Commentary

A2.123 A practical approach to the construction and application of the direct tax code

Administration and compliance

A2.123 A practical approach to the construction and application of the direct tax code

A2.123 A practical approach to the construction and application of the direct tax code

The cumulative effect of the principles of construction applicable to the direct tax code1 is to demand that the court (or the taxpayer in establishing his rights) should correctly identify the statutory and factual context and ask the relevant questions of the legislation and the transactions: (1) 'is this what this provision means?'2 and (2) 'is this the type of transaction that Parliament can reasonably have intended the provision to cover?'3.

Such an approach was adopted in the Hong Kong case of Collector of Stamp Revenue v Arrowtown Assets Ltd4. The case concerned a 100% subsidiary of Shiu Wing Steel. The shares in Arrowtown were divided into two classes, a tiny minority of which were 'A' shares of considerable value and the overwhelming majority of which (90%) were 'B' shares of minimal value

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