COMMISSIONER OF INLAND REVENUE v. C G LIGHTING LTD

CACV 119/2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 119 OF 2010

(ON APPEAL FROM HCIA NO. 8 OF 2009)

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BETWEEN

COMMISSIONER OF INLAND REVENUE Appellant
and
C G LIGHTING LIMITED Respondent

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Before: Hon Tang Ag CJHC, Cheung JA and Yuen JA in Court

Date of Hearing: 5 May 2011

Date of Decision: 5 May 2011

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DECISION

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Hon Tang Ag CJHC:

1. This application for leave to appeal to the Court of Final Appeal is put first on the basis that it is as of right pursuant to section 22(1)(a) of the Hong Kong Court of Final Appeal Ordinance (Cap 484). Mr Barlow relies on both limbs of section 22(1)(a). The first limb is clearly inapplicable.

2. As for the second limb, in Happy Dragon Restaurant Ltd v. The Director of Lands, FAMV 18/2010 (unreported, 15 November 2010), the Chief Justice, after citing a passage (para. 24) from the judgment of the AppealCommittee, given by Ribeiro PJ in China Field Ltd v Appeal Tribunal (Buildings) (No. 1) (2009) 12 HKCFAR 68, said in para. 11(3):

“(3) Applying this test, we are unpersuaded that the applicant’s claim for compensation was ‘clearly quantifiable’ at $1 millionor over. As noted above, the exercise in the quantification of compensation under the [Lands Resumption Ordinance, Cap. 124] is inmany ways similar to the assessment of unliquidated damages. For this reason alone, this is likely to be a bar in many cases wherecompensation is claimed for a resumption. This is all the more so in the present case where the quantification of the applicant’sclaim was at one stage nil (as the Lands Tribunal found) or substantial (as the Court of Appeal found). The respondent clearly failsto satisfy the requisite test.”

3. In Best Origin Ltd v. Commissioner of Rating and Valuation, CACV 67/2008 (unreported, dated 15 April 2011), this Court (Tang Ag CJHC, Kwan JA and A Cheung J) held that a rating appeal wasindistinguishable from claims for compensation and that the second limb did not apply to a rating appeal.

4. Here we are concerned with an appeal against an assessment of profits tax. It is true that the result of Fok J and our judgmentis that profits tax in excess of $1 million will be payable. Even so, I believe the present application is covered by what the ChiefJustice said in Happy Dragon. Moreover, at the Board of Review where the taxpayer was successful, the Board had remitted the matter to the Commissioner for apportionmentwhich is akin to assessment.

5. Secondly, Mr Barlow relies on section 22(1)(b) and seeks leave on the basis that the proposed appeal raises questions of great generalor public importance concerning the principles applicable to the identification of the source of the trading profits of Hong Kongtaxpayers who engaged in manufacturing finished goods outside Hong Kong for the purpose of supplying offshore customers under contractsof sale entered into in Hong Kong.

6. In our judgment, we have endeavoured to apply the decisions of the Court of Final Appeal such as ING Baring Securities (Hong Kong) Limited v CIR (2007) 10 HKCFAR 417 and Ngai Lik Electronics Co. Ltd v CIR (2009) 12 HKCFAR 296.

7. It is said that we have misapplied or misunderstood the decisions. Even if that is right, that is not a question of great generalor public importance.

8. Mr Barlow also submits that there is a widespread perception that liability to profits tax is being created by the court (meaningpresumably the Court of Final Appeal) and not by the legislature. We are also told that Hong Kong Manufacturers Associations areparticularly unhappy that they have been assessed to profits tax on such profits.

9. In my view, the courts have only applied the law as they understand it.

10. In any event, the solution is not leave to appeal to the Court of Final Appeal but legislation.

11. So for the above reasons, I would dismiss the application for leave to appeal with costs.

Hon Cheung JA:

12. I agree.

Hon Yuen JA:

13. I agree.

(Robert Tang)
Ag Chief Judge, High Court
(Peter Cheung)
Justice of Appeal
(Maria Yuen)
Justice of Appeal

Mr Barrie Barlow, SC, instructed by Messrs Allen & Overy for the Taxpayer/Appellant

Mr Benjamin Yu, SC and Mr Eugene Fung, instructed by Department of Justice of the Appellant/Respondent

Application for appeal to appeal to Court of Final Appeal by the Respondent refused by Court of Final Appeal. Please refer to FAMV23/2011dated 24 August 2011