Tan Boon Yong v Comptroller of Income Tax

• Jurisdiction: Singapore
• Judge: Chao Hick Tin JA
• Judgment Date: 05 February 1993
• Neutral Citation: [1993] SGCA 8
• Date: 05 February 1993
• Subject Matter: Literal application of provision leading to absurdity,Extrinsic aids,Construction of statute,s 19(2C) & (2D)Income Tax Act (Cap 134),Whether taxpayer entitled to deductions on revenue expenditure incurred in maintenance of private hire cars,Statutory Interpretation,Intention of Parliament,Cars registered as private hire cars and let out on hire to same customers for more than six months in a year,Revenue expenditure,ss 15(1)(j) & 19(2D)Income Tax Act (Cap 134),Revenue Law,Cars let out on hire to same customers for more than six months in a year -ss 14(4) & 15(1)(j) Income Tax Act (Cap 134),Income taxation,Whether taxpayer entitled to capital allowance in respect of capital expenditure incurred in acquisition of motor cars for carhiring business,Capital allowance,Determining intention of Parliament by reference to Parliamentary reports,Deduction,Implying words into a provision
• Docket Number: Civil Appeal No 83 of 1992
• Published date: 19 September 2003
• Defendant Counsel: Jimmy Oei Chun Hung with Dorothy Ling
• Court: Court of Appeal (Singapore)
• Plaintiff Counsel: Ronald Lee with Daniel Tan (Palakrishnan & Partners)

Cur Adv Vult

The appellant was at all material times trading under the name and style of Messrs Chop Eng Bee, a sole proprietorship, in the business of, inter alia, renting out motor cars on hire. In the relevant years of assessment -1981, 1982 and 1983 - the appellant incurred capital expenditure in the acquisition of motor cars for his car-hiring business. Expenditure in the maintenance thereof was also incurred. The motor cars were registered as private hire cars under the Road Traffic Act (Cap 276) and they bore registration numbers with the index mark `SZ`.

The Comptroller of Income Tax disallowed the appellant`s claim for (i) capital allowance in respect of the capital expenditure, relying on s19(2C) read with s19(2D) of the Income Tax Act (Cap 134)(`the ITA`); and (ii) deductions on revenue expenditure, relying on s15(1)(j) read with s14(4) of the ITA. These capital and revenue expenditures related to private hire cars which were let out on hire by the appellant to the same customers for a period of more than six months in a year. The appellant appealed against the Comptroller`s decision to the Income Tax Board of Review (`the board`) which allowed the appeal. The Comptroller successfully appealed against that decision to the High Court. Now the appellant has appealed to the Court of Appeal.

Revenue expenditure

We shall first examine the point concerning the revenue expenditure which has been disallowed by the Comptroller. In his letter of 1 August 1984 the Comptroller gave the following reasons for the disallowance:

Please note that s 15(1)(j) of the Income Tax Act disallows all expenses and outgoings incurred on or after 1 April 1979 in respect of a motor car within the meaning of s14(4) of the said Act (whether owned by him or any other person) which is not registered as a BSPV (business service passenger vehicle) for the purpose of the Road Traffic Act. It does not distinguish between a hiree or a hirer.

As the appeal rests on the construction of the abovementioned sections of the ITA as they stood at the relevant time, we shall set out the appropriate parts thereof:

(14) (1) For the purpose of ascertaining the income of any person for any period from any source chargeable with tax under this Act (referred to in this Part as the income), there shall be deducted all outgoings and expenses wholly and exclusively incurred during that period by that person in the production of the income, including -

...

(c) any expenses incurred for repair of premises, plant, machinery or fixtures employed in acquiring the income or for the renewal, repair or alteration of any implement, utensil or article so employed:

Provided that no deduction shall be made for cost of renewal of any plant, machinery or fixture, which is the subject of an allowance under section 19 or 19A; or for the cost of reconstruction or rebuilding of any premises, buildings, structures or works of a permanent nature;

...

(3) Notwithstanding subsection (1), where outgoings and expenses falling within that subsection are incurred, whether directly or in the form of reimbursements, in respect of a motor car (whether or not owned by the person incurring the outgoings and expenses) to which this subsection applies, the sum to be allowed as a deduction shall be limited to the amount which bears to such outgoings and expenses the same proportion as $15,000 bear to the capital expenditure incurred by the owner in respect of the motor car, where such capital expenditure exceeds $15,000.

Provided that any deduction for the cost of renewal of a motor car to which this subsection applies shall not exceed $15,000.

(3A) For the purpose of application to a motor car acquired on or after the 1st April 1979 and before 1st April 1982, the reference to `$15,000` in subsection (3) shall, wherever it occurs, be read as a reference to `$25,000`.

(3B) For the purpose of application to a motor car acquired on or after 1st April 1982, the reference to `$15,000` in subsection (3) shall, wherever it occurs, be read as a reference to `$35,000`.

(4) Subsection (3) shall apply to a motor car which is constructed or adapted for the carriage of not more than 7 passengers exclusive of the driver and the weight of which unladen does not exceed 3,000 kilograms except -

(a) a taxi;

(b) a motor car registered as a private car (school transport);

(c) a private hire car which is hired to the same person for not more than 6 months in any year; and

...

(15) (1) Notwithstanding the provisions of this Act, for the purpose of ascertaining the income of any person, no deduction shall be allowed in respect of -

...

(j) any outgoings and expenses, whether directly or in the form of reimbursements, and any claim for the cost of renewal incurred on or after 1st April 1979 in respect of a motor car within the meaning of section 14(4) (whether owned by him or any other person) which is not registered as a business service passenger vehicle for the purposes of the Road Traffic Act and the rules made thereunder except where the motor car is registered outside Singapore and used exclusively outside Singapore; and

...

The learned judge below differed from the board as to the legislative intention of Parliament. The board held that as it was not possible for a private hire car (whether hired to the same customers for more or less than six months) to be registered as a business service passenger vehicle, s15(1)(j) should not be interpreted in a way which would require a private hire car which was hired out for more than six months to do the impossible, namely, to register as a BSPV. Parliament, it was said, could not have intended a taxpayer to do the impossible. The board was of the view that the words `not being a private hire car` should be inserted in s 15(1)(j) so that such a car would be excluded from the operation of s 15(1)(j).

However, the learned judge having traced the historical development of ss 14 and 15 and the corresponding changes made to the Motor Vehicles (Registration and Licencing) Rules 1972 (`the 1972 Rules`) concluded that:

(i) the law clearly differentiated between private hire cars which were hired to the same customer for less than six months in a year and those which were so hired for more than six months.

(ii) the intention of Parliament in enacting s 15(1)(j) was to take away the limited deductions of revenue expenditure then allowed in respect of private hire cars hired to the same person for more than six months in a year.

(iii) Parliament `must be acknowledged to have known` that private hire cars hired to the same customers for more than six months in any year could not be registered as BSPVs.

We do not propose to trace again the development of ss 14 and 15 from their first enactment. Suffice it for us to highlight those events which are directly material to the issues in hand.

(i) Subsections (3) and (4) to s 14 were only added in 1975 (Act No 37 of 1975), the effect of which was, inter alia, to limit the outgoings and expenses which were deductible in computing chargeable income in respect of motor cars, including a private hire car which was hired to the same customer for more than six months in a year.

(ii) In 1979 by Act No 7 of 1979, s 14(3) was amended by the introduction of the words `(whether or not owned by the person incurring the outgoings and expenses)` after the words `in respect of a motor car` in that subsection.

(iii) By the same Act, s 15(1) was amended by the addition of a new para (j), which is the provision now under scrutiny.

(iv) In 1980 and 1983 the limit set in subsection (3) to s 14 was raised with the introduction of subsections (3A) and (3B).

Turning to the 1972 Rules, there was originally no category of vehicles known as `business service passenger vehicle`. Instead there was only a reference to `public service vehicles` and in respect of such vehicles they were required to bear the index marks `SH` `SZ` `Q` `QA`. In 1974, an amendment to the 1972 Rules introduced the following index marks for these categories of vehicles (among others):

Q QA QB QC Motor cars registered in the names of companies, business concerns, professional firms, societies, associations, clubs, etc.

QX QY Motor cars registered in the names of Government and Statutory Board

CSS SBS SH SZ Omnibuses, taxis and private hire cars.

In 1975 an amendment to the 1972 Rules introduced a new category of vehicles called the `business service passenger vehicle`. This term was defined to mean:

a motor car registered in the name of a statutory board, company, firm, society, association or club, and used for the owner`s business, excluding the carriage of goods other than samples and not used in the course of business for hire or for the carriage of passengers for hire or

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