Tan Hee Liang v Chief Assessor and another

JurisdictionSingapore
Judgment Date05 December 2007
Date05 December 2007
Docket NumberOriginating Summons No 2274 of 2006
CourtHigh Court (Singapore)
Tan Hee Liang
Plaintiff
and
Chief Assessor and another
Defendant

[2007] SGHC 210

Andrew Ang J

Originating Summons No 2274 of 2006

High Court

Revenue Law–Property tax–Annual value–Whether Chief Assessor correct in not excluding from gross rental the contributions payable towards sinking fund and special levy–Sections 2 (1) and 2 (7) Property Tax Act (Cap 254, 2005 Rev Ed)

The appellant was the owner of a commercial unit (“the property”) located within a shopping complex. As such he paid separate quarterly contributions to a management fund (“maintenance”), sinking fund and a special levy imposed by the management corporation strata title concerned. The property was let to a tenant at a monthly rental (“the gross rental”) of $4,000 making an annual rental of $48,000. Under cl 30 (b) of the agreement, the landlord was to bear all rates, assessments, property tax (but not goods and services tax) and all other outgoings imposed upon or payable in respect of the property and to insure the same against fire. It was common ground between the appellant and the Chief Assessor that there was deemed included in the gross rental the contributions made by the appellant towards maintenance, the sinking fund and the special levy. In assessing the annual value of the property at $45,600, the Chief Assessor allowed to be excluded the contribution towards maintenance of approximately $2,400 payable by the appellant but not those towards the sinking fund and the special levy. Upon appeal, the Valuation Review Board (“the Board”) upheld the assessment of the Chief Assessor. Being dissatisfied with the Board's decision, the appellant brought the present appeal, with the sole issue being whether, in arriving at the annual value, the Chief Assessor was correct in not excluding from the gross rental the contributions payable towards the sinking fund and the special levy.

Held, dismissing the appeal:

(1) The effect of the definition of “annual value” in s 2 (1) of the Property Tax Act (Cap 254, 2005 Rev Ed) was that the landlord might be assumed to include, within the rental charged to the tenant, an amount to recoup his expenses of repair, insurance, maintenance or upkeep of the premises let. If, apart from letting the property to the tenant, the landlord were to provide services to the tenant, his cost of providing such services ought not to be included as though they were in respect of the letting. If a gross rental was charged which included such services, the cost of providing such services (together with an element of profit thereon) might be excluded from the gross rental in order to arrive at the annual value, as was decided in Chartered Bank v The City Council of Singapore [1959-1986] SPTC 1 and Bell Property Trust, Limited v Assessment Committee for the Borough of Hampstead [1940] 2 KB 543: at [7] to [10].

(2) If the gross rent payable by the tenant included (apart from those landlord's expenses described in the definition of annual value) payment for anything unrelated to the rent or letting, it ought to be excluded in the determination of annual value. On the other hand, notwithstanding that it might be common ground between the landlord and the tenant that the gross rental included payment for something unrelated to the letting or rent, if in truth the tenant derived no service or benefit in respect of that payment, no exclusion should be allowed. In such a case, the consideration for such a payment must be the letting inasmuch as a payment for a fictitious service or benefit should not go to reduce the annual value. It was also impermissible to deduct from the gross rental the landlord's expenses in the provision of any service or benefit to the tenant beyond the amounts agreed or found to be incorporated in the gross rental. As, ex hypothesi, only the latter amount was included in the gross rental, that same amount only should be excluded: at [16] and [17].

(3) The payment by the tenant must, in character and quantum,be bona fide in return for something other than the use and occupation of the property; if the payment, or any part of it, was not, then there was no justification for excluding the payment or (as the case might be) the relevant part from the gross rental in arriving at the annual value. In that regard, under s 38 (4) read with s 39 (2) of the Building Maintenance and Strata Management Act 2004 (Act 47 of 2004), the contributions towards the sinking fund might be used for improvements to the common property and the acquisition of movable property. Expenditure from the sinking fund extended to the installation of additional facilities would qualify for exclusion. However, even where the sinking fund was to be used for a purpose for which exclusion was permissible, the quantum of the contribution attributable to such purpose must be reasonable. Thus, contributions to the sinking fund borne by the tenant might be excluded from the gross rental provided that, in character and quantum,they were bona fide unrelated to the elements of rent or letting. It was for the appellant to show to the reasonable satisfaction of the Chief Assessor which parts of the contribution to the sinking fund were intended for purposes for which exclusion was permissible on that basis: at [30] to [32], [36], [38] and [39].

(4) The same reasoning applied to the special levy. The collection of that levy over a period of three years was for externalupgrading works. Capital outlay for upgrading works enured to the benefit of the subsidiary proprietor and ought properly to be borne by the landlord rather than the tenant. Although the tenant bore the contribution to the special levy, he received no consideration other than the use and occupation of the tenanted property. Even if such upgrading was completed during the term of the tenancy, the benefit the tenant derived therefrom would be insignificant compared to the lasting benefit gained by the landlord. As such, it was appropriate that the gross rental included such contribution. In other words, no exclusion should be allowed: at [40].

BCH Retail Investment Pte Ltd v Chief Assessor [2002] 2 SLR (R) 973; [2002] 4 SLR 844, HC (refd)

BCH Retail Investment Pte Ltd v Chief Assessor [2007] 2 SLR (R) 580; [2007] 2 SLR 580, CA (refd)

Bell Property Trust, Limited v Assessment Committee for the Borough of Hampstead [1940] 2 KB 543 (folld)

Chartered Bank v The City Council of Singapore [1959-1986] SPTC 1 (folld)

MCST Plans Nos 1298 and 1304 v Chief Assessor [2006] 4 SLR (R) 404; [2006] 4 SLR 404 (refd)

Building Maintenance and Strata Management Act 2004 (Act 47 of2004)ss 29 (1) (b),29 (1) (d),38 (4),39 (1),39 (2), 70,71

Income Tax Act (Cap 134,2004 Rev Ed)

Land Titles (Strata) Act (Cap 158, 1999 Rev Ed)s 3 (1)

Property Tax Act (Cap 254, 2005 Rev Ed)ss 2 (1), 2 (7) (consd)

Workmen's Compensation Act (Cap 354, 1998 Rev Ed)

Valuation (Metropolis) Act1869 (c 67) (UK) s 4

Tan Hee Joek (Drew & Napier LLC) for the appellant

Julia Mohamed (Inland Revenue Authority of Singapore) for the respondents.

Judgment reserved.

Andrew Ang J

1 The appellant is the owner of a commercial unit No 01-03 (“the property”) located within a shopping complex, City Plaza, at 810 Geylang Road, Singapore 409286. As such he pays separate quarterly contributions to a management fund (referred to by the parties as contributions to “maintenance”), sinking fund and a special levy imposed by the City Plaza Management Corporation Strata Title Plan No 669.

2 The property was let to a tenant at a monthly rental (“the gross rental”) of $4,000 making an annual rental of $48,000. Under cl 30 (b) of the agreement, the landlord was to bear all rates, assessments, property tax (but not goods and services tax) and all other outgoings imposed upon or payable in respect of the property and to insure the same against fire.

3 It is common ground between the appellant and the Chief Assessor that there is deemed included in the gross rental the contributions made by the appellant towards maintenance, the sinking fund and the special levy.

4 In assessing the annual value of the property at $45,600, the Chief Assessor allowed to be excluded the contribution towards maintenance of approximately $2,400 payable by the appellant but not those towards the sinking fund and the special levy.

5 Upon appeal, the Valuation Review Board (“the Board”) upheld the assessment of the Chief Assessor. Being dissatisfied with the Board's decision, the appellant brought the appeal before me.

6 The sole issue in this case was whether, in arriving at the annual value, the Chief Assessor was correct in not excluding from the gross rental the contributions payable towards the sinking fund and the special levy.

7 Section 2 (1) of the Property Tax Act (Cap 254, 2005 Rev Ed) (“the PTA”) defines annual value as follows:

“annual value”–

  1. (a) in relation to a house or building or land or tenement, not being a wharf, pier, jetty or landing-stage, means the gross amount at which the same can reasonably be expected to be let from year to year, the landlord paying the expenses of repair, insurance, maintenance or upkeep and all taxes (other than goods and services...

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2 cases
  • Tan Hee Liang v Chief Assessor and Another
    • Singapore
    • Court of Appeal (Singapore)
    • 28 Octubre 2008
    ...of the Valuation Review Board (“the Board”) (see the High Court judgment in Tan Hee Liang v Chief Assessor (“the Judgment”) reported at [2008] 1 SLR 586). The appellant is the owner of a shop unit (“the subject property”) and, essentially, his case centred on the correct amount to be exclud......
  • Tan Hee Liang v Chief Assessor and Another
    • Singapore
    • Court of Three Judges (Singapore)
    • 28 Octubre 2008
    ...of the Valuation Review Board (“the Board”) (see the High Court judgment in Tan Hee Liang v Chief Assessor (“the Judgment”) reported at [2008] 1 SLR 586). The appellant is the owner of a shop unit (“the subject property”) and, essentially, his case centred on the correct amount to be exclud......
1 books & journal articles
  • Revenue and Tax Law
    • Singapore
    • Singapore Academy of Law Annual Review No. 2008, December 2008
    • 1 Diciembre 2008
    ...the Court of Appeal allowed, in part, an appeal relating to the property tax assessment of a shop unit. The High Court decision (see [2008] 1 SLR 586) was reviewed in (2007) 8 SAL Ann Rev 390 at 405—406, paras 21.75—21.82. 21.71 The appellant”s shop unit was located within a shopping comple......

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