ZF v Comptroller of Income Tax

JurisdictionSingapore
CourtCourt of Three Judges (Singapore)
Judgment Date15 December 2010
Docket NumberCivil Appeal No 12 of 2010
Date15 December 2010

[2010] SGCA 48

Court of Appeal

Chan Sek Keong CJ

,

Andrew Phang Boon Leong JA

and

V K Rajah JA

Civil Appeal No 12 of 2010

ZF
Plaintiff
and
Comptroller of Income Tax
Defendant

Leung Yew Kwong and Tan Shao Tong (WongPartnership LLP) for the appellant

Irving Aw and Quek Hui Ling (Inland Revenue Authority of Singapore) for the respondent.

ABD Pte Ltd v Comptroller of Income Tax [2010] 3 SLR 609 (refd)

Attwood (Inspector of Taxes) v Anduff Car Wash Ltd [1997] STC 1167 (refd)

Benson (H M Inspector of Taxes) v Yard Arm Club Ltd [1979] 1 WLR 347; (1979) 53 TC 67 (refd)

Caledonian Railway Co v Banks (1880) 1 TC 487 (refd)

Carr (H M Inspector of Taxes) v Sayer (1992) 65 TC 15 (refd)

Case A43 (1969) 69 ATC 244 (refd)

Cole Bros Ltd v Phillips (H M Inspector of Taxes) [1982] 1 WLR 1450; (1981) 55 TC 188 (refd)

Commissioner of Inland Revenue v Waitaki International Ltd [1990] 3 NZLR 27 (refd)

IRC v Barclay, Curle & Co Ltd [1969] 1 WLR 675 (refd)

CIR v British Salmson Aero Engines Ltd [1938] 2 KB 482 (refd)

Comptroller of Income Tax v GE Pacific Pte Ltd [1994] 2 SLR (R) 948; [1994] 2 SLR 690 (refd)

Cooke (Inspector of Taxes) v Beach Station Caravans Ltd [1974] 1 WLR 1398 (refd)

Dixon (Inspector of Taxes) v Fitch's Garage Ltd [1976] 1 WLR 215 (refd)

Edwards (Inspector of Taxes) v Bairstow [1956] AC 14 (refd)

Gray (Inspector of Taxes) v Seymours Garden Centre (Horticulture) (1995) 67 TC 401 (refd)

Hampton (Inspector of Taxes) v Fortes Autogrill Ltd (1979) 53 TC 691 (refd)

Hinton (Inspector of Taxes) v Maden and Ireland Ltd [1959] 1 WLR 875 (refd)

Imperial Chemical Industries of Australia and New Zealand Ltd v Commissioner of Taxation of the Commonwealth of Australia (1970) 120 CLR 396 (refd)

IRC v Scottish & Newcastle Breweries Ltd [1982] 1 WLR 322 (refd)

J Lyons & Co Ltd v AG [1944] Ch 281 (refd)

Jarrold (Inspector of Taxes) v John Good & Sons Ltd [1963] 1 WLR 214 (refd)

JD Ltd v Comptroller of Income Tax [2006] 1 SLR (R) 484; [2006] 1 SLR 484 (refd)

Leeds Permanent Building Society v Procter (H M Inspector of Taxes) [1982] 3 All ER 925 (refd)

Munby v Furlong (Inspector of Taxes) [1977] 1 Ch 359 (refd)

NP v Comptroller of Income Tax [2007] 4 SLR (R) 599; [2007] 4 SLR 599 (refd)

Quarries Ltd v Federal Commissioner of Taxation (1961) 106 CLR 310 (folld)

Schofield (H M Inspector of Taxes) v R & H Hall Ltd (1974) 49 TC 538 (refd)

St John's School v Ward (H M Inspector of Taxes) (1974) 49 TC 524 (refd)

Wangaratta Woollen Mills Ltd v The Commissioner of Taxation of the Commonwealth of Australia (1969) 119 CLR 1 (refd)

Wimpy International Ltd v Warland (Inspector of Taxes) [1988] STC 149, HC (refd)

Wimpy International Ltd v Warland (Inspector of Taxes) [1989] STC 273, CA (refd)

Yarmouth v France (1887) 19 QBD 647 (refd)

ZF v Comptroller of Income Tax [2008] SGITBR 2 (refd)

Income Tax Act (Cap 134,2004 Rev Ed) ss 81 (5) , 83 (1) (consd) ;s 81

Income Tax Act (Cap 134,2008 Rev Ed) ss 19, 19A,81 (2) , 81 (5) , 83 (1) (consd) ;ss 16-18,18 (1) (h) ,18 (6) , 19B,19C, 19D, 20-22,81

Income Tax Ordinance 1947 (No 39 of 1947) ss 16-22

Capital Allowances Act 1968 (c 3) (UK) s 14

Customs and Inland Revenue Act1878 (c 15) (UK) s 12

Employers' Liability Act1880 (c 42) (UK)

Income Tax Act 1918 (c 40) (UK)

Income Tax Act 1945 (c 32) (UK) s 13

Income Tax Act 1952 (c 10) (UK) s 276

Income Tax and Social Services Contribution Assessment Act 1936-1957 (Cth) s 54

Revenue Law—Income taxation—Appeals—Whether income tax appeals before Court of Appeal to be heard in camera—Sections 81 (5) and 83 (1) Income Tax Act (Cap 134, 2008 Rev Ed

Revenue Law—Income taxation—Capital allowance—Taxpayer constructing dormitories from pre-fabricated materials—Dormitories intended to be temporary—Whether dormitories were plant for capital allowance purposes—Sections 19 and 19A Income Tax Act (Cap 134, 2008 Rev Ed)

A taxpayer was awarded a contract to build and operate workers' dormitories on a site that was let on a short-term lease from the Building and Construction Authority (“BCA”). Under the terms of the lease, BCA could require the site to be vacated on 90 days' notice. Because of this, the taxpayer constructed pre-fabricated dormitories that were portable and demountable. These temporary dormitories could be dismantled at short notice and stored away for re-use on another site. The taxpayer then claimed capital allowances on the basis that the dormitories were “plant” under ss 19 and 19A of the Income Tax Act (Cap 134, 2008 Rev Ed) (“the ITA”). The Comptroller of Income Tax (“the Comptroller”) disallowed the taxpayer's claim and its decision was upheld by the Income Tax Board of Review (“the Board”) and by the High Court.

On appeal to the Court of Appeal, the taxpayer argued that although the dormitories were used to provide accommodation, they also had the additional functions of being portable and demountable due to the nomadic nature of the taxpayer's business. Seen in this context, the dormitories were the tools of the taxpayer's trade and should be considered plant. The Comptroller argued on the other hand that the dormitories were being used as premises regardless of where they might be sited and, therefore, they were purpose-built buildings instead of plant. The Comptroller also argued that the question of whether the dormitories were plant was one of fact and degree and that an appellate court should not interfere with the decisions arrived at below.

Prior to the hearing of the appeal, the taxpayer had also written in to the court requesting that the appeal be heard in camera because its understanding was that s 83 (1) of the ITA only required proceedings before the Board and the High Court, but not the Court of Appeal, to be heard in camera. The taxpayer thus requested the court to exercise its discretion to hear the appeal in camera.

Held, allowing the appeal:

(1) There was a basic distinction between “plant” and “buildings and structures” in the ITA due to the historical development of capital allowances and the fact that buildings depreciated much more slowly than plant. These categories were mutually exclusive and where an asset had the features of both, the question was whether it could be more appropriately described as plant or a building: at [18] to [21], [45] and [46].

(2) The term “plant” itself had a wide definition and any tangible asset (other than a building or structure, or an asset forming part of the same) used permanently for the purposes of a taxpayer's trade, profession or business would qualify as plant: at [23].

(3) In determining whether an asset was plant or a building, the court would consider the operational role of the asset in the taxpayer's business. Assets which functioned as equipment would not be buildings since the normal purpose of a building was to provide a setting or premises for the business. However, it did not follow that assets which provided the setting or premises for a business were necessarily buildings: at [29] and [58].

(4) The physical nature of the asset, which included its size, shape, durability and the material it was constructed of, was also a relevant factor in determining whether it should be classified as a building: at [59].

(5) As buildings and structures carried a certain connotation of permanence, an asset was less likely to be considered a building if it was intended to be temporarily located and moved around from place to place: at [60] and [63].

(6) Where an asset was not a building proper but was inextricably connected with a building, it could be regarded as part of the building for income tax purposes: at [64].

(7) The abovementioned factors (set out at (3) to (6) above) would provide a principled framework for the court in deciding whether an asset was plant or a building, although much would also depend on the precise facts and context of each case: at [67] and [70].

(8) The Board and the judge below had erred in law in coming to their decision because they had focused only on the dormitories being used as setting or premises, without taking into account their temporary nature and physical characteristics. Thus, it was open to the court, applying the correct legal test, to arrive at its own conclusion on the facts: at [72] to [74].

(9) On the facts, the dormitories qualified as plant. Although they resembled buildings physically, they were not made of such lasting materials as to inextricably be considered buildings. Furthermore, they were not intended to have been located permanently and would have remained at the site only for nine years at most. As such, they were more akin to temporary structures like tents or cargo containers stacked on top of one another and modified for the purposes of providing accommodation to the workers: at [77] and [79].

(10) Section 83 (1) of the ITA required all income tax appeals before the Board, the High Court and the Court of Appeal to be heard in camera. It was therefore unnecessary for any party to make an application to this effect for future income tax appeals: at [84] to [86].

Judgment reserved.

Andrew Phang Boon Leong JA

(delivering the judgment of the court):

Introduction

1 This is an appeal against the decision of the judge (“the Judge”) in ZF v Comptroller of Income Tax [2010] 2 SLR 350 (“ZF (HC)”) holding that certain prefabricated dormitories (“the dormitories”), which were both portable and demountable and intended to be used as temporary accommodation, were not “plant” within the meaning of ss 19 and 19A of the Income Tax Act (Cap 134, 2008 Rev Ed) (“the ITA”). Although the ITA is one of the most detailed pieces of legislation in the Singapore statute book, the central concept in the present appeal, the concept of “plant”, is surprisingly not defined in the ITA. Instead, that definition has been elaborated upon in case law. The flexibility that such an approach affords is laudable in...

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