The case of Commissioner of Inland Revenue v CG Lighting Limited continues. Since my last comment on this case, the judgment of the Court of Appeal has been handed down.
The Court of Appeal’s decision, delivered by The Hon Tang Ag CJHC, dismissed the appeal by CG Lighting Limited (“CGL”) against Fok J’s judgment in the Court of First Instance and upheld the position of the Commissioner of Inland Revenue (“CIR”) that 100% of CGL’s profits were sourced in Hong Kong. This came as no surprise, as past experience has indicated that only when cases are heard at the Court of Final Appeal, for which experienced international tax judges are brought in to sit on the bench, can a taxpayer expect a clear interpretation of Hong Kong’s tax laws.
I assume that many people who have read the decision will share my opinion that there was a strong expectation by the Court of Appeal that the case would be appealed to the Court of Final Appeal. Such people will probably not be surprised that the judgment lacks substance in its analysis of the law. However, I was surprised by the comments of the Court of Appeal that were directed at the Board of Review’s findings on fact which, in Tang’s own words, were “not something with which we are required to deal”, yet were expressed anyway, albeit in passing. This is certainly a practice that should be avoided.
Whatever my opinion of the decision, it pales into insignificance when compared with my disgust at the CIR’s refusal to grant consent to CGL’s application to appeal the Court of Appeal’s decision to the Court of Final Appeal. CGL has now applied to an appeal committee of the Court of Final Appeal for leave to appeal to that Court. I suspect that such an appeal has been based on the amount of tax involved, and also on the fact that the issues are of great or general public importance. Certainly for the case to be concluded at this stage would be a huge, if not unexpected, bonus for the Inland Revenue Department.
Personally, I am extremely disappointed that neither the CIR nor the Court of Appeal was able to appreciate the importance of taking this case to its final conclusion. If you were a cynic, you might conclude that the CIR saw this as an easy way to win the case before it could be heard by an experienced revenue judge. In my opinion, such a course of action, whilst to the CIR’s benefit, shows a total lack of interest in seeking an important decision on one of Hong Kong’s more contentious issues. Similarly, it would also be easy to conclude that the Court of Appeal did not wish to have its own decision in this case, and the decision in the earlier case of Datatronics, reviewed and possibly overturned by a court of higher authority.
I sincerely hope that common sense prevails and that leave to appeal to the Court of Final Appeal is forthcoming.
