Sim Lim Investments Ltd v Attorney General

• Jurisdiction: Singapore
• Judge: Sir Garfield Barwick
• Judgment Date: 28 July 1969
• Neutral Citation: [1969] SGPC 3
• Docket Number: Privy Council Appeal No 34 of
• Date: 28 July 1969
• Published date: 19 September 2003
• Year: 1969
• Plaintiff Counsel: HH Monroe QC and G Starforth Hill (Loward Chance & Co)
• Citation: [1969] SGPC 3
• Defendant Counsel: Michael Nolan QC, Stewart Bates and Sat Pal Khattar (State Counsel) (Charles Russell & Co)
• Court: Privy Council
• Subject Matter: Income taxation,ss 35(1), 35(7A) Income Tax Ordinance (Cap 166, 1955 Rev Ed),Dividend paid to parent company by subsidiary company,Revenue Law,Whether such dividend constitutes parent companyÂ’s statutory income for year in which dividend is declared and paid or for year subsequent to that in which dividend is declared and paid,Statutory income in respect of dividends

The only question in this appeal is whether a dividend of $1,192,500 declared and paid on 6 March 1965 by Sim Lim Co Ltd, a wholly-owned subsidiary of the appellant company, is to be included in the statutory income of the appellant company for the year of assessment ended 31 December 1965.

The appellant company itself declared and paid on 17 August 1965 a dividend of $811,162.50 from which it duly deducted tax at the rate of 40% under s 44(1) of the Income Tax Ordinance. Subsections (2) to (5) of s 44 provide in effect that if the amount so deducted exceeds the amount of tax payable by the appellant company in respect of the year of assessment in which the deduction was made (together with any balance of tax from previous years available as a set-off under the provisions of sub-s (5)) the amount of the excess is recoverable from the appellant company as a debt to the Government. It is unnecessary for their Lordships to refer to these provisions in detail, for it is common ground that the excess so recoverable amounts to $302,324.60 unless the dividend of $1,192,500 which the appellant company received from its wholly-owned subsidiary of 6 March 1965 did form part of its statutory income for the year of assessment (ended 31 December 1965) in which it paid its own dividend to its own shareholders and deducted tax therefrom. The High Court of Singapore and, on appeal the Federal Court of Malaysia, held that it did not. Both courts gave substantially the same reasons for their judgments. Their Lordships so fully agree with them that it is unnecessary to do more than to repeat them in summary form in dismissing this further appeal.

Under s 10 of the Income Tax Ordinance income tax is payable upon the income of any person accruing in or derived from Singapore, in respect of (inter alia): `(a) gains or profits from any trade, business ...` and `(d) dividends ...`. The amount of the income of a company resident in Singapore which is assessable to tax for any year of assessment is determined by ascertaining what is its `statutory income` for that year of assessment under s 35 and deducting therefrom any deductions allowed by s 37. No question as to deductions arises in the present appeal, which turns solely upon the true construction of s 35 and in particular sub-s (7A).

The general basis for computing `statutory income` for any year of assessment laid down in sub-s (1) of s 35, is that it is the full amount of the taxpayer`s income for the year...