Comptroller of Income Tax v KE: Income Taxation of Housing Developer under Completed Contract Method

In Comptroller of Income Tax v KE, the High Court of Singapore heard an appeal by the Comptroller of Income Tax against the Income Tax Board of Review's decision regarding the income taxation of KE, a licensed housing developer. KE sought to deduct 85% of incurred costs from 85% of sale proceeds in Year of Assessment 1999, with the balance to be deducted in a subsequent year. The Comptroller disagreed, arguing the full amount of incurred costs should be deducted in Year of Assessment 1999. The High Court allowed the appeal, finding no basis for restricting the deduction of incurred costs to 85% for Year of Assessment 1999.

1. Case Overview

1.1 Court

High Court

1.2 Outcome

Appeal Allowed

1.3 Case Type

Tax

1.4 Judgment Type

Grounds of Decision

1.5 Jurisdiction

Singapore

1.6 Description

The High Court addressed whether a housing developer could deduct 85% of costs against 85% of accrued purchase price at TOP stage. The appeal by the Comptroller of Income Tax was allowed.

1.7 Decision Date

2. Parties and Outcomes

Party NameRoleTypeOutcomeOutcome TypeCounsels
Comptroller of Income TaxAppellantGovernment AgencyAppeal AllowedWon
David Lim of Inland Revenue Authority
KERespondentCorporationAppeal DismissedLost

3. Judges

Judge NameTitleDelivered Judgment
Kan Ting ChiuJudgeYes

4. Counsels

Counsel NameOrganization
David LimInland Revenue Authority
Ong Sim HoOng Sim Ho
Ong Ken LoonOng Sim Ho
Low Wee SiongOng Sim Ho

4. Facts

  1. KE is a licensed housing developer.
  2. KE developed a condominium project, with Temporary Occupation Permits issued in 1998.
  3. All condominium units were sold by the time TOPs were issued.
  4. Agreements stipulated 85% of the purchase price payable upon TOP issuance, 15% upon legal completion.
  5. The development was undertaken under the Housing Developers (Control and Licensing) Act.
  6. KE elected to be taxed by the Completed Contract Method.
  7. The Comptroller of Income Tax disallowed KE's proposed deduction method.

5. Formal Citations

  1. Comptroller of Income Tax v KE, DA 29/2005, [2006] SGHC 140

6. Timeline

DateEvent
Temporary Occupation Permits issued for condominium project units
Judgment reserved

7. Legal Issues

  1. Deduction of Costs under Completed Contract Method
    • Outcome: The court held that the full amount of incurred costs should be deducted in the Year of Assessment 1999.
    • Category: Substantive
    • Sub-Issues:
      • Timing of cost deduction
      • Apportionment of costs
      • Application of accounting standards

8. Remedies Sought

  1. No remedies sought

9. Cause of Actions

  • No cause of actions

10. Practice Areas

  • Taxation
  • Commercial Law
  • Construction Law

11. Industries

  • Construction
  • Real Estate

12. Cited Cases

Case NameCourtAffirmedCitationJurisdictionSignificance
TH Limited v Comptroller of Income TaxPrivy CouncilYes(1950–1985) MSTC 457N/ACited to explain the rationale for the Completed Contract Method of computing tax liability.
Thomas Hill Ltd v Comptroller of Income TaxCourt of Appeal of SingaporeYes[1984–1985] SLR 2SingaporeCited to explain the rationale for the Completed Contract Method of computing tax liability.
KE v Comptroller of Income TaxIncome Tax Board of ReviewYes[2005] SGITBR 4SingaporeCited to reference the Board's grounds of decision in the present case.
Minister of National Revenue v Anaconda American Brass LtdN/AYes[1956] AC 85N/ACited by the Board to support the accounting method consistent with tax laws and the Completed Contract Method.
Odeon Associated Theatres v JonesN/AYes[1973] Ch 288N/ACited for the principle that tax laws prevail over accounting practices.
Heather v P-E Consulting Group LtdN/AYes[1973] Ch 189N/ACited for the principle that tax laws prevail over accounting practices.
Pinetree Resort Pte Ltd v Comptroller of Income TaxN/AYes[2000] 4 SLR 1SingaporeCited for the principle that the court has the power to disregard accounting practice where that practice appears to be based on a mistaken view of the law.

13. Applicable Rules

Rule Name
Housing Developers Rules (Cap 130, R 1, 1990 Rev Ed)
Rules of Court (Cap 322, R 5 2006 Rev Ed)

14. Applicable Statutes

Statute NameJurisdiction
Housing Developers (Control and Licensing) Act (Cap 130, 1985 Rev Ed)Singapore
Income Tax Act (Cap 134, 2004 Rev Ed)Singapore

15. Key Terms and Keywords

15.1 Key Terms

  • Completed Contract Method
  • Temporary Occupation Permit
  • Housing developer
  • Project Account Rules
  • Year of Assessment
  • Incurred costs
  • Sale proceeds

15.2 Keywords

  • Income Tax
  • Housing Developer
  • Completed Contract Method
  • Temporary Occupation Permit
  • Deduction
  • Singapore

17. Areas of Law

Area NameRelevance Score
Income taxation95
Taxation60
Company Law25
Property Law15

16. Subjects

  • Taxation
  • Income Tax
  • Housing Development