KOO MING KOWN AND ANOTHER v. THE COMMISSIONER OF INLAND REVENUE

CACV 602/2018

[2021] HKCA 1037

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 602 OF 2018

(ON APPEAL FROM HCIA 1 OF 2017)

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REASONS FOR JUDGMENT

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Hon Lam VP:

1.  I agree with the reasons given by Barma JA.

Hon Chu JA:

2.  I agree with the reasons given by Barma JA.

Hon Barma JA:

3.  This was an appeal by the Commissioner of Inland Revenue (“the Commissioner”) against the judgment of G Lam J (as he then was) (“the Judge”) dated 23 November 2018, by which he allowed the appeals of the applicants, Mr Koo Ming Kown and Mr Murakami Tadao (“the Applicants”) against the decisions of the Inland Revenue Board of Review (“the Board of Review”) in cases D32/16 and D33/16 confirming assessments to additional tax that had been made against the Applicants by the Commissioner under section 82A(1)(a) of the Inland Revenue Ordinance (Cap 112) (“the IRO”), for incorrect statements that had been made in tax returns of Nam Tai Trading Company Limited (“NT Trading”).

4.  At the hearing, the Applicants were represented by Mr Denis Chang SC and Ms Isabel Tam, and the Commissioner was represented by Mr Stewart Wong SC and Ms Elizabeth Cheung.  At the conclusion of the hearing we dismissed the appeal with costs to the Applicants with reasons to be handed down later, which we now give, with apologies for the delay in doing so.

5.  The relevant facts are set out in the Statement of Agreed Facts for the hearing before the Board of Review.  For present purposes, the key facts are as follows. 

6.  NT Trading, which was incorporated as a private company in Hong Kong in 1983, submitted profits tax returns for the years of assessment 1996/97, 1997/98, 1998/99 and 1999/2000 as required pursuant to notices issued to it by the Commissioner.  The tax returns for 1996/97 and 1997/98 were signed by Mr Koo, and that for 1999/2000 was signed by Mr Murakami, who were directors of NT Trading at the time.  Mr Koo ceased to be a director in 2006, and Mr Murakami ceased to be a director in 2002.  The 1998/99 assessment was signed by another director of NT Trading, and is not relevant to this appeal.

7.  The profits declared under the 1996/97, 1997/98 and 1998/99 returns, and the loss declared under the 1999/2000 return, were arrived at after the deduction as expenses of management fees and legal and professional fees paid to NT Trading’s parent company, Nam Tai Electronics Inc., under service agreements between them.  NT Trading was duly assessed to tax on the basis of the returns, and paid the tax to which it was assessed, paying no tax in respect of the 1999/2000 year of assessment, in which it claimed to have incurred a loss.

8.  In December 2002, an assessor of the Inland Revenue Department commenced an audit of NT Trading’s profits tax returns and accounts lodged with those returns.  At the conclusion of the audit, the assessor came to the view that the management fees and legal and professional fees paid by NT Trading pursuant to the service agreements were not deductible expenses under sections 16 and 17 of the IRO, or alternatively that they were transactions entered into or carried out for the sole or dominant purpose of enabling NT Trading to obtain a tax benefit, within the meaning of sections 61 and 61A of the IRO.  As a result, the assessor disallowed those expenses and raised additional profits tax assessments for 1996/97, 1997/98 and 1998/99 and a profits tax assessment for 1999/2000.

9.  NT Trading objected to the additional assessments and to the assessment for 1999/2000.  Two of the additional assessments were revised by the Deputy Commissioner for Inland Revenue, while the third additional assessment and the 1999/2000 assessment were confirmed.  NT Trading then appealed unsuccessfully to the Board of Review against the Deputy Commissioner’s determination, its appeal being dismissed by a decision dated 9 December 2008 (D41/08).  Attempts to challenge this decision by way of an appeal by case stated and judicial review were unsuccessful.  However, NT Trading did not pay the additional tax to which it had been assessed and was wound up by the court on the petition of the Commissioner on 4 June 2012.

10.  In January 2011, the Commissioner took steps to invoke section 82A(1)(a) against the Applicants, resulting in the assessments to additional tax which are the subject of this appeal being issued in April 2013.  Mr Koo was assessed to additional tax of HK$6,400,000 and HK$6,200,000 in respect of the 1996/97 and 1999/2000 years of assessment, while Mr Murakami was assessed to additional tax of HK$5,400,000 for the 1997/98 year of assessment, on the ground that having signed the tax returns of NT Trading for those years of assessment as a director, he had made an incorrect return on behalf of NT Trading within the meaning of section 82A, by understating NT Trading’s profits in the relevant years.

11.  Appeals to the Board of Review against such assessments resulted in the amounts of additional tax being increased for Mr Koo, and slightly reduced for Mr Murakami, and interest being charged on the additional tax, resulting in the total amount payable for each year of assessment being increased for both Applicants, with Mr Koo being required to pay HK$11,170,763 and HK$10,625,471, and Mr Murakami being required to pay HK$6,691,064.

12.  The Board of Review held that:

(1)  Both of the Applicants made returns on behalf of NT Trading within the meaning of section 82A(1)(a) of the IRO.

(2)  The Board had determined in D41/08 that the returns were incorrect within the meaning of section 82A(1)(a).

(3)  The Applicants were precluded from reopening the questions of NT Trading’s liability to profits tax and the correctness of the assessments by reason of sections 70 and 82B(3) of the IRO.

13.  The Applicants were granted leave to appeal to the Court of First Instance in respect of, inter alia, the following questions of law:

“Q1. Upon the true construction of the [IRO] and in particular Parts IX, XI and XIV (‘Penalties and Offences’) thereof:

(a) does section 82A of Part XIV permit the [Commissioner] to make a penalty assessment to make a penalty assessment upon an agent (‘Agent’) of a company taxpayer (‘Taxpayer’) who assists the Taxpayer to make a tax return which the Taxpayer is required by the [IRO] to provide?

(b) if it does, then do sections 70 and 82B(3) preclude the Agent from: (i) re-opening questions concerning the Taxpayer’s liability to all or part of the profits tax that was assessed upon the Taxpayer? (ii) challenging the [Commissioner’s] assertion in the penalty assessment upon the Agent that the Taxpayer’s return was ‘incorrect’?

(c) if they do, then did the determination of the [Board] in D41/08 that the deductibility of the Taxpayer’s payments of the management fees plus the legal and professional fees pursuant to the service agreements constituted ‘tax benefits’ (which the section 61A assessments were made to remove or counteract) conclusively determine that the statements within the Taxpayer’s Returns therein were not ‘incorrect’?

14.  In the Court below, the Judge, in a comprehensive judgment, answered questions (1)(a) and (b) in the negative.  In relation to question 1(c), the Judge found that the Board did decide in D41/08 that the expenses were not deductible under sections 16 and 17, but did not have to deal with and did not determine whether the returns were “incorrect” within the meaning of section 82A.  Further, and in any event, the Judge considered that in the light of his answer to question 1(b), that decision of the Board was not conclusive as against the Applicants.  Following further submissions as to the appropriate form of order to be made, the Judge made an order annulling the additional tax assessments against the Applicants.

15.  The Commissioner appealed to this court against the Judge’s conclusions in respect of each of questions 1(a) to (c) and sought an order that the additional tax assessments against the Applicants be confirmed, or (if the answers to questions 1(b) and (c) were answered in the negative) an order for the matter to be remitted back to the Board for it to consider whether the returns signed by the Applicants were (as against the Applicants) “incorrect” for the purpose of section 82A(1)(a).  The Applicants, for their part, filed a respondents’ notice in relation to question 1(c).

16.  At the hearing, we first heard argument from both sides in relation to question 1(a).  Having done so, we were of the firm view that the Judge was entirely correct in his conclusion that this question should be answered in favour of the Applicants.  As such a conclusion was determinative of the outcome both in the court below and before us, we concluded that it would be preferable for us not to decide questions 1(b) and (c) in a case in which they did not arise for determination, and therefore did not hear further argument on those questions.  Thus, in what we say below, we confine ourselves to the issues arising under question 1(a) and do not express any views as to questions 1(b) and (c).

17.  So far as question 1(a) is concerned, the starting point is section 82A(1)(a) itself.  That provides:

“(1) Any person who without reasonable excuse

(a) makes an incorrect return by omitting or understating anything in respect of which he is required by this Ordinance to make a return, either on his behalf or on behalf of another person

…

shall, if no prosecution under section 80(2) or 82(1) has been instituted in respect of the same facts, be liable to be assessed under this section to additional tax of an amount not exceeding treble the undercharged amount.”

18.  Section 80(2), to which section 82A(1) refers, provides that the same matters which give rise to a potential liability for additional tax under section 82A(1) constitute offences giving rise to liability upon conviction to a fine at level 3, and a further fine of treble the undercharged amount.  The equivalent provision to section 82A(1)(a) is section 80(2)(a).  Section 82(1), also referred to in section 82A(1), creates a separate offence of tax evasion in respect of false statements made with intent to evade or assist another to evade tax.

19.  For liability to attach to the Applicants under section 82A(1)(a), as the Judge observed, the following two conditions (amongst other things) must both be satisfied:

(1)  The Applicants must have “made” the return in question – this gives rise to the question of whether, having been physically signed by the Applicants, the returns were made by NT Trading (which, being a company, could only make a return through the physical acts of one or more natural persons) itself, or should be regarded as having been made by the Applicants in their personal capacity on behalf of NT Trading.

(2)  Even if the returns in question should be regarded as having been made by the Applicants on behalf of NT Trading, it is necessary for them to be returns which the Applicants were required by the IRO to make on behalf of NT Trading.

20.  As to the first condition, the Judge was of the view that the returns were not made by the Applicants in their personal capacity as agents for NT Trading, but by NT Trading alone acting through the physical agency of the Applicants.  As to the second condition, the Judge was of the opinion that the Applicants were not required by the IRO to make the returns on behalf of NT Trading.  Thus, neither of the two conditions was satisfied, and there could be no liability on the Applicants’ part for additional tax pursuant to section 82A(1)(a).

21.  Before us, Mr Wong SC contended that the Judge erred in relation to both these conclusions.

22.  As to the first condition, Mr Wong SC contended that the returns were made by the Applicants in their personal capacities, and not as NT Trading.  In support of this, Mr Wong SC argued:

(1)  While accepting that it was NT Trading that was primarily required to make the returns, it did not follow from this that the returns were not also made by the Applicants in their own personal capacity as an agent for the company. 

(2)  The actual words used in the tax returns signed by the Applicants put it beyond doubt that they were signing the returns, and thereby making them, on behalf of NT Trading, rather than as NT Trading.

(3)  The context of the IRO as a whole (to provide for a revenue system that commands a high degree of compliance) and the additional tax system (as an integral part of such a system) and their purpose of punishment and deterrence of delinquent taxpayers, so as to ensure that returns filed are complete and accurate, supports the conclusion that liability for incorrect returns is intended to be placed not just on the taxpayer itself, but also on whoever personally makes a tax return on behalf of the taxpayer, so that both are liable.  Thus, where a director signs a tax return of a company, he should be construed or regarded as doing so on behalf of the company so as to ensure that he is potentially liable under sections 80(2)(a) and 82A(1)(a).

23.  With respect, we are unable to agree with Mr Wong, and consider that the Judge was correct in his conclusion on this point, substantially for the reasons that he gave.

24.  We consider that the starting point is the fact that the process of filing a return is triggered by the giving of notice by the assessor to the person who is required to make (or furnish) the return.  This is provided for by section 51(1) of the IRO, which states:

“(1) An assessor may give notice in writing to any person requiring him within a reasonable time stated in such notice to furnish any return which may be specified by the Board of Inland Revenue for –

(a) property tax, salaries tax or profits tax; or

(b) property tax, salaries tax and profits tax,

Under Parts 2, 3, 4, 10A, 10B, and 10C.”

25.  In this case, it is not in dispute that the notices requiring the making of the returns in question were all issued and directed to NT Trading.  As the Judge pointed out, they stated:

“TO NAM TAI ELECTRONIC AND ELECTRICAL PRODUCTS LTD

[address]

By virtue of section 51(1) of the Inland Revenue Ordinance (Cap. 112) you are required to make on this form a true and correct return of the Assessable Profits (or Adjusted Loss) arising during the basis period … For the year of assessment ended 31 March [year]. The information provided will be used for purposes relating to the administration of the Ordinance.

All sections of this form MUST be completed and returned to me WITHIN ONE MONTH from the date of this Notice, … together with a certified copy of your Balance Sheet, Auditor’s Report, and Profit and Loss Account in respect of the basis period, and a tax computation with supporting schedules, showing how the amount of Assessable Profits (or Adjusted Loss) has been arrived at.”

26.  The notices having been addressed to NT Trading, the natural consequence appears to us to be that it was for NT Trading to furnish the return, and there is no compelling reason to regard the returns which were made to have been made by someone else on its behalf, when it was capable of doing so itself (albeit the physical acts needed to achieve this would inevitably have to be done by one or more human beings).

27.  We do not regard the terms of the declaration by the Applicants contained in the returns as requiring a different conclusion to be reached.  Those declarations were in the following terms:

“I, ….. (full name), being SECRETARY / MANAGER / DIRECTOR / LIQUIDATOR* of ….. (full name of the Corporation), declare that to the best of my knowledge and belief all the statements contained in this return are true, correct and complete, and I have disclosed the Assessable Profits (or Adjusted Loss) of the Corporation arising during the basis period for the year of assessment ended 31 March as stated in the formal notice in Page 1.

Signature ……….

(Heavy penalties may be incurred for failing to keep sufficient business records, making an incorrect return, or committing other offences – See Notes 8 and 9.)

Date ……….

*Delete whichever is inapplicable.”

28.  We note first that, at the time that the returns with which we are concerned were made, section 51AA(1) of the IRO, which states that returns required to be furnished under section 51(1) must be in a form specified by the Board of Inland Revenue and provided by the Commissioner, had not yet been enacted (it was in fact enacted in 2003).  The form of the notice and the declaration set out above were therefore not in a form authorised by the statute, but were simply forms created by the Commissioner.  They would therefore provide little assistance in the exercise of ascertaining the capacity in which the Applicants signed the returns.

29.  More fundamentally, however, it does not seem to us that the form of the declaration signed by the Applicants throws any meaningful light on the question whether they are to be regarded as having made the returns on behalf of NT Trading. Nothing in the declaration expressly indicates that they were, or were intending, to do so.  While the declaration may well have been one made by them in their personal capacities, it did no more than declare their own belief as to the correctness of the information in the return which was (in our view) provided by NT Trading itself. 

30.  We do not think Mr Wong SC’s argument based on the context and purpose of the statutory provisions takes him any further.  Section 51(5) relevantly provides that “any person signing any … return, statement or form shall be deemed to be cognizant of all matters therein”.  This simply means that the Applicants are to be taken to know the matters stated in the return, which is, in effect, what was stated by the declaration signed by them.  It does not assist in the determination of the capacity in which they signed the return in question. Sections 80(2)(a) and 82A(1)(a) are the provisions relied upon as giving rise to liability in this case.  To suggest that these throw light on their own meaning is, with respect, somewhat circular reasoning.

31.  In any event, while we would readily accept that the provisions mentioned by Mr Wong SC were enacted as part of the scheme for the collection of tax revenue in Hong Kong, and that their purpose must include the aim of facilitating such revenue collection and ensuring that all those who are required to pay taxes provide full and accurate information to enable the amount of such taxes to be properly ascertained, with appropriate sanctions for failure to do so, it does not follow from this that the net of sanctions and liability must be cast as widely as it could conceivably be.  In other words, it does not follow that the utility of having an effective revenue collection system requires that every person who signs a return addressed to a company should be taken as doing so in his personal capacity on behalf of the company, when, by reason of his position within the company, it would be proper to regard him as doing the act as the company.

32.  In this context, Mr Wong SC also referred us to Dutton v Marsh (1871) LR 6 QB 361 and Chapman v Smethurst [1909] 1 KB 927, two cases concerning bills of exchange signed by directors of companies, and sought to suggest that the wording of the declaration in this case was closer to that in Dutton v Marsh, in which the director in question was held to have assumed a personal liability on the bill.  With respect, we agree with the Judge that these cases are of little assistance.  In the present case, for the reasons we have given, we are satisfied that in signing the returns in question, the Applicants did not do so as agents for NT Trading, but that their acts were rather to be regarded as those of NT Trading itself.

33.  We turn now to consider the second issue – whether the Applicants were required by the IRO to make the returns on behalf of NT Trading.

34.  Mr Wong SC submitted that the Applicants were indeed required by the IRO to make the returns on behalf of NT Trading, contending that this was the effect of section 57(1), which provides:

“(1) The following person is answerable for doing all the acts, matters or things that are required to be done under the provisions of this Ordinance by a corporation or body of persons –

(a) for a corporation that is an open-ended fund company, any director or investment manager or the provisional liquidator or liquidator or the corporation;

(b) for any other corporation, the secretary, manager, any director or the provisional liquidator or liquidator of the corporation;

(c) for a body of persons, its principal officer.”

In the present case, the relevant sub-paragraph of sub-section (1) is sub‑paragraph (b).

35.  Mr Wong SC contended that this provision required the Applicants to make returns on behalf of NT Trading.  He submitted that properly construed, section 57(1) requires the directors of a company collectively to perform all of the duties and obligations imposed on the company under the IRO, including the obligation to file a correct return declaring the whole of the assessable profits of the company for the relevant year of assessment.  He contended that such a construction would give effect to the underlying legislative intent of promoting the observance by companies of their obligations under the IRO.

36.  Mr Wong SC went on to submit that for the section to have meaningful effect, directors should not only be required to perform such duties, but be subject to legal consequences or sanctions for failing to do so, as it made little sense to say that a person was “answerable” for something if there were no sanction for breach of that obligation.  Such consequences or sanctions, he said, were those set out in sections 80(2) and 82A(1).

37.  Again, we are unable to agree with Mr Wong SC’s submissions in this respect.

38.  The obligation imposed on directors under section 57(1) is couched in terms of being “answerable” for doing the acts, matters or things which are required to be done by the company.  It remains the company that is required to do the acts, matters or things in question.  The directors (or secretary, manager, provisional liquidator or liquidator) are not in terms required to do those acts, matters or things, but to be “answerable” for doing them.  The use of a different term (“answerable”, rather than “required”) suggests to us, as it did to the Judge, that the obligation imposed on the director is different to that imposed on the company.  It is the company that is required to make or furnish returns.  The director(s), however, are not required to do this, but are made answerable for doing it.

39.  In our view, to be answerable for doing acts required to be done by a company can best be understood as being under a duty to ensure that the act in question is done by the company.  This is different to being under an obligation or requirement to do the act on behalf of the company.  Rather, it entails being obliged to see to it that the act is done.

40.  This distinction is, we think, underlined by the existence of provisions in the IRO which clearly and explicitly impose a requirement on certain persons to do acts (including the making of returns) on behalf of others.  The Judge identified these provisions:

(1)  Section 22(2), which requires the precedent partner of a partnership to make and deliver a return of the profits or losses of the partnership’s trade, business or profession, by providing that “the precedent partner shall make and deliver a statement of the profits and losses”; and

(2)  Section 53 which requires

(a)  the trustee of an incapacitated person to do any act or thing required by the IRO to be done by the incapacitated person; and

(b)  the agent (in Hong Kong) of a non-resident person to do any act or thing required by the IRO to be done by the non-resident person

by deeming the acts or things in question to be required to be done by the trustee or agent, as the case may be.

41.  There are therefore a number of situations in which a person is required by the IRO to make a return on behalf of another, so that the phrase “on behalf of another” in sections 80(2)(a) and 82A(1)(a) would still have meaningful content, notwithstanding our interpretation of section 57(1).

42.  Further, it seems to us that, had it been the intention to actually require a director of a company to make returns or do other acts or things on its behalf, this could easily have been done in the same manner as in these provisions, rather than by the introduction of the additional notion of being “answerable” as in section 57(1) as a means of requiring persons to do acts on behalf of others.

43.  We would also note that section 56(1) of the IRO provides that the precedent partner of a partnership shall be answerable for doing all such acts, matters and things as would be required to be done under the provisions of the IRO by an individual acting in such capacity.  Given that the precedent partner is already expressly required to make returns on behalf of the partnership pursuant to section 22(2), section 56(1) would appear to be redundant in this respect, if being answerable meant being required to make the return.  This, we think, supports our interpretation of being “answerable” for doing something as being required to see to it that the thing is done, rather than being required to do the acts themselves on behalf of others.

44.  It also seems to us that the fact that the obligation under section 57(1) is placed on multiple persons in the case of a company (all directors, the secretary and the manager (or managers)) supports our interpretation of “answerable” as being obliged to see to it that the company does what it is required to do.  Such an obligation can well be carried out by multiple persons concurrently, whereas an obligation on each person in the class of persons specified to personally make a return on behalf of the Company would seem likely to result in the generation of a multiplicity of returns, leading to confusion.

45.  Mr Wong SC placed considerable reliance on two Australian cases, Lean v Brady (1937) 58 CLR 328 and Reynolds v Deputy Commissioner of Taxation (1984) 3 FCR 329.  We agree with the Judge that these cases do not assist Mr Wong SC. 

46.  Lean v Brady concerned the Income Tax (Management) Act 1928, which required every company to appoint a “public officer” and provided (by section 78(e)) that:

“the public officer shall be liable for the doing of all such things as are required to be done by or on behalf of the company under this Act or the regulations in force thereunder, and in the case of default in doing any of such things, shall be liable for all penalties imposed for any breach of the provisions of this Act or such regulations, and the company, as well as such public officer, shall also be liable for such penalties.”

47.  The issue in Lean v Brady was whether the liability of the public officer extended to the obligation of the company to pay income tax, so as to become personally liable for such tax if it were not paid by the company.  It was decided that it did not.

48.  Dixon J held (at p 336) that “things required to be done” did not extend to the payment of tax, but referred to “the active responsibility falling on taxpayers in connection with returns, assessments and ancillary matters”, having earlier said that this provision related to the “discharge of the various responsibilities placed upon the taxpayers in relation to the administration of income tax law”.  Starke J suggested (at p.332) that this provision cast upon the public officer duties “such as making returns, giving information and so forth”.

49.  In Reynolds, the provision under consideration was section 252(1)(f) of the Income Tax Assessment Act 1936, which provided:

“The public officer shall be answerable for the doing of all such things as are required to be done by the company under this Act or the Regulations, and in case of default shall be liable to the same penalties.”

50.  Lockhart J said of this provision that it was “a recognition of Parliament’s perception of the importance of protecting the Revenue by imposing upon natural persons the performance of duties owed by companies.  In this way the observance by companies of their responsibilities under the Act is more likely to be achieved”.

51.  As the Judge pointed out, these provisions are materially different from section 57(1) of the IRO, in that they expressly provide for the public officer to be liable to the same penalties as the company, which is not provided for in section 57(1).  They also envisage a single person bearing the responsibilities imposed by them, and thus differ from section 57(1) which extends to a wider range and larger number of persons.

52.  More fundamentally, however, the question remains whether or not such provisions actually require the persons identified to personally do the acts in question on behalf of the company.  For the reasons we have explained above, we do not think that this is the case, and that the provisions require only that the persons identified ensure that the company performs its obligations, without requiring them to do the acts required to be done by the company themselves in their personal capacity.  To the extent that the contrary is suggested in Lean v Brady and Reynolds, we would respectfully disagree.

53.  Even if it might be regarded as arguable that section 57(1) casts upon the directors of a company an obligation personally to make returns on behalf of the company, this would not assist the Commissioner, as in such a situation the well-established principle against doubtful penalisation (see e g T v Commissioner of Police (2014) 17 HKCFAR 593 at paras 196 and 261, per Fok PJ) would come into play, so as to call for the provision to be interpreted in such a way as to avoid penalising the Applicants, thus supporting their construction of the provision. 

54.  As for Mr Wong SC’s submission that the imposition of an obligation upon the directors to make returns on behalf of the company would better promote the objects and purpose of the legislation, as we pointed out in [31] above, it does not follow from an acceptance that it is important to have an effective and properly functioning tax system that the net of liability should be cast as widely as possible.  In our view, the deterrent effect of provisions such as section 80(2)(a) and 82A(1)(a) on the company can properly be regarded as sufficient to promote and achieve such an aim.

55.  Finally, with regard to Mr Wong SC’s suggestion that it would not make sense for the IRO to require the directors to be answerable for the company’s performance of its obligations without imposing on them some liability where they have failed in this regard by failing to ensure that the company performs its obligations, we note that the assessor and/or the assistant commissioner has the power under Section 51(4) to require the answerable director (as “other person whom he considers may be in possession or control of information or documents”) to provide information or to be examined with regard to the tax liabilities of the company and the failure to comply with such demands in notices without reasonable excuse is an offence under Section 51(4B).  It is ultimately a question for the legislature to determine what, if any, consequences should flow from such failures on the directors’ part.  Moreover, Mr Wong SC was inclined to accept that the directors could not be held liable under the provisions of the IRO in the event that the company failed to file a return at all – this, in our view, also undermines this contention.

56.  We therefore consider that the Judge was right to hold that the Applicants were not required by the IRO to make the returns on behalf of NT Trading, and thus could not be made liable to additional tax pursuant to section 82A(1)(a) for this reason also.

57.  For the foregoing reasons, the Commissioner’s appeal was dismissed with costs to the Applicants, to be taxed on the party and party basis if not agreed.  In so far as necessary, we grant certificate for two counsel.