Comptroller of Income Tax v BJY

• Jurisdiction: Singapore
• Judgment Date: 13 September 2013
• Date: 13 September 2013
• Docket Number: Originating Summons No 184 of 2013
• Court: High Court (Singapore)

Comptroller of Income Tax

Plaintiff

and

BJY and others

Defendant

[2013] SGHC 173

Andrew Ang J

Originating Summons No 184 of 2013

High Court

Revenue Law—International taxation—Avoidance of double taxation agreement—Application for records and information on bank accounts—Request by tax authority in India for exchange of information under the avoidance of double taxation agreement—Whether granting application was justified in circumstances of case—Whether information requested foreseeably relevant—Whether information requested was trade, business, industrial, commercial or professional secret or trade process—Whether granting application was not contrary to public interest—Article 28 (1) Agreement between the Government of the Republic of Singapore and the Government of the Republic of India for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income—Sections 105 J (2) and 105 J (3) Income Tax Act (Cap 134, 2008 Rev Ed) —Order 98 Rules of Court (Cap 322, R 5, 2006 Rev Ed)

The Comptroller of Income Tax (‘the Comptroller’) made an application to the court for an order that the first respondent bank [BJY] and the second respondent bank [Bank 2], release certain information, documents, and bank records concerning the third respondent [BJX], a Singapore-incorporated company. The application was made pursuant to a request for such information by the tax authorities in India who were investigating [BJX] for tax liabilities in India. This request for information was made under the Agreement between the Government of the Republic of Singapore and the Government of the Republic of India for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income, as amended by the Second Protocol (‘the Singapore-India DTA’). The Singapore-India DTA provided for the exchange of information between Singapore and India for the purposes of enforcing and administering tax laws in both countries. The tax authorities in India suspected that [BJX] which was part of an alleged Ponzi-scheme concerning Indian nationals, was liable for taxes in India through [BJX] 's alleged permanent establishments in India. The tax authorities in India thereby sought further information concerning [BJX], some of which were bank records in the possession and control of the banks [BJY] and [Bank 2] in Singapore.

Held, allowing the application:

(1) The information held by [BJY] and [Bank 2] were ordinarily protected from disclosure by s 47 of the Banking Act (Cap 19, 2008 Rev Ed), and therefore, an order had to be made by the High Court pursuant to s 105 J (2) of the Income Tax Act (Cap 134, 2008 Rev Ed) (‘ITA’) before such information could be obtained by the Comptroller: at [13] .

(2) Before making the order under s 105 J (2), the court first had to be satisfied that the conditions set out in both s 105 J (3) (a) (ie, the making of the order is justified in the circumstances of the case) and s 105 J (3) (b) (ie, it is not contrary to the public interest that access to the information be given) were met: at [20] .

(3) In deciding whether the making of an order was justified in the circumstances, the court would take into account the requirements of the internationally agreed Standard for the exchange of information for tax purposes as expressed by the Minister for Finance Mr Tharman Shanmugaratnam during the Parliamentary Debate on the Second Reading of the Income Tax (Amendment) (Exchange of Information) Bill (Singapore Parliamentary Debates, Official Report(19 October 2009) vol 86 at cols 1602-1625). Those concerns were reflected in the Eighth Schedule of the ITA, and in most of the recently signed or amended DTAs (including the Singapore-India DTA): at [22] , [23] and [24] .

(4) The two considerations which were important in this particular instance were, first, whether the information requested was foreseeably relevant, and second, whether the information requested disclosed a trade, business, industrial, commercial or professional secret or trade process: at [25] .

(5) The standard of foreseeable relevance was such that the requesting State did not need to show that the requested information was demonstrably relevant for the administration or enforcement of its domestic tax laws, but had at the very least to explain why the particular information requested was thought to be possibly relevant: at [28] .

(6) The tax authorities in India did not have to establish that [BJX] was liable to pay taxes under Indian law in order to show that the information requested was foreseeably relevant to the investigations carried out on [BJX] : at [32] .

(7) Pursuant to Art 28 (3) (c) of the Singapore-India DTA, the Comptroller was under no obligation to supply information which would disclose a trade, business, industrial, commercial or professional secret or trade process (‘Business Secrets’): at [35] and [36] .

(8) The scope of Business Secrets had to be interpreted narrowly: at [38] .

(9) Article 28 (2) of the Singapore-India DTA provided that the requesting State should treat the information obtained as secret in the same manner as it would if the information was obtained under the domestic laws of the requesting State, and disclose the same only to persons or authorities concerned with the assessment or collection of, the enforcement or prosecution in respect of, or the determination of appeals in relation, to taxes of the sort referred to in the Singapore-India DTA. Therefore, any prejudice that might be suffered by the taxpayer because confidential documents were provided to the requesting State should not be overstated: at [39] and [40] .

(10) Banking documents per se did not fall within the narrow scope of Business Secrets: at [41] .

(11) The making of an order under s 105 J (2) was contrary to the public interest only in extreme cases, such as where it involved national security interests, or covered sensitive information held in the vital interests of the requested country, and would rarely arise: at [43] and [44] .

(12) Public interest in this context did not extend to giving another layer of protection for, firstly, information that was protected from disclosure under s 47 of the Banking Act and s 49 of the Trust Companies Act (Cap 336, 2006 Rev Ed), and secondly, Business Secrets: at [45] .

Comptroller of Income Tax v AZP [2012] 3 SLR 690 (distd)

Banking Act (Cap 19, 2008 Rev Ed) ss 47, 47 (1)

Income Tax Act (Cap 134, 2008 Rev Ed) ss 105 D (1) , 105 J (1) , 105 J (2) , 105 J (3) , 105 J (6) , 105 J (8) (consd) ;ss 105 A-105 M, 105 D, 105 E (1) , 105 E (1) (a) , 105 E (1) (b) , 105 J, 105 J (3) (b) , 105 J (9) , Eighth Schedule

Income Tax (Amendment) (Exchange of Information) Act 2009 (Act 24 of 2009)

Rules of Court (Cap 322, R 5, 2006 Rev Ed) O 98 r 2 (2) (b) , O 98 r 2 (4) (consd) ;O 98 r 2 (1)

Trust Companies Act (Cap 336, 2006 Rev Ed) s 49

Alvin Chia Ken Li and Patrick Nai (Inland Revenue Authority of Singapore (Law Division) for the plaintiff

First and second respondents unrepresented

Noelle Seet and Guo Longjin (RHTLaw Taylor Wessing LLP) for the thirdrespondent.

Andrew Ang J

Introduction

1 This was an application in Originating Summons No 184 of 2013 (‘OS 184’) by the Comptroller of Income Tax (‘the Comptroller’) pursuant to s 105 J of the Income Tax Act (Cap 134, 2008 Rev Ed) (‘ITA’) for an order that the first respondent bank [BJY] and the second respondent bank [Bank 2] release certain information, documents and bank records concerning the third respondent [BJX]. I allowed the Comptroller's application in an inter partes hearing in chambers, and now set out the grounds for my decision.

Factual background

2 The Comptroller made this application following a request for such information by Mr K Ramalingam, the Joint Secretary (Foreign Tax and Tax Research II) of the Central Board of Direct Taxes of the Department of Revenue of India (‘the Competent Authority of India’) by way of a letter dated 12 September 2012 (‘the EOI Request’). Further correspondence was exchanged between the Comptroller and the Competent Authority of India in order for the Comptroller to clarify uncertainties in the EOI Request. This was done by way of a letter sent by the Comptroller to the Competent Authority of India dated 30 September 2011 to which the Competent Authority of India replied in a letter dated 29 May 2012 (such correspondence exchanged between the Comptroller and the Competent Authority of India being hereinafter referred to as the ‘Information Request Correspondence’).

3 The EOI Request was made pursuant to the Agreement between the Government of the Republic of Singapore and the Government of the Republic of India for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income which entered into force on 27 May 1994 (‘the Singapore-India DTA’). Specifically, the EOI Request was made under Art 28 of the Singapore-India DTA (‘Art 28’), a provision for the purposes of exchange of information (‘EOI’) in relation to the administration of tax issues in Singapore and India. Art 28 was amended by the Second Protocol signed on 24 June 2011, which came into force on 1 September 2011.

4 The Information Request Correspondence was placed before the court by way of an affidavit filed on 26 February 2013 in support of OS 184 by Ms Chan Wei Ting (‘Ms Chan’), a senior tax investigator with the Inland Revenue Authority of Singapore (‘IRAS’). Ms Chan also recounted certain important claims relating to [BJX] in the main text of the affidavit which were taken from the Information Request Correspondence. I pause at this juncture to note that in the event the supporting affidavit is to be served on the person in relation to whom the information is sought pursuant to O 98 r 2 (4) of the Rules of Court (Cap 322, R 5, 2006 Rev Ed) (as was the case here), the letter of request made...