephone line service. 20 Mr Bhatti Senior explained the low electricity account as a result of her particular modest lifestyle. She asserted her lifestyle consisted of a series of nursing shifts and she spent 4 nights a week using the nurses quarters between shifts and helping her son look after his children and time with her son's family on the weekends. She did not use the hot water service and she took cold showers and she cooked on the gas camp stove, instead of the regular stove .In this account, the applicants' produced a witness Mr Somapala Rubasinghe. His account was that of the moving in and moving out and it was that it was accomplished using his modified ute in one trip each time. He could not recall seeing any table or chairs, or kitchen utensils or crockery or clothing. 21 A telling statement was made during cross-examination by Mrs Bhatti Senior where she conceded the lack of transport as difficult and she conceded that she did not get her driving licence and would only stay at the Bringelly property on days off to see how it would go, "I wasn't sure if it was going to be my home". She stated that she would stay at the nurses quarters on her night shifts and that she was unhappy being away from her son and grandchildren. She stated "I thought I would try it to see how it would go, but that it was a matter of my comfort, I failed and I could not stay here". The Respondent's Case 22 The Chief Commissioner asserted that the Bringelly property had not been used as a principal place of residence due to the following circumstances: a) the initial reason for the purchase as investment speculation property, and the subsequent steps taken to make it ready for rental b) the nature and manner of the holding of the property title and ownership by each of the various applicants and the changes to it. c) the remote location of the property made it difficult to get to and from work, with long periods of travelling time. d) the nature of Mrs Bhatti Senior's night shift work and her continued maintenance of her nurses quarters which was shown on her employment records as her residential address. e) the limited immigration status of Mrs Bhatti Senior f) the concession made by Mrs Bhatti Senior to the effect that is was a short term, try and see experience, which was carried out on a part time basis in any event and that of itself was a clear indication it was not intended to be a principal place of residence because its use was temporary. g) that the applicants' explanation of a modest lifestyle also indicates the temporary nature of the occupation when looked at in terms of the different locations Mrs Bhatti Senior used to store her various belongings and to receive important correspondence. h) that the mobile telephone records do not reveal increased use, which would be expected from a person who relied on her family for transport and indicates very little time was spent at the Bringelly property. i) The electricity supply bill for the relevant period indicates little or no occupation activity as the bill was small, when compared with the vendors use and the tenants use. j) The small amount of furniture, appliances and personal items disclosed by the Applicants as moved to the property indicate the temporary nature of their placement. k) that all of the circumstances should be taken together as a clear indication of the temporary nature and true intention, that the property was at all times contemplated to be an investment property. The Legislation 23 The relevant legislation at the time of the assessment of the 2005 Land tax year for land owned as 31/12/2004 is Section 10 of the Land Tax Management Act 1956: 10 Land exempted from tax l) Except where otherwise expressly provided in this Act the following lands shall be, subject to sections 10B, 10D, 10E, 10G and 10P be exempted from taxation under this Act: … (r) land that is exempt from taxation under the principal place of residence exemption as provided for by Schedule 1A Schedule 1A Principal Place of Residence exemption (Section 10(1)(r)) Part 1 Preliminary 1 Definitions (1) In this Schedule: Principal place of residence exemption – see clause 2 Residential land – see clause 3 Taxing date – means midnight on the thirty-first day of December. (2) For the purposes of this Schedule, a reference to the owner of land includes, if there are joint owners, any one or more of those joint owners. Part 2 Principal place of residence exemption 2 Principal place of residence exemption (1) Land used and occupied by the owner as the principal place of residence of the owner of the land, and for no other purpose, is exempt from taxation under this Act, in respect of the year commencing 1 January 2005 or any succeeding year, if the land is: (a) A parcel of residential land, or (b) a lot under the Strata Schemes ( Freehold Development ) Act 1973 or a lot under the Strata Schemes ( Leasehold Development ) Act 1986. (2) Land is not used and occupied as the principal place of residence of a person unless: (a) the land, and no other land, has been continuously used and occupied by the person for residential purposes and for no other purposes since 1 July in the year preceding the tax year in which land tax is levied, or (b) in any other case, the Chief Commissioner is satisfied that the land is used and occupied by the person as the person's principal place of residence. (3) If the owner of land is entitled to the exemption conferred by this clause, no other person is liable to be assessed for taxation under this Act in respect of the land during the period of the owner's entitlement to the exemption. (4) The exemption conferred by this clause is referred to as the principal place of residence exemption. 3 Residential land – meaning (1) In this Schedule, residential land means land that is used and occupied for residential purposes and for no other purpose, that use and occupation being use and occupation of a building or buildings designed, constructed or adapted for residential purposes, other than a building or buildings: (a) comprised of Strata lots or residential units, or (b) containing out of the total of all rooms in the building or buildings occupancies other than that of the owner, or (c) from any part of which income is derived. (2) Land does not cease to be used and occupied as provided by subclause (1) by reason of there being on that land any building or improvement that is used or occupied for a purpose ancillary to the purposes for which the building is, or the buildings are, designed, constructed or adapted. Note. Clause 4 allows one residential occupancy to be disregarded in applying the principal place of residence exemption. Clause 5 allows the use of land for purposes ancillary to a business conducted at a different place to be disregarded in certain circumstances. 37. Section 3 of the Land Tax Management Act 1956 contained the following relevant definitions: Owned and similar expressions have a meaning corresponding with that of owner. Owner includes: (a) in relation to land, every person who jointly or severally, whether at law or in equity: (i) is entitled to the land for any estate of freehold in possession, or (ii) is entitled to receive, or is in receipt of, or if the land were let to a tenant, would be entitled to receive the rents and profits thereof, whether as beneficial owner, trustee, mortgagee in possession, or otherwise, (b) (Repealed) (c) in relation to any leasehold estate in land, whether legal or equitable (other than under any lease to which section 21C or 21D applies), a person, or a person who is a member of a class or description of persons, prescribed for the purposes of this paragraph, and (d) a person who, by virtue of this Act, is deemed to be the owner. Joint owners means persons who own land jointly or in common, whether as partners or otherwise, and includes persons who have a life or greater interest in shares of the income from the land and persons who by virtue of this Act are deemed to be joint owners. THE RESIDENCE ISSUE 24 All of the Applicants in this matter are co-owners and owners for the purposes of Section 3 are joint owners. 25 Pursuant to section 10(l)(r) and schedule 1A contemplates that one or more "joint" owners may claim the principle residence exemption. In this case only Mrs Bhatti Senior claims to have stayed in the property. 26 To claim that exemption clause 2 of Schedule 1A also needs to be satisfied: (a) The land, and no other land, has been continuously used and occupied by the person for residential purposes and for no other purposes since 1 July in the year preceeding the tax year in which land tax is levied, or (b) In any other case, the Chief Commissioner is satisfied that the land is used and occupied by the person as the person's principal place of residence. 27 The property was acquired by the Applicants in November 2004 and for the 2005 Land Tax year, could not satisfy the condition of continuous use since 1st July and nor could any of the other co owners for that matter. 28 On the facts and in all the circumstances and more particularly, on the evidence given by Mrs Bhatti Senior herself, the Bringelly property was not used and occupied as a principal place of residence within the time period required by the Act nor can the Tribunal be satisfied on the evidence of that fact, given that Mrs Bhatti senior, effectively retained two other addresses where she kept personal property and which she notified to her employer and the Department of personal property and which she notified to her employer and the Department of Immigration as the point of contact for her visa and pay notification. The case in point is Prager v Chief Commissioner of State Revenue [2007] NSWADT 23 (applying the residence principals set out in Chief Commissioner of State Revenue v Ferrington [2004] NSWADTAP 41 where "principal place of Residence" is given its ordinary meaning" and in this matter in assessing the evidence objectively, there no strong evidence of occupation other than that of transient and temporary stays, if any, by Mrs Bhatti senior. When viewed against all of the circumstances, the short stays and the duration of the period of occupation, did not have the element of permanence. 29 The Tribunal makes this finding, not merely based on the modest lifestyle asserted by Mrs Bhatti Senior, but also on the fact that the property was purchased initially for property speculation, all co-owners were not family members and the Applicants sought to rent the property as from settlement and did find a tenant, who went into occupation in January 2005. The original intention was pursued by all co owners and put into operation. 30 The onus of placing sufficient material before the Tribunal to allow the Tribunal to exercise the discretion granted to it under section 101(1) of the Taxation Administration Act 1996, rests with the Applicants. The principles in support of this onus are set out in Chief Commissioner of State Revenue v Aldridge & Anor [2003] NSW ADTAP 50. Until the day of the hearing, the Chief Commissioner had very limited information placed before it and no representations from Mrs Bhatti herself. The Applicants provided Mrs Bhatti Senior as their witness on the hearing day and she readily gave her evidence as to her circumstances and intentions, however evidence as to actual days and time spent was not clear and when pressed she advised that her comfort and managing her work shifts were vitally important as was getting to and from work, as it must be for her to retain her visa, significantly she retained the nurses quarters for her accommodation. Orders The Chief Commissioner's determination is affirmed. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.