AVD v. Comptroller of Income Tax

The taxpayer was a Singapore company that was previously indirectly owned by four family members and had incurred significant tax losses in previous years of assessment. Pursuant to a family arrangement, the shareholdings were restructured, resulting in one of the four members (who previously indirectly owned 33 percent of the taxpayer) becoming the 100 percent indirect owner of the taxpayer.

For the taxpayer to automatically carry forward and utilize its unabsorbed losses, the tax law requires that there should not be a substantial (i.e. more than 50 percent) change in the taxpayer's ultimate shareholders (the Shareholding Test). Since the Shareholding Test was not satisfied in this case, the taxpayer applied for a waiver of the Shareholding Test. Under the tax law, the Comptroller may waive the Shareholding Test if he is satisfied that the substantial change in ultimate shareholding was not for the purpose of deriving any tax benefit or obtaining any tax advantage.