Singapore Airlines Ltd and Another v Inland Revenue Authority of Singapore and Another

• Jurisdiction: Singapore
• Judge: G P Selvam J
• Judgment Date: 31 July 1999
• Neutral Citation: [1999] SGHC 198
• Docket Number: Originating Summons No 19 of 1999
• Date: 31 July 1999
• Published date: 19 September 2003
• Year: 1999
• Plaintiff Counsel: P Selvadurai and Lawrence Teh (Rodyk & Davidson)
• Citation: [1999] SGHC 198
• Defendant Counsel: Foo Hui Min and Tham Siok Peng
• Court: High Court (Singapore)
• Subject Matter: Principles governing the grant of declaratory orders,Settlor and trustees of employee provident fund seeking construction of Income Tax Act and declaratory orders,Application to join one beneficiary as party to proceedings,Parties,Civil Procedure,Whether court proceedings are proper avenue for beneficiary to determine tax liability,Ord 15 r 16 Rules of Court,Whether plaintiffs who are not beneficiaries of the fund have locus standi to bring proceedings,Locus standi

The question

The purpose of this judgment is to explain the procedural inappropriateness of this application. The application was made by Singapore Airlines Ltd (`SIA`) and dbs trustees (`DBS Trustee`). Collectively they will be called the plaintiffs.

The application is for the construction of s 13(1)(ja) of the Income Tax Act (Cap 134, 1996 Ed). It provides as follows:

There shall be exempt from tax sums standing to the account of an individual in an approved pension or provident fund (other than the Central Provident Fund or any approved pension or provident fund designated by the Minister under section 39(8)) to the extent of the sum standing to his account as at 31 December 1992 and of such interest on that sum as the Comptroller may determine for the period 1 January 1993 to the date of his retirement and which are withdrawn only upon or after his retirement in accordance with the rules or constitution of the fund.

The construction sought by the applicants was:

1 That the proposed transfer of the moneys standing to the employees` accounts in the SIA Singapore Provident Fund (`the Fund`) to the said employees` accounts in the Central Provident Fund (`CPF`) would not amount to premature withdrawals of the said moneys contrary to the provisions of s 13(1)(ja) of the Income Tax Act (Cap 134).

2 That the proposed transfer of the said moneys from the employees` accounts in the SIA Provident Fund to the employees` accounts in the Central Provident Fund shall not disentitle the employees to the exemption from income tax which the employees would otherwise be allowed on the moneys standing in their accounts in the Fund as at the 31 December 1992, when they withdraw the said moneys in accordance with the provisions of Rules 16A, 17, 18, 19 and 20 of the Rules (First Schedule).

3 That on the transfer of the employees` said moneys from the Fund to the said employees` accounts in the Central Provident Fund, the first plaintiffs may wind-up the Fund at a time of their own choosing pursuant to the provisions of cl 24(b)(I) of the Trust Deed.

The application, further sought declaratory orders in the above terms.

Now comes the problem which I raised when counsel for the plaintiffs opened their case: whether the applicants named as plaintiffs had the locus standi to ask the court to decide the construction point.

The applicants were not members (beneficiaries) of the Fund but were named as the plaintiffs. The Inland Revenue Authority of Singapore (`IRAS`) and the Comptroller of Income Tax (`the Comptroller`) were named as the defendants.

The Fund was constituted by a trust deed dated 14 November 1970 between Malaysia-Singapore Airlines Ltd (now called Singapore Airlines Ltd) and the Hongkong and Shanghai Bank (Malaysia) Trustee Ltd. DBS Trustee later substituted Hongkong and Shanghai Bank from 16 April 1979.

Briefly the purposes of the Fund were:

(1) providing retiring gratuities and other benefits for such of the present and future employees of SIA,

(2) providing an alternative retirement fund for the overseas posted staff (`OPS`) and

(3) augmenting the retirement benefits of staff in view of the low CPF contribution rates prevailing at that time.

The principal reason for the Fund was that CPF Board at that time was not prepared to accept CPF contributions in respect of overseas posted staff. Furthermore, the contributions to the CPF at that time were small.

The Fund is an approved pension and provident fund under s 5(6) of the Income Tax Act (Cap 134, 1996 Ed). Until 31 December 1992 the sums standing to the accounts of the employees were exempt from income tax by virtue of s 13(1)(j) of the Income Tax Act.

However, by a new s 13(1)(ja) which was introduced into the Income Tax Act in 1993 (Act No 26 of 1993) the tax exemption on the sums standing to the account of an individual in an approved pension or provident fund was withdrawn with effect from 1 January 1993. The Fund is one such Fund where, if the sums standing in the said accounts in the fund as at 31 December 1992 were withdrawn before the date of retirement of an employee, the tax exemption would be lost.

At the end of 1997 the value of the Fund in the aggregate was $37m.

The plaintiffs said that by a letter dated 17 October 1994 addressed to SIA, IRAS stated, inter alia, that with effect from 1 January 1995 SIA should cease collecting employees` contribution to the fund. This meant that with effect from 1 January 1995, such employees` contributions where made would not be...