Comptroller of Income Tax v BKW

• Jurisdiction: Singapore
• Judgment Date: 04 October 2013
• Date: 04 October 2013
• Docket Number: Originating Summons No 204 of 2013 (Summons No 1499 of 2013)
• Court: High Court (Singapore)

Comptroller of Income Tax

Plaintiff

and

BKW and another

Defendant

[2013] SGHC 205

Andrew Ang J

Originating Summons No 204 of 2013 (Summons No 1499 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 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 in Originating Summons No 204 of 2013 (‘OS 204 of 2013’) for an order that the first respondent bank [BKW] release certain information, documents, and bank records concerning the second respondent [R] Ltd, a Singapore incorporated company. The application was made pursuant to a request for such information by the Indian tax authorities 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.

In the course of investigations into the tax affairs of an Indian company, [S], the Indian tax authorities conducted a raid and search at the office premises of [S] in Mumbai, India. During the raid, a loose piece of paper (‘the Paper’) was found in an office safe under the control of two employees of [S]. The Paper contained detailed information regarding [R] Ltd's Singapore bank account with [BKW]. When confronted with the Paper, the joint managing director of [S] gave evasive replies about the nature of the entries made on the Paper. According to the Indian tax authorities, it was understood that when money was transferred from [S] to [R] Ltd's bank account in Singapore, [S] received an equivalent sum of cash in Indian Rupees within India. On this basis, the Indian tax authorities sought further information concerning [R] Ltd to ascertain the existence and details of hidden transactions which could have potential income tax implications for [S] under Indian tax legislation.

On 14 March 2013, an order in terms of the Comptroller's application in OS 204 of 2013 was granted (‘the Order’). [R] Ltd then filed the present application in Summons No 1499 of 2013 praying for a discharge of the Order.

Held, dismissing the application:

(1) Before making an order under s 105 J (2) of the Income Tax Act (Cap 134, 2008 Rev Ed) (‘ITA’), the court first had to be satisfied that the two conditions under s 105 J (3) of the ITA were met. The making of the order had to be justified in the circumstances of the case (s 105 J (3) (a) of the ITA) and it had to not be contrary to the public interest that access to the information be given (s 105 J (3) (b) of the ITA): at [11] .

(2) For the first requirement under s 105 J (3) (a) of the ITA, the following principles were pertinent. The requested information had to be foreseeably relevant for carrying out the provisions of the DTA or to the administration or enforcement of the requesting State's domestic tax laws. This standard of foreseeable relevance only required a reasonable possibility that the information would be relevant at the time a request was made. Whether the information, once provided, actually proved to be relevant was immaterial. In addition, no disclosure would be made of trade, business, industrial commercial or professional secrets or trade processes (‘Business Secrets’): at [13] .

(3) On the facts, the requested information was foreseeably relevant to the administration or enforcement of Indian tax law. The taxpayer under investigation was clearly identified and the purpose of the information request was sufficiently elaborated upon. Also, the requested account-opening documents might shed light on the personalities involved in the operation of [R] Ltd's bank account with [BKW] and the movement of funds out of Singapore. That, together with the requested bank statements, would enable the Indian tax authorities to ascertain the existence and details of hidden transactions affecting [S] 's tax liability in India: at [14] .

(4) Moreover, the information on the Paper was significant because it contained all the details necessary for a transfer of funds, including SWIFT and bank codes. The level of detail contained in the Paper, viewed together with the fact that the Paper was found in [S] 's safe under the control of [S] 's associate vice president and his subordinate, was sufficient to establish a connection between the tax investigations on [S] and the [R] Ltd's bank account with [BKW] : at [16] .

(5) Furthermore, the highly suspicious circumstances of this case showed that the requested information was foreseeably relevant. Neither the employees of [S] nor [R] Ltd could offer any explanation regarding the provenance of the Paper. Given that the Paper was found in a safe of two trusted [S] employees and on [S] 's premises, the lack of any explanation regarding the Paper was highly suspicious: at [17] .

(6) The information relating to [R] Ltd's customers was not akin to the character or nature of patent applications or secret trade formulae and did not fall within the narrow scope of Business Secrets protected from disclosure under Art 28 (3) (c) of the Singapore-India DTA. In any case, the strict confidentiality obligations placed on the Indian tax authorities under Art 28 (2) of the Singapore-India DTA would serve to allay any concerns regarding prejudice arising from the disclosure of information: at [20] and [21] .

(7) Regarding the second requirement under s 105 J (3) (b) of the ITA, [R] Ltd's bare assertion that the Indian tax authorities had failed to show why the Order was not contrary to public interest did not advance [R] Ltd's case in any way because the...