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2025 MarsdenLR 4421
HIGH COURT MALAYA SHAH ALAM
CENTRALFIELD SDN BHD – Appellant
Versus
KETUA PENGARAH HASIL DALAM NEGERI (LHDN) – Respondent
[Appeal No: BA-25-54-08/2023]
The court ruled that the Federal Court's decision on tax provisions is not automatically applicable retrospectively, emphasizing the importance of legal certainty and the potential adverse effects of retrospective application.
Headnote:(A) Land Acquisition Act 1960 - Section 16 - Income Tax Act 1967 - Sections 4C and 77A - Compulsory acquisition of land - Compensation received by the Applicant was deemed taxable under ITA until declared unconstitutional by the Federal Court - The Applicant contended for retrospective application of the ruling in Wiramuda, asserting that retaining taxes under an unconstitutional provision violates legal principles. (Paras 1, 2, 3, 4)
(B) Judicial Review - Retrospective vs. Prospective Application - The Respondent argued that the Federal Court's decision in Wiramuda did not address retrospective application, citing legal certainty concerns and precedent supporting prospective overruling in similar cases. (Paras 3, 4)
Facts of the case:
The Applicant received compensation for land acquisition and reported it as taxable income. Following a Federal Court ruling declaring the relevant tax provision unconstitutional, the Applicant sought a tax refund for the assessment year 2016, arguing for retrospective effect of the ruling.
Findings of Court:
The High Court dismissed the Applicant's Judicial Review Application, agreeing with the Respondent's position on the prospective application of the Federal Court's decision.
Issues: Whether the Federal Court's decision in Wiramuda should apply retrospectively and the implications of tax retention under an unconstitutional law.
Ratio Decidendi: The court reasoned that the Federal Court's decision did not specify retrospective application, and that applying judicial decisions retrospectively could disrupt legal certainty and fairness.
Result: Judicial Review Application dismissed with no order as to costs.
[1] The Applicant principal activity is property development and investment. On 31 May 2016 the Applicant received a compensation from the Selangor State of Authority for the compulsory acquisition of the land held under No.PT 3790, HSD 155803 Mukim Sungai Buloh Daerah Petaling ("The Land"), via Notice of Award of the Land Administrator under s 16 of the Land Acquisition Act 1960 . The deemed assessment was made by virtue of s 90(1) of the Income Tax Act 1967 ( ITA ) when the compensation was brought to tax by the Applicant as part of income in its tax return made for Year of Assessment 2016 (YA 2016) pursuant to s 77A . There was no appeal made to the Special Commissioner of Income Tax (SCIT). On 9 December 2022, the Federal Court in (Civil Appeal No.01 (f)-38-08/2022 (W)) Wiramuda (M) Sdn Bhd v. Ketua Pengarah Hasil Dalam Negeri ; [2022] 5 MLJ 414; (Wiramuda) ruled that s 4C is unconstitutional and thus any compensation received from compulsory acquisition of the land by the State Authority is not taxable. Upon the decision in Wiramuda, on 27 June 2023 the Applicant issued a letter to the Respondent, requesting for a refund of the tax paid pursuant to s 4C for YA 2016.
[2] It was the Applicant contention that the Federal Court's decision in Wiramuda should be applied retrospectively as the Federal Court made no declaration that its decision was to apply prospectively, and as a result, the ruling must be given full retrospective effect. This contention is based on the decision in the case of Semenyih Jaya Sdn Bhd v. Pentadbir Tanah Daerah Hulu Langat & Another Case ; ; [2017] 4 AMR 123. The Applicant also contends that the Respondent, as an arm of the executive, is bound by the principle of legality and must comply with the decision of the Federal Court. Retaining taxes collected under an unconstitutional provision amounts to unjust enrichment and violates the fundamental constitutional requirement that no tax shall be levied except under valid law. Please see Woolwich Equitable Building Society and Inland Revenue Commissioners [1993] AC 70 (HOL); see art 96 of the Federal Constitution.
[3] The Respondent, on the other hand, argues that in reliance to the recent Federal Court (FC) ruling in Obata-Ambak Holdings Sdn Bhd v. Prema Bonanza Sdn Bhd & Other Appeals ; [2024] 5 MLJ 897; [2024] 8 CLJ 519; [2024] 6 AMR 813, the FC cited an earlier decision in Ang Ming Lee & Ors v. Menteri Kesejahteraan Bandar, Perumahan Dan Kerajaan Tempatan & Anor & Other Appeals ; [2020]] 1 MLJ 281; [2019] 8 AMR 297 in which the FC in Ang Ming Lee did not address whether their decision should be applied prospectively or retrospectively. In reaching its conclusion, the FC in Obata-Ambak considered the laws that were in effect at the time the Sale Purchase Agreements were signed. The Federal Court in Obata-Ambak case also held that a retrospective invalidation of a legislation undermines legal certainty and predictability. The invalidation of a legislation or any provision of the legislation would have serious ramifications and implications on those who would have relied on its validity in the past. The Respondent in this case submits that the decision of the Federal Court of Wiramuda was made on 9 December 2022 and the Court also did not address whether the law would be taken into effect retrospectively or prospectively. Retrospective application of a judicial decision that invalidates a statute can have disruptive and seemingly unfair consequences. Reference was also made to another FC case of The Government Of Malaysia & Anor v. Aminah Ahmad (suing In Her Personal Capacity And On Behalf Of 56 Retired Members Of The Public Service) ; [2023] 5 MLJ 32; [2023] 8 CLJ 1; [2023] 6 AMR 102 and reliance was focusing to the Court of appeal finding where the Court affirmed that a judicial decision deeming legislation unconstitutional falls within the doctrine of prospective overruling and should not be applied retrospectively. It was held that to mitigate the
