BCH Retail Investment Pte Ltd v Chief Assessor

• Jurisdiction: Singapore
• Judge: Tan Lee Meng J
• Judgment Date: 25 July 2006
• Neutral Citation: [2006] SGHC 133
• Docket Number: Originating Motion No 30 of 2005
• Date: 25 July 2006
• Year: 2006
• Published date: 26 July 2006
• Plaintiff Counsel: David de Souza and Jeanette Lee (De Souza Tay & Goh)
• Citation: [2006] SGHC 133
• Defendant Counsel: Foo Hui Min and Joyce Chee (Inland Revenue Authority of Singapore)
• Court: High Court (Singapore)
• Subject Matter: Revenue Law,Annual value,Whether owner of shopping centre entitled to deduct all reasonable advertising and promotional expenses from gross rental paid by tenants for purpose of ascertaining annual value of shopping centre,Property tax

25 July 2006 Judgment reserved.

Tan Lee Meng J:

1 This case raises an important issue as to whether or not owners of shopping centres in Singapore may deduct all their reasonable advertising and promotion expenses from the gross rental paid by their tenants for the purpose of ascertaining the annual value of their shopping centres, which is relevant to how much property tax has to be paid.

2 The appellant, BCH Retail Investment Pte Ltd (“BCH”), the owner and operator of a shopping centre known as “Parco Bugis Junction”, appealed against the Valuation Review Board’s dismissal of its appeal against the Chief Assessor’s refusal to allow it to deduct the entire amount that it had spent on advertising and promotion of the shopping centre in 2003, namely $2,591,707.00, from the actual gross sums paid by its tenants for the purpose of computing the annual value of Parco Bugis Junction. During the hearing of the appeal, BCH was content to argue that only its “reasonable” advertising and promotion expenses should be deducted from the gross rental to determine the annual value of its shopping centre.

3 The outcome of the present appeal depends on the effect of s 2 of the Property Tax Act (Cap 254, 1997 Rev Ed), which defines “annual value” as follows:

“annual value” —

(a) in relation to a house or building or land or tenement … means the gross amount at which the same can reasonably be expected to be let from year to year, the landlord paying the expenses of repair, insurance, maintenance or upkeep and all taxes (other than goods and services tax); …

4 When considering what Parco Bugis Junction, which has around 203 tenants, can reasonably be expected to be let from year to year, it is relevant to note that tenants pay BCH a “basic rent”, which is a fixed sum computed on a per square metre basis. Furthermore, all tenants except one pay BCH an “additional rent”, which is an agreed percentage of the tenant’s gross sales. Apart from the basic rent and additional rent, tenants pay BCH an “advertising and promotional contribution” (“A & P”), which is defined in the lease agreement as a fee “payable by the Tenant to the Landlord for advertising and promotion as provided in the Lease” and is computed on the basis of $3.23 per square metre occupied by the tenant. For the purpose of this judgment, the basic and additional rent and the A & P contributions will be referred to as the “gross rental”.

5 This is the second time that BCH has come to the High Court for a ruling on the annual value of Parco Bugis Junction. In BCH Retail Investment Pte Ltd v Chief Assessor [2002] 4 SLR 844 (“the BCH (No 1) case”), BCH argued that for the purpose of computing the annual value of Parco Bugis Junction, the tenants’ A & P contributions, which amounted to $591,677.00 in 2003 and which had been regarded as part of the gross rental collected from tenants, should be deducted from the gross rental. This argument was rejected by the Chief Assessor, whose decision was affirmed by the Valuation Review Board. However, Lee Seiu Kin JC (as he then was) allowed BCH’s appeal against the decision of the Valuation Review Board. He explained at [18]:

If the owner can satisfy the Chief Assessor, in relation to the A&P contributions, that: (1) it was reasonable to provide those services; (2) the tenants had agreed to pay for such services; (3) the services were in fact provided; and (4) the costs of providing them were reasonably incurred, then he ought to deduct such sums from the gross rent in arriving at the annual value.

6 With respect to the four conditions listed at [18] of his judgment, Lee JC...