BLP v Comptroller of Income Tax: Special Levy for Retrofitting as Revenue or Capital?
In BLP v Comptroller of Income Tax, the High Court of Singapore addressed whether a special levy collected by BLP, a management corporation, from its members for retrofitting and upgrading its premises should be considered revenue or capital for tax purposes. The court, presided over by Choo Han Teck J, allowed BLP's appeal, holding that the special levy was capital in nature because it was used for a project that strengthened existing assets and created new assets.
1. Case Overview
1.1 Court
High Court1.2 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 special levy collected by a management corporation for retrofitting is revenue or capital, impacting tax liability.
1.7 Decision Date
2. Parties and Outcomes
| Party Name | Role | Type | Outcome | Outcome Type | Counsels |
|---|---|---|---|---|---|
| Comptroller of Income Tax | Respondent | Government Agency | Appeal Dismissed | Lost | Julia Mohamed of Inland Revenue Authority of Singapore Michelle Chee of Inland Revenue Authority of Singapore |
| BLP | Appellant | Corporation | Appeal Allowed | Won |
3. Judges
| Judge Name | Title | Delivered Judgment |
|---|---|---|
| Choo Han Teck | Judge | Yes |
4. Counsels
| Counsel Name | Organization |
|---|---|
| Julia Mohamed | Inland Revenue Authority of Singapore |
| Michelle Chee | Inland Revenue Authority of Singapore |
| Tan Kay Kheng | WongPartnership LLP |
| Novella Chan Yandian | WongPartnership LLP |
| Jeremiah Soh Zi Qing | WongPartnership LLP |
4. Facts
- The appellant, a management corporation, sought to retrofit and upgrade its premises in 1997.
- The appellant obtained a loan of $11,600,000 to finance the project.
- The appellant collected a 'special levy' from subsidiary proprietors to finance the loan.
- The special levy was collected monthly over 13 years, from 1997 to 2010, totaling about $16.4 million.
- The appellant did not include the special levy contributions in its tax computation for the year of assessment 2006.
- The project included replacement of floor finishes, installation of a new building logo, and construction of ten new studio apartments.
- The complex was built more than 25 years ago, and no major retrofitting had been undertaken.
5. Formal Citations
- BLP v Comptroller of Income Tax, Tribunal Appeal No 21 of 2013, [2014] SGHC 127
6. Timeline
| Date | Event |
|---|---|
| Appellant sought to retrofit and upgrade its premises | |
| Special levy collection began | |
| Respondent raised the matter in a letter to the appellant | |
| Appellant replied, seeking amendment to exclude the special levy | |
| Special levy collection ended | |
| Respondent raised an additional assessment | |
| Respondent issued a notice of refusal to amend | |
| Income Tax Board of Review found in favor of the respondent | |
| Judgment reserved |
7. Legal Issues
- Revenue vs. Capital
- Outcome: The court held that the special levy was capital in nature, not revenue.
- Category: Substantive
- Related Cases:
- [2006] 4 SLR(R) 161
- [2010] 3 SLR 609
- Principle of Mutuality
- Outcome: The court found that the principle of mutuality should prevail, and the appellant should not be deemed to carry on a business.
- Category: Substantive
8. Remedies Sought
- Reversal of the Income Tax Board of Review's decision
- Allowance of the appellant's appeal against the Board
9. Cause of Actions
- No cause of actions
10. Practice Areas
- Tax Litigation
- Commercial Litigation
11. Industries
- Real Estate
- Property Management
12. Cited Cases
| Case Name | Court | Affirmed | Citation | Jurisdiction | Significance |
|---|---|---|---|---|---|
| Comptroller of Income Tax v IA | Court of Appeal | Yes | [2006] 4 SLR(R) 161 | Singapore | Cited to define the revenue-capital divide, providing the 'purpose test' and 'temporary and fluctuating test'. |
| ABD Pte Ltd v Comptroller of Income Tax | High Court | Yes | [2010] 3 SLR 609 | Singapore | Cited for the 'Composite and Integrated Approach' to differentiate between revenue and capital expenditure. |
| Tan Hee Liang v Chief Assessor | Court of Appeal | Yes | [2009] 1 SLR(R) 335 | Singapore | Cited regarding a special levy collected for external upgrading works being for the purpose of maintenance or repair, but distinguished in the present case. |
| The Seaham Harbour Dock Co v Crook (HM Inspector of Taxes) | House of Lords | Yes | 16 TC 333 | England and Wales | Cited and distinguished regarding government assistance for building an extension of a dock being considered capital. |
| St John Dry Dock v Minister of National Revenue | N/A | Yes | 2 DTC 663 | Canada | Cited and distinguished regarding a government subsidy for constructing a dry dock being a capital receipt. |
| Commissioner of Income Tax v Beldih Club | N/A | Yes | [1986] 161 ITR 861 | N/A | Cited and distinguished regarding a donation for major repairs and renovations being a capital receipt. |
| Comptroller of Income Tax v BBO | Court of Appeal | Yes | [2014] 2 SLR 609 | Singapore | Cited to show that provisions of the Insurance Act do not determine whether gains are capital or revenue in nature. |
| BLP v The Comptroller of Income Tax | Income Tax Board of Review | Yes | [2013] SGITBR 2 | Singapore | The decision of the Income Tax Board of Review that was appealed in this case. |
13. Applicable Rules
| Rule Name |
|---|
| No applicable rules |
14. Applicable Statutes
| Statute Name | Jurisdiction |
|---|---|
| Income Tax Act (Cap 134, 2008 Rev Ed) | Singapore |
| Building Maintenance and Strata Management Act (Cap 30C, 2008 Rev Ed) | Singapore |
| Insurance Act (Cap 142, 2002 Rev Ed) | Singapore |
15. Key Terms and Keywords
15.1 Key Terms
- Special levy
- Management corporation
- Retrofitting
- Upgrading
- Revenue
- Capital
- Principle of mutuality
- Sinking fund
- Management fund
- Year of assessment
15.2 Keywords
- tax
- income tax
- special levy
- management corporation
- retrofitting
- capital
- revenue
17. Areas of Law
| Area Name | Relevance Score |
|---|---|
| Income taxation | 90 |
| Taxation | 80 |
| Special Levy | 60 |
| Property Law | 30 |
| Company Law | 20 |
16. Subjects
- Taxation
- Income Tax
- Strata Management