Sim Lim Investments Ltd v Attorney General

JudgeChua F A J
Judgment Date03 September 1968
Neutral Citation[1968] SGFC 13
Docket NumberCivil Appeal No Y60 of 1967
Date03 September 1968
Published date19 September 2003
Plaintiff CounselGS Hill (Rodyk & Davidson)
Citation[1968] SGFC 13
Defendant CounselSat Pal Khattar (State Counsel)
CourtFederal Court (Singapore)
Subject MatterSubsidiary company declaring dividend in favour of parent company,Revenue Law,Income taxation,Whether parent company entitled to treat dividend declared and paid in subsequent year as having been derived in a preceding year,Statutory income,Sections 35(7A) Income Tax Ordinance 1962 (No 15 of 1962),Dividend

The appellants, Sim Lim Investments Ltd are a holding company of a group of companies known as the Sim Lim Group, one of them being Sim Lim Co Ltd, a wholly trading subsidiary of the parent company.

On 8 March 1965 Sim Lim Co Ltd declared a dividend of $1,192,500 pursuant to a resolution passed at an ordinary general meeting held on 6 March 1965.

On 17 August 1965 Sim Lim Investments Ltd, the parent company, declared to its shareholders a gross dividend from which tax was deducted under s 44(1) of the Income Tax Ordinance amounting in the aggregate to a total sum of $324,465.

In the accounts of the parent company, the dividend declared by Sim Lim Co Ltd on 8 March 1965 was included by its auditors as income of the parent company for the year ended 31 December 1964 although this dividend was paid by the subsidiary and received by the parent company in 1965.
The Comptroller of Income Tax in his computation, however, treated the dividend declared in March 1965, as income of the parent company for the basis period ending 31 December 1965 and accordingly falling to be taxed in the year of assessment 1966.

The parent company on the other hand contended that this dividend declared by its subsidiary in March 1965 has been correctly treated by it in its own computation for income tax as its income for the basis period ending 31 December 1964 thus falling to be assessed in the year of assessment 1965.

If the comptroller is right, this appeal fails.
If Sim Lim Investments Ltd is right, this appeal succeeds.

Winslow J in the court below held that the comptroller was right and that on the true construction of s 35(7A) the dividend in question, for the purposes of ascertaining the statutory income of the appellants for the year of assessment 1965, was rightly excluded.

Section 35(7A) reads as follows:

The statutory income of any person for any year of assessment in respect of dividends shall be the full amount of the income therefrom for the year preceding the year of assessment notwithstanding that the source of such income is not possessed by him during the year of assessment.

It is conceded that so far as an individual is concerned his statutory income for any year of assessment in respect of dividends shall be the full amount of the income from dividends declared or paid to him during the year preceding the year of assessment.

Winslow J held that it would be erroneous and contrary to common sense to give a different meaning where a shareholder is

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