Colombo, Sri Lanka – 02 October 2026 – The Sri Lanka Court of Appeal has issued a significant order clarifying its powers within the framework of tax appeals, specifically concerning the remittal of cases to the Tax Appeals Commission (TAC). In a recent ruling dated 01 October 2026, the Court disallowed an application by Commercial Credit and Finance PLC to remit their VAT assessment case back to the TAC for adjustment without first addressing the core questions of law. The decision underscores the procedural rigor expected at the appellate stage of tax disputes.
Background to the Appeal
The case, titled Commercial Credit and Finance PLC v. The Commissioner-General of Inland Revenue (CA CASE NO: CA/TAX/34/2019), originated from an assessment of Value Added Tax (VAT) on financial services for the taxable period from 01 April 2011 to 31 March 2012. Commercial Credit and Finance PLC, a financial services provider, initially contested the Assessor’s determination regarding their VAT liability. The company’s appeal to the Commissioner-General of Inland Revenue, and subsequently to the Tax Appeals Commission (TAC), saw the original assessment largely upheld.
Dissatisfied with the TAC’s determination, Commercial Credit and Finance PLC requested the TAC to refer a “Case Stated” to the Court of Appeal, presenting sixteen specific questions of law for the Court’s opinion. These questions traversed a range of issues, from procedural aspects such as the TAC’s timeliness in determining appeals and the Assessor’s communication of reasons, to substantive matters concerning the applicability of VAT on various income streams. Key points of contention included whether investment interest income from government securities and fixed deposits, or gains from the sale of shares in listed entities and investments on the Appellant’s own account, should be treated as “supply of financial services” under the VAT Act.
The Court’s Recent Order and Reasoning
During the hearing on 07 August 2026, Counsel for the Appellant moved for the case to be remitted to the Tax Appeals Commission for the purpose of adjusting the assessment in accordance with written submissions filed before the Court. This application was objected to by the Deputy Solicitor General appearing for the Respondent.
The two-judge bench, comprising Justices B. Sasi Mahendran and Adithya Patabendige, carefully considered the application in light of Section 11A of the Tax Appeals Commission Act No. 23 of 2011, as amended. Section 11A outlines the powers of the Court of Appeal when a case is stated for its opinion. Specifically, subsections (5) and (6) were central to the Court’s deliberation:
- Section 11A (5) permits the Court to cause a stated case to be sent back to the Commission for amendment of the case itself.
- Section 11A (6) empowers the Court to hear and determine questions of law arising from the stated case. Following its decision, the Court may either confirm, reduce, increase, or annul the assessment determined by the Commission, or remit the case to the Commission with the Court’s opinion, for the Commission to revise the assessment accordingly.
Justice B. Sasi Mahendran, delivering the order, clarified that while the Court has the power to remit a case for amendment of the stated case or to remit with its opinion after determining the questions of law, it does not possess the jurisdiction to direct the TAC to amend or adjust an assessment *without first determining and answering the questions of law* arising from the stated case. Consequently, the application to remit the matter to the Tax Appeals Commission for immediate assessment adjustment was disallowed.
Implications for Tax Appeals in Sri Lanka
This ruling by the Court of Appeal serves as an important judicial pronouncement on the procedural sequence and jurisdictional boundaries within Sri Lanka’s tax appeals process. It reinforces that the appellate stage at the Court of Appeal, when presented with a “Case Stated,” primarily focuses on the interpretation and application of law to the specific questions formulated by the Tax Appeals Commission. Only after these legal questions have been heard and determined can the Court direct consequential adjustments to the assessment, or provide its opinion for the TAC to revise the assessment.
The decision emphasizes that the Court of Appeal’s role in such matters is not to re-evaluate the assessment directly or to function as a primary forum for recalculations, but rather to provide definitive legal opinions on questions of law that guide the final determination of tax liabilities. This structured approach ensures legal clarity and consistency in the resolution of complex tax disputes.
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