Read the full judgment text of FACV 000020/2003 on BabelCite. This FACV judgment was delivered on 8 July 2004 before Bokhary PJ, Chan PJ, Ribeiro PJ, Cons NPJ, Richardson NPJ.
Hong Kong profits tax – source of profits – underwriting arrangement – Inland Revenue Ordinance, Cap. 112, s.14 – assessable profits arising in or derived from Hong Kong – Hong Kong company underwrote pre-sale of 122 flats and 10 car parking spaces in Regent House, a building being developed in Guangzhou by South House Property Industry Co. Ltd – Taxpayer liable for any shortfall but entitled to any excess – underwriting contract signed in Guangzhou on 22 November 1991 – marketing of Property in Hong Kong through Canada Land as exclusive agent from December 1991 to March 1992 – all but two purchasers Hong Kong residents paying in Hong Kong dollars – provisional sale and purchase agreements entered into in Hong Kong – broad guiding principle from CIR v Hang Seng Bank Ltd and CIR v HK-TVB International Ltd – ascertain source of profits by looking at what the taxpayer has done to earn the profit and where he has done it – assumption of underwriting risk in the Mainland did not earn any premium, fee or other payment – it merely provided an opportunity to earn profits through marketing in Hong Kong – whether underwriting arrangement materially different from purchase and resale – Taxpayer never acquired ownership of Property, which remained owned by the Developer – Edwards v Bairstow basis for appellate intervention in appeal on law only – true and only reasonable conclusion contradicted the Board of Review's determination that profits arose in the Mainland – appeal dismissed with costs and certificate for three counsel for the Commissioner
Legal issues: Source of profits for Hong Kong profits tax · Whether underwriting arrangement equates to purchase and resale · Basis for appellate intervention in appeal on law only
Outcome: Appeal dismissed.
Cited by 2 cases