Commissioner of Inland Revenue v. Perfekta Enterprises Ltd

CACV 115/2017

[2018] HKCA 373

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 115 OF 2017

(ON APPEAL FROM HCIA NO. 1 OF 2016)

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DECISION ON COSTS

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Hon Cheung JA (giving the Decision on Costs of the Court) :

1.This Court allowed the taxpayer’s appeal to the extent that the taxpayer is allowed to amend its ground of appeal and the issue of the valuation of the Lot for the purpose of assessing the taxable profit and the amount of tax thereof is remitted to the Board for its determination.

2.The taxpayer now asks this Court to

1)  make no order as to costs of the appeal and below; or

2)  order the taxpayer to pay one-third of the costs of this appeal and below to the Commissioner.

3.The Commissioner asks for

1)  the costs of this appeal to follow the event; and

2)  there will be no order as to the costs below. 

4.In respect of the latter the Commissioner submitted that the costs of the Commissioner’s appeal from the Board to the Court below should not be disturbed.

Costs of the appeal

5.There  were  three  issues  before  us : 1)    change of intention to trade, 2) capital receipt and 3) valuation. The taxpayer failed on the first two issues and only succeeded on the third issue of valuation.  Although the taxpayer has, in its written submission on costs, made submissions on the valuation and the amount of tax likely to be payable or not payable, it is not the proper time and place to address that since the matter has to be considered by the Board.  We will order the taxpayer to pay two-thirds of the costs of the appeal to the Commissioner with a certificate for two counsel.

Costs below

6.Chung J ordered the taxpayer to pay the Commissioner costs of the case stated (including any reserved costs).  The same three issues were also before Chung J.  The taxpayer failed on all three issues.  The taxpayer’s success on the third issue of valuation in this Court will have no impact on the costs order made by Chung J because the taxpayer did not ask Chung J to remit the valuation to the Board.  Its stand then was simply that it was not required to pay tax at all.  The issue of remitting the valuation was only raised in the taxpayer’s notice of appeal to this Court.  Hence the costs order below should not be disturbed and we will make no further order in respect of the costs order below.

Mr Paul Shieh SC and Mr Mike Lui, instructed by Department of Justice, for the appellant

Mr Clifford Smith SC and Mr Justin Lam, instructed by Pang & Associates, for the respondent