Mauritian land deal

The taxpayer owned the residue of a lease in Mauritius and entered into a scheme with a developer to prepare plots of land for building.

When the plots were sold the taxpayer took a proportion of the sum paid. He did not include the payments in his tax returns so the Mauritian tax authority raised assessments on the amounts treating them wholly as income (as opposed to capital).

The tax authority valued the property on a comparable transaction basis. The taxpayer argued that the sums represented capital which is not subject to tax in Mauritius. His valuer used a residual method to value the property.

The taxpayer appealed. The appeal progressed to the UK Privy Council where the issue concerned the method of valuation.

The Privy Council held that the taxpayer’s method of valuation was...