SINGAPORE – In a recent ruling, the High Court has dismissed an appeal by Changi Airport Group (CAG) to claim capital allowances on over S$270 million spent on assets over three years. This decision was pronounced by Justice Choo Han Teck in a judgment dated 1 November 2024.
The case at the centre of the dispute revolved around whether two runways, taxiways, and aprons at Changi Airport should qualify as ‘plants’ under the Income Tax Act. While CAG contended these assets were integral tools for its operations, the Comptroller of Income Tax disagreed, categorising them as structures instead.
Background of the Case
CAG, licensed to manage Changi Airport since 2009, submitted claims for capital allowances between 2011 and 2013, amounting to S$272,575,162. Capital allowances enable companies to deduct capital expenditure from their taxable income, lowering their tax bills.
However, the Comptroller denied CAG’s claims, asserting that the runways and taxiways did not fit the definition of ‘plants’. Instead, CAG received industrial building allowances, recognising the assets as structures.
The Court’s Findings
In the appeal, legal representatives for CAG argued that the assets played critical roles in facilitating aircraft movements, stating they were core to the business operations. “These assets are the very tools of trade,” said CAG’s lawyer, Tan Kay Kheng.
Justice Choo agreed with the findings of the Income Tax Board of Review, which stated that the basic function of the runways and taxiways was to support the transit of aircraft, effectively classifying them as structures rather than plants. He noted that any navigational or safety functions were primarily served by aerodrome equipment.
A Limited Scope for Legal Interpretation
While CAG’s lawyer attempted to highlight certain foreign case precedents to argue for a different classification, Justice Choo expressed that Singapore law’s objective focuses on whether an asset is more aptly described as a plant or as a structure.
Justice Choo also reaffirmed that the board’s role as the primary trier of fact—having heard witness testimonies and evaluated the relevant characteristics of the assets—meant the court should be cautious in overriding their findings.
Implications of the Ruling
This ruling has significant implications for how capital allowances are interpreted in the context of infrastructure investments in Singapore. As businesses increasingly develop fixed assets, understanding their tax classifications becomes crucial.
While CAG has faced a setback, it’s a reminder that clarity in the definitions within the Income Tax Act is paramount for future operational and financial decisions.