Revenue and Tax Law

• Citation: (2016) 17 SAL Ann Rev 632
• Date: 01 December 2016
• Published date: 01 December 2016
• Publication year: 2016

Introduction

24.1 Again, a “relatively quiet” year for tax litigation, the Supreme Court delivered only three decisions in 2016 which may be regarded as having some “passing relevance” to revenue law as no substantive issues of revenue law were judicially considered. One decision covered specifically the issue of legal professional privilege in the context of an interlocutory application within a suit brought by the comptroller of income tax, which is itself a sequel to the proceedings in Comptroller of Income Tax v AQQ1 (“AQQ”). A second case involving a foreign demerger of companies discussed stamp duty in passing. Finally, a third case explained the decision of ABD Pte Ltd v Comptroller of Income Tax2 (“ABD”) in relation to one of the sub-issues being considered by the court.3

24.2 Therefore, in our view, there are three cases for the year 2016 which had some relevance to revenue law:

Tax type	High Court	Court of Appeal
Income tax	0	1
Stamp duty	1	0
Miscellaneous	0	1

Income tax

Legal professional privilege and in-house counsel

24.3 ARX v Comptroller of Income Tax4 (“ARX”) concerned the issue of whether the Comptroller could claim legal professional privilege on legal advice he had obtained from his in-house Law Division.

24.4 As mentioned, ARX was a follow-up from AQQ. Hence, only brief facts from AQQ will be adumbrated here.

24.5 A Malaysian company, ARX, wholly owns AQQ (a Singapore company). Between 2005 and 2007, the Comptroller paid around S$9.6m in tax refunds to AQQ. This arose from ARX's restructuring of its group of companies through a complex financing scheme (“scheme”). Subsequently, the Comptroller claimed the scheme was a tax avoidance arrangement under s 33 of the Income Tax Act5 (“ITA”). Among other things, the scheme was to induce the Comptroller to pay the S$9.6m tax refunds to AQQ. The Comptroller, thus, raised additional assessments to claw back the S$9.6m he had paid AQQ.

24.6 In AQQ, the Court of Appeal agreed with the Comptroller that the scheme was a tax avoidance arrangement. Though, the Court of Appeal ruled the Comptroller's additional assessments were ultra vires. Nevertheless, the Court of Appeal mentioned unjust enrichment as an alternative possibility for the Comptroller to claim back the S$9.6m.

24.7 The Comptroller proceeded to file a suit against ARX to claim the S$9.6m under various heads: unjust enrichment; fraudulent misrepresentation; and conspiracy by unlawful means.6 The Comptroller also obtained an order to serve the writ out of Singapore on ARX.

24.8 In applying to set aside the order granting leave to serve the writ out of Singapore, one issue was whether the Comptroller knew his claim was time-barred. To this, a deponent known as Ms Christina Ng Sor Hua (“Ms Ng”) swore an affidavit on behalf of the Comptroller on 28 August 2014 as follows:7

…

17 In the course of the Plaintiff's consideration of the information and documents provided by the 1st Defendant (the latest

of which was provided, as mentioned above, on or about 24 March 2008), advice was sought from the Law Division [of Inland Revenue Authority of Singapore] on the matter, which advice was received on 3 April 2008. For the avoidance of doubt, this should not be taken or construed in any way as a waiver of privilege.

18 Following receipt and consideration of Law Division's advice, the Plaintiff concluded that: (i) the [Corporate Restructuring and Financing Arrangement] was a tax avoidance arrangement which did not have bona fide commercial justifications; and (ii) decided to invoke section 33(1) of the ITA to disregard the effect of the arrangement and issue the Additional Assessments pursuant to section 74(1) of the ITA.

In response, ARX applied for the Comptroller to produce the Law Division's advice (“Advice”) for inspection under O 24 r 11 of the Rules of Court.8

24.9 The High Court dismissed ARX's application. The Court of Appeal also dismissed ARX's appeal. The Court of Appeal held that:

(a) The common law recognised that privilege attaches to communications by in-house counsel subject to certain conditions.9 This was the law even prior to the amendments to the Evidence Act in 2012.10

(b) The Advice was privileged.11

(c) The Comptroller had not waived privilege to the Advice. Ms Ng had not mentioned what the Advice had said. Neither had she deposed that it was because of the Advice that the Comptroller had formed the view that the arrangement had been a tax avoidance arrangement.12

24.10 However, the Court of Appeal accepted the Comptroller could not act inconsistently: he could not rely on the Advice to his advantage while seeking to withhold producing it.13 To this end, the Court of Appeal varied the High Court's order as follows:14

… We vary the order of the Judicial Commissioner to the extent that – as the respondent has now, by Christina Ng Sor Hua's affidavit of 6 August...