Tan Hee Liang v Chief Assessor and Another

• Jurisdiction: Singapore
• Judge: Choo Han Teck J
• Judgment Date: 28 October 2008
• Neutral Citation: [2008] SGCA 43
• Docket Number: Civil Appeal No 1 of 2008
• Date: 28 October 2008
• Published date: 30 October 2008
• Year: 2008
• Plaintiff Counsel: Tan Hee Joek (Drew & Napier LLC)
• Citation: [2008] SGCA 43
• Defendant Counsel: Julia Mohamed (Inland Revenue Authority of Singapore)
• Court: Court of Appeal (Singapore)
• Subject Matter: Whether Chief Assessor correct in not excluding from gross rental contributions payable towards sinking fund and special levy,Property tax,Annual value,Sections 2(1), 2(7) Property Tax Act (Cap 254, 2005 Rev Ed),Revenue Law

28 October 2008 Judgment reserved.

Andrew Phang Boon Leong JA (delivering the judgment of the court):

Introduction

1 This is an appeal from the decision of the High Court judge (“the Judge”) dismissing the appellant’s appeal from the decision 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 excluded from the total monthly rental (“gross rental”) in the ascertainment of the annual value (for taxation purposes) of the subject property. The respondents are the Chief Assessor and the Comptroller of Property Tax.

2 As characterised by the parties, the sole issue before us is whether, in arriving at the annual value, the Chief Assessor was correct in not excluding from the gross rental the contributions payable by the appellant towards a sinking fund and a special levy. However, the simplicity of this characterisation obscures what is really a difficult exercise in both concept and logic. As can perhaps be appreciated, this case raises interesting issues regarding the correct meaning to be given to the expression “annual value” as found in s 2(1) of the Property Tax Act (Cap 254, 2005 Rev Ed) (“PTA”).

3 However, whatever meaning is eventually ascribed to the particular provision must also take into account the prevailing tax assessment practices of the relevant authorities, lest unwarranted confusion be unintentionally caused. As such, after we first heard the parties, we invited them to tender additional written submissions on s 2(1) of the PTA. The Chief Assessor submitted additional submissions on 16 May 2008, with the appellant filing submissions in reply two weeks later. We took these additional submissions into account in reaching the decision detailed in this judgment.

Facts leading to legal proceedings

4 Having provided the brief backdrop to the present appeal, we come now to the facts. The facts leading to the institution of legal proceedings are relatively simple and can be stated within a brief compass. As we briefly alluded to above, the appellant is the owner of the subject property which is specifically located within a shopping complex, City Plaza, which in turn is located at 810 Geylang Road, Singapore 409286.

5 As such, and this is common ground between the parties, the appellant pays separate quarterly contributions to: (a) a management fund (referred by the parties as contributions to a “maintenance fund”); (b) a sinking fund; and (c) a special levy imposed by the City Plaza Management Corporation Strata Title Plan No 669 (“the MCST”). The MCST also refers to payments to the management fund, viz, category (a) above, as the “maintenance contributions”. For consistency, we shall refer to the payments to the fund under category (a) as “payments to the management fund” in this judgment.

6 In the present case, the subject property was let to a tenant at a gross rental of $4,000, making an annual rental of $48,000. Under cl 30(b) of the tenancy 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 subject property and to insure the same against fire. It is common ground between the appellant and the Chief Assessor that there is deemed included in the gross rental the payments made by the appellant to the management fund, the sinking fund and the special levy.

7 In assessing the annual value of the property at $45,600, the Chief Assessor allowed to be excluded the appellant’s payments to the management fund of approximately $2,400 per year but not those towards the sinking fund and the special levy. In other words, the Chief Assessor had decided that contributions made by the appellant towards the sinking fund and the special levy were not to be excluded from the gross rental in the calculation of the annual value, whereas payments to the management fund were allowed to be excluded.

8 Being dissatisfied with the Chief Assessor’s decision to allow only the payments to the management fund to be excluded from the assessment of the annual value and not allow those contributions payable towards the sinking fund and the special levy to be excluded, the appellant commenced a series of legal proceedings which culminated in the present appeal.

The appeals to the Board and the High Court

9 The appellant first appealed against the Chief Assessor’s decision to the Board. The Board dismissed the appellant’s appeal and the appellant appealed against the Board’s decision to the High Court. As the arguments raised and considered in the proceedings below are of some utility to understanding the true nature of the issues raised before us, we propose to detail them at some length. We should mention that the arguments raised before the Board and the High Court are largely identical.

The parties’ arguments below

The rationale behind exclusion of payments to the management fund

10 Both the appellant and the Chief Assessor agreed before the Board and the High Court that, in the computation of the annual value, the appellant’s payments to the management fund should be excluded. However, the rationale for the exclusion of this component was not agreed upon by both parties. As will be seen later, it is this conceptual difference that the issue raised in the present appeal can be said to stem from.

11 The appellant’s position was that payments to the management fund should be excluded, as such payments were unrelated to the subject property since they related only to the common property and not to the subject property. There was thus an attempt to differentiate between common property and individual property privately owned by individuals. On the other hand, the Chief Assessor argued that the reason why payments to the management fund should be excluded was that this component was for payment for “services”, and the case authorities, such as the 1959 High Court decision of Chartered Bank v The City Council of Singapore [1959-1986] SPTC 1 (“Chartered Bank”), stated that such payments should be excluded.

Arguments in respect of exclusion of payments towards sinking fund and special levy

12 Following from the parties’ dispute on the rationale behind why payments to the management fund should be excluded in the computation of the annual value, the parties were (and are) in dispute as to whether the appellant’s payments towards the sinking fund and special levy should be excluded as well.

(1) The Chief Assessor’s arguments

13 The Chief Assessor took the position that the payments towards the sinking fund and the special levy should not be excluded because these payments, unlike the appellant’s payments to the management fund, were not payments for services but for expenses for maintenance and repair. The Chief Assessor argued that since the statutory definition of “annual value” in s 2(1) of the PTA specifically stated that the landlord had to bear the expenses of repair and maintenance, the payments towards the sinking fund and special levy must be included in the computation of the annual value. The Chief Assessor further took the position that no distinction should be drawn between payments towards repair and maintenance of the subject property and of the common property.

14 The Chief Assessor attempted to find support in this court’s decision in MCST Plan Nos 1298 and 1304 v Chief Assessor [2006] 4 SLR 404 (“Centrepoint Shopping Centre”) for the argument that, since the subsidiary proprietor of an individual lot owns a part of the common property under s 13 of the Land Titles (Strata) Act (Cap 158, 1999 Rev Ed) (“LTSA”) and the determination of the annual value of an individual lot would invariably take into account the enjoyment to be derived from facilities and amenities forming part of the common property, it would be wrong to exclude the payments for maintenance and repair even though they related to the common property.

(2) The appellant’s arguments

15 The appellant took the position before the Board and the High Court that the payments towards the sinking fund and the special levy should be excluded because these payments were unrelated to the rent or the letting of the subject property, being payments towards the common property, just like the appellant’s payments to the management fund.

16 The appellant relied on this court’s decision in BCH Retail Investment Pte Ltd v Chief Assessor [2007] 2 SLR 580 (“BCH No 2”) to support his argument that payments towards the sinking fund and the special levy were unrelated to the rent or the letting of the subject property as they were payments in relation to the common property and not the subject property. As it was not the common property, but the subject property, that was being assessed for property tax, the appellant argued that payments that were related to the common property should be excluded since such payments were unrelated to the rent or the letting of the subject property.

The Board’s decision

17 The Board upheld the Chief Assessor’s decision based on the following three grounds:

(a) A “common law service charge exception” was established in Chartered Bank ([11] supra). The sinking fund and the special levy were collected for purposes beyond the provision of services or profit on those services. Thus, payments to the sinking fund and the special levy did not fall within the categories decided by the High Court in Chartered Bank or in BCH Retail Investment Pte Ltd v Chief Assessor [2002] 4 SLR 844 (“BCH No 1”).

(b) It was impermissible for the appellant, relying on the English Court of Appeal decision of Bell Property Trust, Limited v Assessment Committee for the Borough of Hampstead [1940] 2 KB 543 (“Bell Property Trust”), to extend the service charge exception established by Chartered Bank and BCH...