The court established that the principle for granting a stay of proceedings is based on 'rare and compelling circumstances,' not merely ongoing appeals against tax assessments.

(Defendants' Application For A Stay Of Proceedings)

Kenneth St James JC:

Prelusion

[1] This is a tax case. The Plaintiff (LHDN) assessed an additional tax amount on the 1st Defendant (Company) for 2015. The Company lodged an Appeal against this additional assessment to the Special Commissioners Of Income Tax. The LHDN then took this civil suit against the Company, and against the Company's directors: the 2nd and 3rd Defendants. In response, the Defendants filed an Application to stay this civil suit, pending the "hearing and ultimate disposal" of their Appeal with the Special Commissioners. Should this suit and its proceedings be stayed pending the outcome of the Appeal before the Special Commissioners?

The Applicable Facts

[2] For the assessment year 2015, the LHDN imposed on the Company an additional tax payable of RM3,125,969.67. The LHDN issued to the Company a notice of assessment for the additional tax in October 2016. In November 2016, the Company filed the Appeal against this assessment. The Appeal is now pending before the Special Commissioners.

[3] While the Appeal is awaiting disposal, the LHDN filed this civil suit under the Income Tax Act 1967 (the Act).

The Relevant Provisions Of The Act

[4] The relevant provisions of the Act that apply to this proceeding include sub-section 103(1). Sub-section 103(1) obligates the Company to pay the assessed tax payable for any year of assessment, whether or not the Company appeals against the assessment.

[5]Sub-section 103(1) is set out here:

Section 103 . Payment of tax.

(1) Except as provided in subsection (2), tax payable under an assessment for a year of assessment shall be due and payable on the due date whether or not that person appeals against the assessment.

[Emphasis Added]

[6] Another relevant provision of the Act is sub-section 106(3). Sub-section 106(3) provides that the LHDN can recover any tax due and payable, as a debt, by filing a civil suit for the amount.

[7]Sub-section 106(1):

Section 106 . Recovery by suit.

(1) Tax due and payable may be recovered by the Government by civil proceedings as a debt due to the Government.

[Emphasis Added]

[8] Also relevant for analysis here is sub-section 106(3). Sub-section 106(3) is the ouster clause that says that in any civil suit filed under s 106, the Court cannot consider the argument that the amount of tax that the LHDN seeks is excessive, incorrectly assessed, is under appeal or is incorrectly increased.

[9] This is sub-section 106(3):

Section 106 . Recovery by suit.

(2) In any proceedings under this section the Court shall not entertain any plea that the amount of tax sought to be recovered is excessive, incorrectly assessed, under appeal or incorrectly increased under subsection 103(3), (5) or (7).

[Emphasis Added]

The Defendants' Reasons For A Stay Of Proceedings

[10] The Defendants have two grounds for a stay of this civil suit proceedings. First, the Defendants argue that this civil suit is for the same amount of tax that the Defendant is appealing against before the Special Commissioners. So, the Defendants say that a judgment in this civil suit should wait for the outcome of the decision of the Special Commissioners. The Defendants submit that this circumstance constitutes a "special circumstance" that warrants a "stay of proceeding".

[11] Second, the Defendants argue that Mohd Najib Bin Abdul Razak (the former Prime Minister) has an Appeal that is pending before the Federal Court that has a bearing on this Application for a stay of proceeding. One of the issues that the Federal Court will decide on, that will affect this Application for stay, is: Whether sub-section 106(3) is "unconstitutional and/or ultra vires ", as it "usurps the judicial power" of the Courts.

[12] The Defendants say that this pending Federal Court hearing and decision constitutes a "special circumstance" that justifies a stay of this civil suit proceeding.

The Law On Stay Of Proceedings: Rare And Compelling Circumstances

[13] I noticed that both the Defen