ABU v Comptroller of Income Tax

• Jurisdiction: Singapore
• Judge: Sundaresh Menon CJ
• Judgment Date: 22 January 2015
• Neutral Citation: [2015] SGCA 4
• Plaintiff Counsel: Sundareswara Sharma (ATMD Bird & Bird LLP)
• Docket Number: Civil Appeal No 150 of 2013
• Date: 22 January 2015
• Hearing Date: 13 November 2014
• Subject Matter: construction of statute,double taxation agreement,international taxation,Revenue Law,Statutory Interpretation,presumption against retrospective operation
• Year: 2015
• Citation: [2015] SGCA 4
• Defendant Counsel: Vikna Rajah, Patrick Nai and Michelle Chee (Inland Revenue Authority of Singapore)
• Court: Court of Appeal (Singapore)
• Published date: 26 January 2015

Sundaresh Menon CJ (delivering the grounds of decision of the court) Introduction

This appeal arises in the context of an exchange of information request made by the National Tax Agency of Japan (“the JNTA”) to the Comptroller of Income Tax (“the Comptroller”). The request was made pursuant to Art 26(1) of the Agreement between the Government of the Republic of Singapore and the Government of Japan for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income as amended by the Protocol (“the Treaty”).

The JNTA sent a letter to the Comptroller requesting, among other things, the production of bank statements for certain accounts held by the Appellant, his son and their related entities with [BLM] Bank (“the Bank”) pursuant to Art 26(1) of the Treaty (“the Letter of Request”). Having concluded that the bank statements were protected against unauthorised disclosure by s 47 of the Banking Act (Cap 19, 2008 Rev Ed), the Comptroller filed Originating Summons 331 of 2013 (“OS 331”) against the Bank for an order directing the production of the bank statements under s 105J(2) of the Income Tax Act (Cap 134, 2008 Rev Ed) (“the ITA”). The Appellant applied for and was granted leave to intervene in OS 331.

On 31 May 2013, an order in terms of OS 331 was made by a High Court judge (“the Judge”). The Appellant filed Summons No 3310 of 2013 (“Summons 3310”) for the order of court dated 31 May 2013 to be discharged and Summons No 5041 of 2013 (“Summons 5041”) for execution of the order of court to be stayed pending the determination of legal proceedings commenced against the JNTA in Japan challenging the validity of the Letter of Request. Both summonses were dismissed by the Judge on 17 October 2013.

On 13 November 2013 the Appellant filed his appeal in Civil Appeal No 150 of 2013 (“CA 150”) against the Judge’s decision to dismiss Summonses 3310 and 5041. We heard the appeal on 15 October 2014. At the close of the hearing we dismissed the appeal save to the extent that the scope of the order made below on 31 May 2013 was to be varied to reflect the terms of the original request made by the JNTA and no more. As we indicated we would, we now set out the grounds of our decision in full.

Facts

The Appellant is a Japanese national residing in Japan. On 22 November 2012, the JNTA sent the Letter of Request to the Comptroller making a request for information pursuant to Art 26(1) of the Treaty. Article 26 bears setting out in full: ARTICLE 26 1. The competent authorities of the Contracting States shall exchange such information as is foreseeably relevant for carrying out the provisions of this Agreement or to the administration or enforcement of the domestic laws concerning taxes of every kind and description imposed on behalf of the Contracting States, or of their local authorities, insofar as the taxation thereunder is not contrary to this Agreement. The exchange of information is not restricted by Articles 1 and 2. 2. Any information received under paragraph 1 by a Contracting State shall be treated as secret in the same manner as information obtained under the domestic laws of that Contracting State and shall be disclosed only to persons or authorities (including courts and administrative bodies) concerned with the assessment or collection of, the enforcement or prosecution in respect of, the determination of appeals in relation to the taxes referred to in paragraph 1, or the oversight of the above. Such persons or authorities shall use the information only for such purposes. They may disclose the information in public court proceedings or in judicial decisions. 3. In no case shall the provisions of paragraphs 1 and 2 be construed so as to impose on a Contracting State the obligation:

(a) to carry out administrative measures at variance with the laws and administrative practice of that or of the other Contracting State;

(b) to supply information which is not obtainable under the laws or in the normal course of the administration of that or of the other Contracting State.

(c) to supply information which would disclose any trade, business, industrial, commercial or professional secret or trade process, or information the disclosure of which would be contrary to public policy.

4. If information is requested by a Contracting State in accordance with the provisions of this Article, the other Contracting State shall use its information gathering measures to obtain the requested information, even though the other Contracting State may not need such information for its own tax purposes. The obligation contained in the preceding sentence is subject to the limitations of paragraph 3 but in no case shall such limitations be construed to permit a Contracting State to decline to supply information because it has no domestic interest in such information. 5. In no case shall the provisions of paragraph 3 be construed to permit a Contracting State to decline to supply information solely because the information is held by a bank, other financial institution, nominee or person acting in an agency or a fiduciary capacity or because it relates to ownership interests in a person However, a Contracting State may decline to supply information relating to confidential communications between attorneys, solicitors or other admitted legal representatives in their role as such and their clients to the extent that the other communications are protected from disclosure under the domestic laws of that Contracting State.

The ostensible purpose of the JNTA’s request, insofar as it is relevant to these proceedings, was to determine whether the Appellant had failed to report distributions he had received from foreign securities investment funds which he and his family had invested in. In this regard the JNTA had found documents during the Appellant’s tax examination in Japan suggesting that he had not done so. This was material because the Appellant was subject to income tax on his worldwide income under Japanese law.

Arising from its suspicions, the JNTA requested, among other things, the production of bank statements for the following accounts held with the Bank for the period 2006 through to 2011 and furnished the following reasons why these bank statements were required:

S/N	Account No	Account Holder	Reasons
1	[xxx]	The Appellant	The Appellant may have failed to report his financial income including interest arising from the bank accounts in Singapore and other financial income arising from overseas assets paid into bank accounts in Singapore.
2	[xxx]	[B]	[B] is the child of the Appellant and the Appellant may have used the bank account held in [B]’s name to hide his own income.
3	[xxx]	[C Company]	[C Company] was an asset management company located in the Netherlands. Its main source of income was dividends from the Dutch Shares. The Appellant was the representative of [C Company]. Income that was attributable to the Appellant may have been deposited into this account.
4	[xxx]	[D Company]	[D Company] was the investment management company for all foreign security investment trusts which the Appellant’s family invested in. The JNTA had to examine [D Company’s] bank accounts to determine whether there was any hidden income attributable to the Appellant’s family (and therefore the Appellant) which had not been declared.
5	[xxx]	[E Company]	[E Company] was an asset management company located in the Netherlands. It was formed in October 2007 and dissolved in November 2009. The Appellant was the representative of [E Company]. [E Company] derived its revenue mainly from dividend income from foreign security investment funds. It was possible that the Appellant’s Family continued to use the bank account of [E Company] to collect investment income and dividends attributable to them.
6	[xxx]	[F Trust]	These were bank accounts of the foreign securities investment trusts managed by [D Company]. Examining these accounts was necessary to clarify issues relating to the financial income attributable to the Appellant’s Family.
7	[xxx]	[G Trust]
8	[xxx]	[H Trust]

The Proceedings Below

Having formed the opinion that the said bank statements were protected from unauthorised disclosure by s 47 of the Banking Act, the Comptroller sent a notice under s 105E of the ITA to the Bank and each of the account holders on 15 April 2013 informing them of his intention to make an application to the High Court for the production of the bank statements under s 105J(1) of the ITA. Section 105J of the ITA is central in these proceedings and the material parts of it read as follows:

Orders relating to certain information 105J.—(1) Where — (a) the Comptroller requires any information — (i) for the administration of this Act, other than for an investigation or a prosecution of an offence alleged or suspected to have been committed under this Act; or (ii) in order to comply with a request made under section 105D; and (b) the Comptroller is of the opinion that the information is protected from unauthorised disclosure under — (i) section 47 of the Banking Act (Cap. 19) including any regulations made under subsection (10) of that section; or (ii) section 49 of the Trust Companies Act (Cap. 336),

then the Comptroller or an authorised officer may apply to the High Court for an order under subsection (2).

(2) If, on such an application, the High Court is satisfied that the conditions referred to in subsection (3) are fulfilled, it may make an order that the person who appears to it to have possession or control of the information to which the application relates shall — (a) make a copy of any document containing the information and provide the copy to an authorised officer for him to...