Under section 14(1) of the Ordinance, every person who carries on a trade,
profession or business in Hong Kong is chargeable to Profits Tax on the profits from that trade, profession or business.
Section 15(1)(c) of the Ordinance deems sums received by a person by way of grant, subsidy or similar financial assistance in
connection with the carrying on of a trade, profession or business in Hong Kong to be chargeable receipts.
Section 15(2) of the Ordinance provides that where a deduction has been allowed for any debt incurred for the purposes of the
trade, profession or business, the amount of that debt thereafter released shall be deemed to be a receipt of the trade,
profession or business.
Section 61 of the Ordinance disregards artificial or fictitious transactions that reduce or would reduce the tax payable by a
person whereas section 61A of the Ordinance counteracts transactions entered into for the sole or dominant purpose to obtain a
tax benefit.
In the present case, the waived amount will not constitute a profit derived by the Company in the ordinary course of its
business. Section 15(1)(c) has no application either as the waiver of the loans and advances is not done in connection with
the carrying on of the Company's business. Section 15(2) is also not applicable as no deduction has been allowed in respect of
the loans and advances previously made to the Company. Moreover, the waiver is not considered to be a tax avoidance transaction
and sections 61 and 61A do not apply.
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