First DCS Pte Ltd v Chief Assessor

Judgment Date25 May 2007
Date25 May 2007
Docket NumberOriginating Summons No 820 of 2006
CourtHigh Court (Singapore)
First DCS Pte Ltd
Chief Assessor and another

Andrew Ang J

Originating Summons No 820 of 2006

High Court

Revenue Law–Property tax–Appeal against valuation and assessment–Whether machinery located in subject property falling within one or more exclusions provided by s 2 (2) Property Tax Act (Cap 254, 2005 Rev Ed)–Whether pipelines extending beyond boundaries of subject property ought to be included in property tax assessment–Whether contractor's test method correct method of assessment–Statutory Interpretation–Construction of statute–Purposive approach–Whether water as article had been made or altered or adapted for sale under s 2 (2) Property Tax Act (Cap 254, 2005 Rev Ed)

First DCS Pte Ltd (“the Appellant”) owned a property (“the subject property”) comprising a building that housed a district cooling plant serving the Changi Business Park. The Appellant provided, and charged for, chilled water for the air-conditioning needs of other buildings in Changi Business Park. Chilled water was produced using district cooling machinery on the subject property (“the machinery”). The machinery included pipelines that extended beyond the boundaries of the subject property, conveying chilled water to customers and warm water back for re-chilling (“the pipelines”).

For the purposes of property tax, the Chief Assessor had valued the subject property using the “contractor's test” method. The machinery including the pipelines were taken into account in the assessment of the annual value of the subject property.

The Appellant objected to the use of the contractor's test method and the inclusion of the machinery and pipelines in the assessment. Its objection to the Chief Assessor's assessment was partially allowed by revising the annual value figures, but the Appellant appealed that decision before the Valuation Review Board (“VRB”). The appeal was dismissed and a further appeal to the High Court was brought.

The questions before the court were: (a) whether water, as an “article”, had been made or altered or adapted for sale so that the “machinery” used for so doing might qualify for exclusion under s 2 (2) of the Property Tax Act (Cap 254, 2005 Rev Ed) (“the Act”); (b) whether the pipelines were correctly included as part of the subject property for the purposes of property tax assessment; and (c) whether instead of the “contractor's test” method, the Chief Assessor ought to have applied the “elemental approach”, which required elements of the rental method to be combined with the elements of the “contractor's test” method.

Held, allowing the appeal in part:

(1) It was likely that the object behind s 2 (2) of the Act was to encourage investments in plant and machinery for manufacturing, processing and other industrial purposes. As such, a distinction could be drawn between machines affixed to the land for manufacturing or processing or industrial purposes, and machines affixed to the land for other purposes: at [28].

(2) The chilled water was not made by the machinery and had been merely cooled by it, and therefore s 2 (2) (a) of the Act did not apply: at [29].

(3)“Altering” in s 2 (2) (b) of the Act was not mutually exclusive with “adapting” in s 2 (2) (c) and in certain circumstance, adaptation might have involved greater change than alteration. It was unwarranted to further impose a requirement of permanence to the plain meaning of the word “altering”. Also, s 2 (2) (b) did not only apply to solids. As such, the chilling of water to 4 C was an alteration notwithstanding that such change was not permanent and that there had not been a change from its liquid state to any other: at [32], [35] and [36].

(4) Agreeing with the VRB that the word “adapting” in s 2 (2) (c)of the Act could cover the chilling of water to the specific temperature of 4 C: at [37].

(5) As the provision of district cooling service was considered a sale under s 2 of the District Cooling Act (Cap 84A, 2002 Rev Ed) notwithstanding that property in the chilled water did not pass, there was no justification for denying that the case on appeal involved sale of water under s 2 (2) (c) of the Act. Like cases ought to be treated alike: at [38] and [39].

(6) Since the machinery qualified under s 2 (2) of the Act, the pipelines were similarly not subject to assessment on the basis that they were an integral part of the machinery: at [41].

(7) Even if the machinery did not qualify under s 2 (2) of the Act, the pipelines would still not be assessable. The general rule at common law was that everything substantially attached to land was part of the land. However, the rule was subject to two exceptions: firstly, if the purpose of the annexation was for the better enjoyment of the object as a chattel rather than to improve the land permanently; secondly, even though an object was clearly a fixture, and therefore part of the land, a tenant for years or for life was allowed to sever and remove it if he had annexed it to the land for certain purposes. Neither exception applied in the present case and thus the pipelines would still not be assessable as they would be fixtures on the neighbouring land and not part of the subject property: at [43] to [45].

(8) As the VRB's finding that there were no comparable properties was a question of fact, an appellate judge should be slow to intervene in such findings made by a lower court. In the absence of rental evidence of comparable properties, the first element of the elemental approach could not be ascertained. The elemental approach therefore could not be used and, accordingly, the Chief Assessor's adoption of the contractor's test method was appropriate: at [51] and [52].

Bancroft v Manchester Assessment Committee and Union Cold Storage Co [1931] 1 KB 385; [1931] All ER 242 (folld)

Chief Assessor v Van Ommeren Terminal (S) Pte Ltd [1993] 2 SLR (R) 354; [1993] 3 SLR 489 (distd)

Collector of Land Revenue v Alagappa Chettiar [1971] 1 MLJ 43 (folld)

James Buchanan & Co Ltd v Assessor for Glasgow 1932 SC 358 (folld)

Letang v Cooper [1965] 1 QB 232 (folld)

Pan-United Marine Ltd v Chief Assessor [2007] 2 SLR (R) 633; [2007] 2 SLR 633 (distd)

People's Park Chinatown Development Pte Ltd v Schindler Lifts (Singapore) Pte Ltd [1992] 3 SLR (R) 236; [1993] 1 SLR 591 (folld)

Sedgwick v Camberwell Assessment Committee and Watney, Combe, Reid & Co [1931] 1 KB 385; [1931] All ER 242 (folld)

District Cooling Act (Cap 84A, 2002 Rev Ed) s 2

Interpretation Act (Cap 1, 2002 Rev Ed) s 9A

Property Tax Act (Cap 254, 1997 Rev Ed) s 20A (1)

Property Tax Act (Cap 254, 2005 Rev Ed) ss 2 (2), 2 (2) (a), 2 (2) (b), 2 (2) (c), 29 (1)

Property Tax Ordinance 1960 (No 72 of 1960)

Factories Act 1961 (c 34) (UK) s 175

Rating and Valuation (Apportionment) Act 1928 (c 44) (UK) ss 3, 4

Leung Yew Kwong, Tan Kay Kheng and Teo Lay Khoon (WongPartnership) for the appellant

Liu Hern Kuan and Ong Ken Loon (Inland Revenue Authority of Singapore) for the respondents.

Judgment reserved.

Andrew Ang J

1 This is an appeal of First DCS Pte Ltd, a company incorporated in Singapore (“the Appellant”), from the decision of the Valuation Review Board (“the VRB”) dismissing its appeal against the valuation and assessment to property tax of the Appellant's property at No 48 Changi Business Park Central 2 (“the subject property”).

2 The subject property comprises a building that houses a district cooling plant which serves the Changi Business Park. It has a floor area of 3,750.58m2.

3 The Appellant is the lessee of Lot A18727, within which the subject property is located. The Appellant had leased Lot A18727 from the Jurong Town Corporation (“JTC”) for 30 years, commencing on 1 March 1999, with an option to renew for a further term of 30 years.

4 The principal activity of the Appellant is the production of chilled water for the air-conditioning needs of other buildings in Changi Business Park (hereinafter referred to as the “customers”). The Appellant provides chilled water to its customers pursuant to contractual arrangements under which the Appellant charges for the chilled water.

5 The Appellant produces the...

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