JUDGMENTBY: LEE HUN HOE CJ (BORNEO)

(delivering the Judgment of the Court): This appeal is concerned with the interpretation of certain provisions, particularly section 60 of the Income Tax Act, 1967. The facts are not in dispute as they are agreed by the parties.

The Taxpayer is an insurance company resident in Singapore and also carries on insurance business in Malaysia through a permanent establishment. It maintains a number of funds. By virtue of section 10 of the Malaysian Insurance Act, 1963 the Taxpayer was required to establish a Malaysian Life Fund in support of its insurance business in Malaysia. It similarly maintains a Singapore Life Fund under the requirements of the Singapore Insurance Act, 1966. The income of the Malaysian Life Fund from investments carried out in and outside Malaysia has been assessed to tax under section 60(4) of the 1967 Act. No dispute arises in regard to the computation of this tax. The Taxpayer also made investments out of the Singapore Life Fund and also out of the other non-assigned funds. These investments earned dividends which are income for years of assessment 1968 to 1974. The Revenue decided that these dividend income were liable to tax under sections 3 and 4 of the 1967 Act. The tax assessed and in dispute is as follows: --

Year of Assessment Singapore Life Fund Other Non-Assigned Fund

1968 $ 1,636,333 $ 124,524

1969 639,087 57,519

1970 564,107 55,277

1971 915,684 55,081

1972 1,009,080 72,217

1973 277,866 90,498

1974 690,597 132,991

The question for the determination of the Special Commissioners is whether there is any liability to tax on the Malaysian income of the Singapore Life Fund and of the other non-assigned funds. By consent the parties agreed to take the year of assessment 1974 as the basis of a test case. The decision on that year of assessment would be binding for the other years of assessment. The Special Commissioners held that such income was chargeable to tax under sections 3 and 4 of the 1967 Act.

We set out below the relevant provisions of the 1967 Act: --

"3. Subject to and in accordance with this Act, a tax to be known as

income tax shall be charged for each year of assessment upon the

income of any person accruing in or derived from Malaysia or

received in Malaysia from outside Malaysia."

"4. Subject to this Act, the income upon which tax is chargeable

under this Act is income in respect of --

(a) gains or profits from a business, for whatever period of time

carried on;

(b) gains or profits from an employment;

(c) dividends, interest or discounts;

(d) rents, royalties or premiums;

(e) pensions, annuities or other periodical payments not falling

under any of the foregoing paragraphs;

(f) gains or profits not falling under any of the foregoing

paragraphs."

"52. In a case where any provision of this Chapter applies, the

foregoing Chapters shall also apply but shall be modified in

their application to the extent necessary to conform with that

provision; and if in that case there is any inconsistency between

that provision and any provision of the foregoing Chapters, that

provision of those Chapters shall be void to the extent of the

inconsistency."

"60(4) The adjusted income for the basis period for a year of

assessment from the life business of an insurer not resident for

the basis year for that year of assessment shall where that

business is wholly or partly carried on in Malaysia consist of an

amount arrived at by --

(a) taking the aggregate of --

(i) the amount of the gross income for that period from the

investments made (in Malaysia or elsewhere) out of the

insurers Malaysian life fund; and

(ii) the amount of

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