LEUNG SHEE WING v. COMMISSIONER OF INLAND REVENUE

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

APPELLATE JURISDICTION

Inland Revenue Appeal No. 4 of 1989

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J U D G M E N T

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1. This is an appeal by way of case stated pursuant to section 69 of the Inland Revenue Ordinance Cap. 112 ("the Ordinance") by a Board of Review for the opinion of the Court.

2. The appellant taxpayer is aggrieved by the refusal of the Inland Revenue to allow him to set off, against a personal assessment under Part VII of the Ordinance, property tax which the taxpayer has paid and in respect of which he claims to be entitled to a set off under the provisions of section 43(2B)(c) of the Ordinance. This section provides as follows :-

"(2B)    Any tax paid by the individual whether directly or indirectly under the provisions of Part II [i.e. Property Tax] for a year of assessment for which he has elected personal assessment, to the extent to which such tax -

(a)    .......

(b)    ......

(c)    would have been refundable under section 7 except that the relevant period when the land or buildings were unoccupied did not consist of entire months in the year of assessment,

shall be set off for the purposes of collection against the tax charged under this part [i.e. Pesonal Assessment] on that individual for that year of assessment."

3. It will be noted that this claim for a set off is expressed to be referential to the provisions of section 7 of the Ordinance. It is, however, no use looking at section 7 of the Ordinance in its present form in order to make any sense of section 43(2B)(c). The reason is that section 7 in its present form has been amended. It no longer contains any reference to entire months such as is mentioned in section 43(2B)(c). In its original and unamended form, it did contain such a reference. Section 7 in its original form provides as follows :-

"7.    Where it is proved to the satisfaction of the Commissioner that any land or buildings or land and buildings have been unoccupied during one or more entire months of any year of assessment any property tax payable in respect thereof shall be reduced proportionately and any excess tax paid shall be refunded."

Section 7 in its amended form provides as follows :-

"When it is proved to the satisfaction of the Commissioner that any land or buildings or land and buildings have been occupied for less than 12 months in any year of assessment any property tax payable in respect thereof shall be reduced proportionately and any excess tax paid shall be refunded."

4. So the scope of section 7 has been extended. No longer is there to be an entire month in respect of which the relief is to be available; any period of less than 12 months will do.

5. When section 7 was amended, it does not appear that the opportunity was taken to make any amendment to section 43(2B)(c), which now stricks out like a sore thumb because nobody appears to have appreciated that some amendment to it was required to produce internal consistency within the legislation.

6. The problem which this has caused in the present case arises in the following way. The taxpayer, if he had wished to make a claim for relief under section 7, whether in its amended or unamended form, would have had to do so within the time limits imposed by the legislation, which would have required him to make his claim for relief within 90 days of the end of the relevant year of assessment or within 90 days of the notice of assessment to which his claim would have related. The taxpayer did not do that; but his case is that he has a separate and independent claim for the relief by way of set off, a claim which stands on its own bottom, based on section 43(2B)(c) of the Ordinance. If this claim to an independent relief is right, the time limits no longer apply and he can simply ignore them for the purpose of obtaining the set off in relation to the personal assessment.

7. The issue between the parties, therefore, is whether the provisions of section 43(2B)(c) do give an independent right of set off to the taxpayer independently of the provisions of section 7 or whether those provisions do not have any such independent effect.

8. The material facts are set out in the stated case. They are as follows. At all relevant times the Appellant was the owner of a building at No. 13, Aberdeen Street, Hong Kong. After development it comprised premises part of which were left vacant. The rateable values of the vacant premises were not fixed at the same time as the remainder of the building.

9. In the result there were separate rateable values for the occupied, and the vacant, premises from 1st July 1981, which is the date on which the vacant premises were assessed.

10. The assessable values of the units within 13 Aberdeen Street was as follows :-

Ground Floor and cockloft - $64,000

2nd Floor - $21,800

3rd Floor - $21,800

4th Floor - (with effect from 1 July 1981) - $26,040

5th Floor and roof (with effect from 1 July 1981) - $26,880

(The 4th and 5th floors, and the roof, were the vacant premises.)

11. On the 16th November 1981, the appellant received a property tax assessment of $22,898 based on these assessable values. In fact the vacant premises were never let, although they had been included in the premises on which tax was paid. The taxpayer paid the tax on 28th December 1981, without making any objection to the assessment.

12. On 8th September 1982, the appellant indicated his intention of applying for a personal assessment for the year of assessment 1981/82. On 25th January 1983, the appellant filed his personal assessment return, and informed the Inland Revenue Department that the 4th Floor had been vacant with no rental income from 1st July 1981 until it was sold on 24th December 1981 and that the 5th Floor was vacant throughout the assessment period. At the same time the taxpayer made his claim to set off the property tax which he had paid on 28th December 1981.

13. The assessment eventually made included the property tax, in that no allowance was given for what had been paid by the taxpayer in relation to the vacant premises. By a letter dated 4th January 1985, the taxpayer's representatives wrote to the Inland Revenue in the following terms :-

"Our client is eligible to claim under section 43(2B)(c) to set off Property Tax paid (whether income is included or not) against the Personal Assessment Tax Please be advised that section 43(2B) (c) states that the tax would have been refundable under section 7 (Not 7A nor 7B). Our client does not use the Personal Assessment to prolong the objection but the method of calculation so stipulated under section 43(4B)(c) will enable the Tax paid to be set off for the purpose of collection against the tax charged on him."

14. The substantive question for the decision of the Court is framed by the Board in the following terms :-

"Whether the Board erred in finding that the appellant was not entitled to set off under section 43(2B)(c), the property tax paid in respect of the vacant premises against the total tax charged on him for the year of assessment 1981/82 under Personal Assessment?"

15. If the Board was right the question must be answered in the negative; and this appeal must fail. I have come to the conclusion that the question must indeed be answered in the negative.

16. The argument before me on behalf of the taxpayer raised, it was said, an important point of principle; in that the taxpayer claimed that no part of a section in an ordinance ought to be treated by the Court as having no meaning unless the Court is absolutely driven to that conclusion for want of any other possible conclusion.

17. I would accept that proposition. But it operates, not in cases where the legislature has made an obvious mistake in amending legislation (as it did here by failing to amend section 43(2B)(c) at the same time as it amended section 7). The principle is applicable where the legislation is difficult to construe, but where the Court is unable to rest its head on the easy pillow of uncertainty and is forced to come to the conclusion that the Legislature must have meant something when it passed the Act, or Ordinance, in question. There is a salutary rule. Somewhere in A.P. Herbert's Uncommon Law, Lord Goat is quoted as having said, in the House of Lords : "If Parliament does not mean what it says, then Parliament must say so". This, although not to be regarded as authoritative, is plainly right.

18. The fact is that the problem in this case has been brought about by a combination of two factors. First, the failure of those responsible for the legislation to amend section 43(2B)(c) at the same time as it deprived the relevant parts of section 7 of all content; and secondly, the attempt by the taxpayer to pray in aid, in this case, the provisions of section 43(2B)(c) for a purpose for which they were never designed in order, no doubt, to avoid the time constraints that would have precluded his claim for relief under section 7. Section 43(2B)(c) now gives the taxpayer no relief against tax, even on a personal assessment, which is not provided by section 7. As it seems to me, there is no substance in this appeal and I must therefore dismiss it.