SUEN HUNG SHAN v. COMMISSIONER OF INLAND REVENUE

HCIA 1/2020

[2020] HKCFI 1322

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

INLAND REVENUE APPEAL NO 1 OF 2020

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D E C I S I O N

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1.  This is an application by Mr Suen, a taxpayer, for leave to appeal against the decision of the Board of Review (“Board”) in Case No B/R 48/18 dated 16 March 2020 (“Decision”).

2.  The decision relates to the salaries tax assessment for the year 2013/14 raised on the taxpayer.  During that year of assessment from 1 April 2013 to 31 March 2014, for the first 10 days (1 to 10 April 2013) the taxpayer had been employed by Wong & Ouyang (HK) Ltd (“W&O”), a Hong Kong company, as Resident Architect to work on a Hong Kong project.  That employment (“the 2012 Employment”) was terminated with effect from 11 April 2013.  The assessable income from the 2012 Employment falling within the year of assessment 2013/14 was $144,166, which included salary, leave pay, payment in lieu of notice, terminal awards and gratuities.  The Board held that such income was chargeable to salaries tax.[1]

3.  From 27 May 2013 onwards, the taxpayer was employed by W&O again, on a contract entered into in Hong Kong, as Senior Resident Architect for the project of Galaxy Macau (“the 2013 Employment”).  The total salaries or wages he received between 27 May 2013 and 31 March 2014 were $1,092,338.

4.  The taxpayer argued that he should be exempt from salaries tax for the year of assessment 2013/14.  He argued that s 8(1A)(b)(ii) of the Inland Revenue Ordinance (Cap 112) (“Ordinance”) applied, which excludes from assessment “income derived from services rendered by a person who … renders outside Hong Kong all the services in connection with this employment”.  He also relied on s 8(1B), which provides that:

“ In determining whether or not all services are rendered outside Hong Kong for the purposes of subsection (1A) no account shall be taken of services rendered in Hong Kong during visits not exceeding a total of 60 days in the basis period for the year of assessment.”

5.  The Board found that the exemption did not apply because:

(1)     The taxpayer did not render all his services outside Hong Kong under the 2013 Employment, since he provided services at a meeting at W&O’s office in Hong Kong on 27 June 2013.  Even if it was an ad hoc meeting lasting for only an hour, the taxpayer did provide services.[2]

(2)     The relevant question was whether the taxpayer stayed, not worked, no more than 60 days in Hong Kong.[3] In computing the number of days of visits, the Board adopted the fraction‑equals‑whole approach,[4] and did not exclude any days of annual leave, Macau public holidays, sick leave and rest days.[5]  On that footing, the taxpayer’s visits to Hong Kong during the year of assessment 2013/14 exceeded 60 days.

6.  The taxpayer also argued that the income from the 2013 Employment was sourced outside Hong Kong.  The Board rejected this argument.[6] In coming to this conclusion, the Board had not exercised its power to summon the senior director of W&O to give evidence.[7]

7.  The Board held that the taxpayer was not entitled to deduct the outgoings and expenses for his 44 visits to Hong Kong during the period.[8]

8.  In the result, the Board confirmed the assessment and dismissed the taxpayer’s appeal.

9.  For the purposes of his application for leave to appeal to the Court of First Instance, the taxpayer has set out in his statement made under s 69(3)(a)(ii) of the Ordinance 10 grounds for his intended appeal. 

10.  In the statement filed on behalf of the Commissioner of Inland Revenue (“Commissioner”) pursuant to s 69(3)(b), in addition to the substantive response to the proposed grounds of appeal, a preliminary point is taken, namely, that the taxpayer’s application is out of time.

11.  Having regard to the preliminary point, I consider it appropriate to determine the application without a hearing, pursuant to s 69(3)(c)(i).

12.  Section 69(3)(a)‑(c) of the Ordinance provides:

“ (3) For the purposes of an application to the Court of First Instance under subsection (2)(a) for leave to appeal—

(a) the application—

(i) must be lodged with the Registrar of the High Court, and served on the other party, within 1 month after the following date—

(A) subject to sub-subparagraph (B), the date on which the Board’s decision is made;

(B) if the Board’s decision is notified to the appellant or the Commissioner by notice in writing, the date of the communication by which the decision is notified; and

(ii) must be made by a summons supported by a statement setting out—

(A) the grounds of the appeal; and

(B) the reasons why leave should be granted;

(b) if the other party intends to resist the application, that party must, within 14 days after the date on which the application is served on that party, file in the Court of First Instance and serve on the applicant a statement as to why leave should not be granted;

(c) the Court of First Instance may—

(i) determine the application without a hearing on the basis of written submissions only; or

(ii) direct that the application be considered at a hearing,

and, in both cases, the Court of First Instance may give any directions it thinks fit in relation to the application.”

13.  It is clear that for there to be a valid application, it must be lodged with the Registrar of the High Court and served on the other party within the prescribed time of 1 month.

14.  In the present case, on the taxpayer’s own case, the Decision was communicated to him on 19 March 2020.  It follows that he had to lodge and serve his application on or before 19 April 2020. 

15.  As far as the Registrar of the High Court is concerned, the Registry was closed on 19 April 2020 as a result of the General Adjournment Period imposed by reason of public health considerations and was only re‑opened on 6 May 2020.

16.  Section 71(1A) of the Interpretation and General Clauses Ordinance (Cap 1) provides:

“ (1A) However, if the computation mentioned in subsection (1) is in relation to the doing of an act or the taking of a proceeding at a court office, the following provisions apply to the computation to the exclusion of subsection (1)(b), (c) and (d)—

(a) if the act or proceeding is directed or allowed to be done or taken within a period of time, and the last day of the period is a closure day for the office, the period includes the next following day, not being a closure day for the office;

…”

17.  It follows that the period of 1 month prescribed by s 69(3)(a)(i) includes, and ends on, 6 May 2020.  The taxpayer’s application, lodged in the Registry on 7 May 2020, was therefore one day late.

18.  As far as service on the Commissioner is concerned, s 71(1)(b) of the Interpretation and General Clauses Ordinance provides as follows:

“ (1) In computing time for the purposes of any Ordinance—

(a) …

(b) if the last day of the period is a public holiday or a gale warning day or black rainstorm warning day the period shall include the next following day, not being a public holiday or a gale warning day or black rainstorm warning day;

…”

19.  Since 19 April 2020 was a Sunday, the period for service of the application on the Commissioner included and ended on 20 April 2020. Alternatively, since s 69(3)(a)(ii) of the Ordinance requires that the application must be made by a summons, and since a summons in the High is generally issued out of the Registry of the High Court and is issued upon being sealed with the Seal of the High Court (see Order 32 rule 2 of the Rules of the High Court and paragraph 4 of Practice Direction—34), it may be argued that the application can only be served on the other party after it has been lodged with and issued out of the Registry of the High Court.  On this argument the time for service on the Commissioner in this case should be extended to 6 May 2020, being the earliest date after 20 April 2020 on which a summons could be issued out of the High Court Registry.  It is however unnecessary to decide which deadline is correct because in either case, service on the Commissioner in the present case, which took place on 11 May 2020, was late.

20.  The time limit for making an application for leave to appeal from the Board to this court is imposed by statute.  There is nothing in the Ordinance to confer a power on this court to extend time, and general rules of court for extending time do not enable the court to alter a statutory time limit: see Re Merck Sharp & Dohme Ltd (Amendment of Patent) [2002] 2 HKC 475; Bangkok Capital Antique Co Ltd v The Collector of Stamp Revenue [1984] HKC 16; Mita Kogyo Kabushiki Kaisha v Mitac Inc [1993] 2 HKLR 466; So Siu Chou v Chief Electoral Officer Vivian Ting [2008] 1 HKCLRT 173.  Specifically, in Francois Ngo v Commissioner of Inland Revenue [2018] HKCFI 2516 at §§11‑12, L Chan J held that there was no jurisdiction for the court to extend the 1‑month time limit prescribed by s 69(3)(a)(i) of the Ordinance.

21.  In his submissions the taxpayer has referred to s 22 of the Limitation Ordinance (Cap 347) which concerns extension of limitation period in favour of a person under a disability.  That provision applies in relation to a period of limitation prescribed by that Ordinance and has no relevance to the present case.

22.  In conclusion, there is no valid application for leave to appeal.  The taxpayer’s summons must therefore be dismissed.  There will be an order nisi that the taxpayer is to pay the Commissioner’s costs of and relating to the summons.