[1] This is an appeal by the appellant against the decision of the Special Commissioners of Income Tax ("SCIT") dated 31 December 2015 which is in favour of the respondent.

The Backgrounds Facts

[2] The established facts found by SCIT or agreed by parties are the following:

(i) The respondent was incorporated on 4 September 2001 by the original shareholders but was inactive. On 21 January 2002, the present shareholders purchased all the respondent's share and assumed control of the respondent.

(ii) In early 2002, 2 groups of families formed a syndicate with the intention to develope a project known as Madge Residence. The 2 groups are as follows:

(a) Group A

Lim Chao Li

Lim Chao Liang

Lo Ying Sai & Lynda Lim Boon Tuang

Dato Lim Kong Wai

(b) Group B

Ng Kim Yip

Ng Kay Ian

Yang Chin Moi

(iii) In furtherance of the intention to develope the project, the 2 groups has entered into a Shareholders Agreement on 29 March 2002. Amongst the terms of the agreement are the following:

(a) a new company will be formed to acquire and develope the land.

(b) 3 from the 8 partners will be appoi