Intevac Asia Pte Ltd v Comptroller of Income Tax: Deduction of R&D Expenses under Cost-Sharing Agreement
Intevac Asia Pte Ltd appealed to the High Court of Singapore against the Comptroller of Income Tax's decision to disallow deductions on research and development expenses incurred under a cost-sharing agreement with Intevac US. The High Court, presided over by Choo Han Teck J, dismissed the appeal, holding that the cost-sharing payments did not qualify as payments made for R&D undertaken on Intevac Asia's behalf under s 14D(1)(d) of the Income Tax Act, as the R&D was for the joint benefit of both companies. The court also found that Intevac Asia had not satisfied the requirement under s 14D(3)(a) of the ITA.
1. Case Overview
1.1 Court
High Court of the Republic of Singapore1.2 Outcome
Tax Appeal dismissed.
1.3 Case Type
Tax
1.4 Judgment Type
Judgment
1.5 Jurisdiction
Singapore
1.6 Description
Intevac Asia's appeal against disallowance of R&D expense deductions under a cost-sharing agreement was dismissed, as the expenses did not qualify under s 14D(1)(d) ITA.
1.7 Decision Date
2. Parties and Outcomes
| Party Name | Role | Type | Outcome | Outcome Type | Counsels |
|---|---|---|---|---|---|
| Comptroller of Income Tax | Respondent | Government Agency | Decision Affirmed | Won | Quek Hui Ling of Inland Revenue Authority of Singapore Shawn Joo Jian Hua of Inland Revenue Authority of Singapore Zheng Sicong of Inland Revenue Authority of Singapore |
| Intevac Asia Pte Ltd | Appellant | Corporation | Appeal dismissed | Lost |
3. Judges
| Judge Name | Title | Delivered Judgment |
|---|---|---|
| Choo Han Teck | Judge | Yes |
4. Counsels
| Counsel Name | Organization |
|---|---|
| Quek Hui Ling | Inland Revenue Authority of Singapore |
| Shawn Joo Jian Hua | Inland Revenue Authority of Singapore |
| Zheng Sicong | Inland Revenue Authority of Singapore |
| Allen Tan Tiaw Kheng | Wong & Leow LLC |
| Soh Zi Qing Jeremiah | Wong & Leow LLC |
| Ng Boon Kiat Kevin | Wong & Leow LLC |
4. Facts
- Intevac Asia Pte Ltd, a subsidiary of Intevac US, claimed deductions on R&D expenses under a cost-sharing agreement.
- The Comptroller of Income Tax disallowed the deduction of the Cost-Sharing Payments.
- The Cost-Sharing Agreement (CSA) superseded the Research and Development Services Agreement (RDSA).
- Under the CSA, both Intevac Asia and Intevac US would acquire the right to exploit any IP generated.
- The payments were made pursuant to an arrangement involving the pooling of resources to undertake R&D for the joint benefit of the Appellant and Intevac US.
5. Formal Citations
- Intevac Asia Pte Ltd v Comptroller of Income Tax, Tax Appeal No 3 of 2020, [2020] SGHC 218
6. Timeline
| Date | Event |
|---|---|
| Research and Development Services Agreement between Intevac Asia Pte Ltd and Intevac US dated | |
| Cost-Sharing Agreement between Intevac Asia Pte Ltd and Intevac US dated | |
| Intevac Asia Pte Ltd made payments to Intevac US | |
| Intevac Asia Pte Ltd made payments to Intevac US | |
| Intevac Asia Pte Ltd made payments to Intevac US | |
| Intevac Asia Pte Ltd made payments to Intevac US | |
| Judgment reserved | |
| Judgment |
7. Legal Issues
- Deductibility of Research and Development Expenses
- Outcome: The court held that the cost-sharing payments did not qualify for deduction under s 14D(1)(d) of the Income Tax Act.
- Category: Substantive
8. Remedies Sought
- Deduction of Research and Development Expenses
9. Cause of Actions
- No cause of actions
10. Practice Areas
- Taxation
- Tax Appeals
11. Industries
- Manufacturing
- Technology
12. Cited Cases
| Case Name | Court | Affirmed | Citation | Jurisdiction | Significance |
|---|---|---|---|---|---|
| Attorney-General v Ting Choon Meng and another appeal | Court of Appeal | Yes | [2017] 1 SLR 373 | Singapore | Cited for the approach to statutory interpretation. |
| BFC v Comptroller of Income Tax | High Court | Yes | [2013] 4 SLR 471 | Singapore | Cited for the principle that legislative intent is determined at the time the law is passed. |
13. Applicable Rules
| Rule Name |
|---|
| No applicable rules |
14. Applicable Statutes
| Statute Name | Jurisdiction |
|---|---|
| Income Tax Act (Cap 134, 2008 Rev Ed) s 14D(1)(d) | Singapore |
| Income Tax Act (Cap 134, 2008 Rev Ed) s 14D(3) | Singapore |
| Income Tax Act s 19C(1) | Singapore |
15. Key Terms and Keywords
15.1 Key Terms
- Research and Development
- Cost-Sharing Agreement
- Deduction
- Income Tax Act
- Intellectual Property
15.2 Keywords
- tax
- research and development
- cost-sharing
- deduction
- income tax
- singapore
17. Areas of Law
| Area Name | Relevance Score |
|---|---|
| Income taxation | 95 |
| Revenue Law | 90 |
| Taxation | 80 |
| Administrative Law | 20 |
| Contract Law | 15 |
16. Subjects
- Taxation
- Research and Development Expenses
- Cost-Sharing Agreements