We refer to the report, "Singapore Subsidiary Wins $13.6m Case Against Taxman - Anti-Tax Avoidance Rules Didn't Apply and Taxpayer's Intention was Key: High Court" (21 Dec 2012) by Mr K.C. Vijayan. We are of the view that the article contained inaccuracies that require clarification.

Contrary to the report that the High Court had held that anti-avoidance rules did not apply in the case, Justice Ang was “of the firm view that the (Income Tax) Board was well entitled to find that the Financing Arrangement was not carried out for bona fide commercial reasons and that it had as one of its main purposes the avoidance or reduction of tax”. In his judgement, Justice Ang had also found that the Comptroller was not wrong in determining that the Financing Arrangement fell within section 33(1) of the Income Tax Act. Section 33 is a general anti-avoidance provision that empowers the Comptroller of Income Tax to vary or disregard certain arrangements to counteract any tax advantage obtained.

While the High Court found that the Financing Arrangement was caught by section 33, it was of the view that the interest expense incurred, and not the dividend income received, by the taxpayer should be disregarded. Thus, the High Court allowed the appellant’s appeal.

It is clear from the judgement that the anti-avoidance rules as set out in section 33 of the Income Tax Act did apply to the case on hand. The High Court only disagreed with the approach adopted by Comptroller in disregarding the unacceptable Financing Arrangement.

Claire Chua (Mrs)
Director (Corporate Communications)
Inland Revenue Authority of Singapore