Back
2025 MarsdenLR 788
HIGH COURT MALAYA SHAH ALAM
YAYASAN BUAH PINGGANG KEBANGSAAN MALAYSIA – Appellant
Versus
KETUA PENGARAH HASIL DALAM NEGERI – Respondent
[Judicial Review Application No: BA-25-78-09/2020]
The court established that a decision to withdraw tax exemption status can be quashed if it is found to be illegal or unreasonable, particularly when conditions are not communicated to the affected party.
Headnote:(A) Income Tax Act 1967 - Subsection 44(6) - Judicial review of the decision to withdraw tax exemption status - The Respondent's decision was quashed due to illegality and unreasonableness, as the conditions for exemption were not communicated to the Applicant, resulting in a denial of legitimate expectations. (Paras 1, 2, 74, 75)
(B) Judicial Review - Grounds for review - A decision may be reviewed on grounds of illegality, irrationality, and procedural impropriety as established by Lord Diplock. (Paras 14, 15)
(C) Vested Rights - The Applicant claimed a vested right in the exemption, but the court distinguished this case from precedents due to the lack of statutory provisions supporting such rights under the ITA 1967. (Paras 69, 70)
(D) Legitimate Expectation - The court found that the principle of legitimate expectation did not apply as the Applicant's exemption was subject to conditions that were not communicated. (Paras 71, 73)
Facts of the case:
The Applicant, a charitable foundation, sought judicial review against the Respondent's decision to withdraw its tax exemption status under subsection 44(6) of the ITA 1967, citing non-compliance with conditions that were allegedly never communicated.
Findings of Court:
The court found the Respondent's decision to be illegal and unreasonable, leading to the quashing of the withdrawal of tax exemption status.
Issues: The main issues were whether the Respondent's decision was lawful and whether the conditions imposed were communicated to the Applicant.
Ratio Decidendi: The court ruled that the Respondent failed to communicate the conditions for maintaining tax exemption status, resulting in an unjust outcome.
Result: Application for judicial review allowed.
| Table of Content |
|---|
| 1. applicant applied for judicial review (Para 1) |
| 2. reliefs sought by applicant (Para 2) |
| 3. background of the applicant (Para 3 , 4) |
| 4. respondent's audit and findings (Para 5 , 6 , 7 , 8) |
| 5. conditions for tax exemption (Para 9 , 10 , 11 , 12 , 13 , 14 , 15 , 16 , 17 , 18 , 20 , 21 , 22 , 23 , 25 , 26 , 27 , 28 , 29) |
| 6. respondent's preliminary objections (Para 19) |
| 7. court's analysis of time-bar issue (Para 24) |
| 8. court's ruling on conditions (Para 30 , 31 , 32 , 33 , 34 , 35 , 36 , 37 , 38 , 39 , 40 , 41 , 42) |
| 9. court's interpretation of ita (Para 43 , 44 , 45 , 46 , 47 , 48 , 49 , 50 , 51 , 52 , 53 , 54 , 55 , 56 , 57 , 58 , 59 , 60 , 61 , 62 , 63 , 64 , 65 , 66 , 67 , 68 , 69 , 70 , 72 , 73) |
| 10. court's final decision (Para 74 , 75 , 76) |
JUDGMENT
Introduction
[1] The Applicant, vide encl 33, applied for judicial review to primarily quash a decision of the Respondent, the Director General of Inland Revenue. The decision of the Respondent is in relation to a letter dated 17 June 2020 which had withdrawn the tax exemption status granted to the Applicant under subsection 44(6) of the Income Tax Act 1967 (" ITA 1967") and the issuance of notices of assessment for the years of assessment ("YA") 2017 and 2018 dated 22 June 2020 thereafter.
Reliefs Sought
[2] The main reliefs sought by the applicant are:
"a) An order for Certiorari to quash the Respondent's decision in the form of a letter dated 17 June 2020 withdrawing the Applicant's tax exemption status under s 44(6) of the Income Tax Act 1967 on the grounds that the said Decision of the Respondent in this respect was illegal, void, unlawful and/or in excess of authority, had been irrational and/or unreasonable, and resulted in a denial of the Applicant's legitimate expectations;
b) A Declaration that the Respondent is not entitled in law to impose arbitrary and unilateral conditions on a charitable organization such as the Applicant when such conditions are not contained in the approval letter and/or communicated to the Applicant; and
c) A Declaration that the Applicant is a tax-exempt charitable organization pursuant to s 44(6) of the Income Tax Act 1967 ."
Factual Background
[3] The Applicant was founded on 2 December 1969. It is a charitable foundation.
[4] The Respondent is the Director General of Inland Revenue who has the statutory obligations for the care and of the ITA 1967.
[5] On 8 December 1969, the Applicant through the Rotary Club of Petaling Jaya made an application to the Ministry of Finance for all donations made to the Applicant to be exempted from income tax. The Applicant's aim was to raise public awareness and improve medical care and treatment for those suffering from kidney related disease.
[6] On 20 June 1970, a letter was issued on behalf of the Comptroller General of the Inland Revenue, Malaysia to the Applicant, stating that the Applicant has been approved for the purposes of para 44(6)(a) of the ITA 1967.
[7] In a letter dated 11 March 2019, the Respondent informed the Applicant that an audit would be conducted on 8 April 2019. The purpose of this audit was to ensure compliance with the Applicant's Financial Statement made pursuant to the ITA 1967 and other Income Tax Rules.
[8] Pursuant to the audit visit, vide a letter dated 24 May 2019, the Respondent informed the Applicant of its non-compliance the conditions of approval of tax exemption under subsection 44(6) of the ITA 1967. On 12 June 2019, the Applicant provided the Respondent with an explanation pertaining to the findings raised by the Respondent. A meeting was then held between both parties on 14 June 2019.
[9] On 29 August 2019, the Respondent informed the Applicant that:
(i) there was non-compliance on the part of the Applicant as follows:
(a) donation receipts were used for the purpose of purchase of assets and are conditional;
(b) existence and functions of unclear funds;
(c) no separation of donation account;
(d) amendment of Constitution without approval;
(e) no prior informati
