Comptroller of Income Tax v VJ: Interpretation of Section 10E Income Tax Act for Property Letting Business
In Comptroller of Income Tax v VJ, the High Court of Singapore heard an appeal by the Comptroller of Income Tax against the Income Tax Board of Review's decision regarding X Property Pte Ltd's Notices of Assessment for Years of Assessment 1999, 2000, and 2001. The central legal issue was whether the company's income from operating AB Shopping Centre and CD Serviced Apartments was derived from the 'business of the making of investments' under Section 10E of the Income Tax Act. The High Court allowed the appeal, holding that Section 10E applies to the profits of the business, including service fees and charges.
1. Case Overview
1.1 Court
High Court1.2 Outcome
Appeal Allowed
1.3 Case Type
Tax
1.4 Judgment Type
Judgment reserved
1.5 Jurisdiction
Singapore
1.6 Description
The High Court addressed whether X Property Pte Ltd's income from operating AB Shopping Centre and CD Serviced Apartments falls under Section 10E of the Income Tax Act.
1.7 Decision Date
2. Parties and Outcomes
| Party Name | Role | Type | Outcome | Outcome Type | Counsels |
|---|---|---|---|---|---|
| Comptroller of Income Tax | Appellant | Government Agency | Appeal Allowed | Won | Foo Hui Min of Inland Revenue Authority of Singapore Lim David of Inland Revenue Authority of Singapore |
| VJ | Respondent | Corporation | Appeal Dismissed | Lost |
3. Judges
| Judge Name | Title | Delivered Judgment |
|---|---|---|
| Andrew Ang | Judge | Yes |
4. Counsels
| Counsel Name | Organization |
|---|---|
| Foo Hui Min | Inland Revenue Authority of Singapore |
| Lim David | Inland Revenue Authority of Singapore |
| Ong Sim Ho | Drew & Napier LLC |
| Yang Shi Yong | Drew & Napier LLC |
4. Facts
- The Respondent is the owner, developer, and manager of AB Shopping Centre and CD Serviced Apartments.
- In 1995, the Respondent commenced the development of the Property.
- On 15 January 1998, Temporary Occupation Permit was issued for the Property.
- On 1 April 1998, the Respondent began leasing out the Property.
- The Respondent obtained an interest-bearing loan from its parent company to finance the construction of the Property and to provide working capital for its operations.
- In 1996, the Respondent began marketing, promoting and advertising for the rental of the Property.
- The Respondent claimed deduction under s 14 of the Income Tax Act of the interest expenses that were incurred on the loan on and after the issuance of TOP for the Years of Assessment 1999, 2000 and 2001.
- The Respondent claimed deduction under s 14 of the Act in respect of the deferred expenditure for the Years of Assessment 1999, 2000 and 2001.
5. Formal Citations
- Comptroller of Income Tax v VJ, ITBR Appeal 3/2007, [2008] SGHC 224
6. Timeline
| Date | Event |
|---|---|
| Respondent commenced the development of the Property | |
| Respondent began marketing, promoting and advertising for the rental of the Property | |
| First deferred expenditure on the Property was brought into the Respondent’s accounts | |
| Temporary Occupation Permit issued for the Property | |
| Respondent began leasing out the Property | |
| Revenue took the position that the Respondent was in the business of the making of investments under s 10E of the Act | |
| Revenue issued Notices of Refusal to Amend for the Years of Assessment 2000 and 2001 | |
| Judgment reserved |
7. Legal Issues
- Construction of s 10E Income Tax Act
- Outcome: The court construed the meaning of 'business of the making of investments' in s 10E to include the business of letting immovable properties where the company carries out systematic, habitual, or repetitive activities with respect to the letting of the properties.
- Category: Substantive
- Applicability of s 10E Income Tax Act
- Outcome: The court held that s 10E applies to the profits of the business of letting immovable properties, including the service fee charged under the tenancy agreements and the service charge under the leases.
- Category: Substantive
- Whether company was in the business of letting immovable properties
- Outcome: The court held that the Respondent was carrying on the business of letting immovable properties incidental and ancillary to which services were provided to the tenants thereof.
- Category: Substantive
- What income was to be treated as income derived from the business of letting immovable properties
- Outcome: The court held that the income from the business of letting immovable properties is not limited to rental income and includes service fees and charges.
- Category: Substantive
8. Remedies Sought
- No remedies sought
9. Cause of Actions
- No cause of actions
10. Practice Areas
- Taxation
- Commercial Litigation
11. Industries
- Real Estate
- Finance
12. Cited Cases
| Case Name | Court | Affirmed | Citation | Jurisdiction | Significance |
|---|---|---|---|---|---|
| JD Ltd v Comptroller of Income Tax | Court of Appeal | Yes | [2006] 1 SLR 484 | Singapore | Cited to show that Section 10E was intended to apply to an investment holding company. |
| DEF v Comptroller of Income Tax | Court of Appeal | Yes | (1961) 27 MLJ 55 | Singapore | Cited for the definition of 'business' as implying a series or repetition of acts for profit making. |
| The Commissioners of Inland Revenue v The Tyre Investment Trust Ltd | N/A | Yes | (1924) 12 TC 646 | N/A | Cited for guidance on the meaning of 'making investments' as investing, not turning over investments for profit. |
| IRC v George and Another | EWCA Civ | Yes | [2003] EWCA Civ 1763 | United Kingdom | Cited by the Board, but the High Court found that the Board made an error of law in following the approach in this case because it related to a different factual and statutory context. |
| Inland Revenue Commissioners v George | N/A | Yes | [2004] STC 147 | N/A | Cited by the Board, but the High Court found that the Board made an error of law in following the approach in this case because it related to a different factual and statutory context. |
| IE v Comptroller of Income Tax | Income Tax Board of Review | Yes | [2005] SGITBR 1 | Singapore | Cited to show that application of s 10E need not be on an 'all or nothing' basis; it is possible that 'any business of the making of investments' may be just one of a number of components of a composite business and that other components of the business may fall outside s 10E. |
| Cook (Inspector of Taxes) v Medway Housing Society Ltd | N/A | Yes | [1997] STC 90 | N/A | Cited by the Board, but the High Court found that their reliance on this case authority was misplaced. |
| Farmer v IRC | N/A | Yes | [1999] STC 321 | N/A | Cited by the Board, but the High Court found that their reliance on this case authority was misplaced. |
| Martin v IRC | N/A | Yes | [1995] STC (SGD) 5 | N/A | The High Court stated that reference to judicial formulations, no matter how elegantly phrased, involving a totally distinct statutory context may tend to obfuscate rather than clarify. |
13. Applicable Rules
| Rule Name |
|---|
| No applicable rules |
14. Applicable Statutes
| Statute Name | Jurisdiction |
|---|---|
| Income Tax Act (Cap 134, 2001 Rev Ed) s 10(1)(a) | Singapore |
| Income Tax Act (Cap 134, 2001 Rev Ed) s 10E | Singapore |
| Income Tax Act (Cap 134, 2001 Rev Ed) s 14 | Singapore |
| Income Tax Act (Cap 134, 2001 Rev Ed) s 37 | Singapore |
| Income Tax Act (Cap 134, 2001 Rev Ed) s 19A | Singapore |
| Companies Act (Cap 50, 1994 Rev Ed) s 23 | Singapore |
15. Key Terms and Keywords
15.1 Key Terms
- Business of the making of investments
- Business of letting immovable properties
- Section 10E Income Tax Act
- Investment properties
- Rental income
- Service charge
- Temporary Occupation Permit
- Deferred expenditure
- Interest expense
15.2 Keywords
- Income Tax
- Section 10E
- Property Letting
- Investment
- Singapore
- Rental Income
17. Areas of Law
| Area Name | Relevance Score |
|---|---|
| Income taxation | 95 |
| Revenue Law | 90 |
| Statutory Interpretation | 60 |
16. Subjects
- Income Tax
- Property Law
- Investment Law