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2021 MarsdenLR 2421
HIGH COURT MALAYA KUALA LUMPUR
SETIA INDAH SDN BHD – Appellant
Versus
KETUA PENGARAH HASIL DALAM NEGERI – Respondent
[Appplication For Judicial Review No: WA-25-185-06-2020]
Contributions to the State Government for the release of Bumiputera housing units are deductible under the Income Tax Act, and judicial review applications allow for amendments to address legal issues raised.
Headnote:(A) Income Tax Act 1967 – Section 44(6) and Section 33(1) – Judicial Review Application – The Applicant sought to amend the Notices and was granted leave to do so to address the deductibility of contributions made to the Johore State Government that were disallowed by the Respondent. The Court recognized the relevant provisions and previous case laws confirming the deductibility of similar expenses in earlier rulings. (Paras 11, 21, 24, 40, 64)
(B) Stay of Proceedings – The Court granted a stay of the Respondent's decision pending a judicial review, highlighting that the stay preserves the status quo and that there exist special circumstances due to the substantial tax implications on the Applicant. (Paras 49, 51, 63)
JUDGMENT
[1] Enclosure 35 is the application filed by the Applicant pursuant to O 53 r 7 of the Rules of 2012 ("ROC")inter alia, for an order that the Applicant is authorised to amend the Notice of Application, its Statement under O 53 r 3(2) of the ROC and Notice of Hearing for Judicial Review Application (cumulatively referred to as the "Notices").
[2] Enclosure 35 and an order for stay on all further proceedings and effect in relation to the Respondent's decision in the form of Notice of Assessment for the year of assessment ("YA") 2017 and Notices of Additional Assessment for the YAs 2014, 2015 and 2018 all dated 12 June 2020 ("Decision"), pending the full and final disposal of the Applicant's Application for Judicial Review to quash the Respondent's Decision were granted by this Court on 15 April 2021. The reasons now follow.
Facts
[3] The Applicant is a property developer. On 12 November 2012 and 18 December 2016 the Applicant entered into agreements with the Johore State Government whereby the Applicant is required to sell the Bumiputera housing units developed by the Applicant to Bumiputera purchasers. In the event the Applicant is unable to meet the requirement, the Bumiputera housing units will be made available to be sold to non-Bumiputera purchasers provided the conditions in the agreements were complied with ("Agreements").
[4] Pursuant to the Agreements, the Applicant applied to the Johor State Government to release the Bumiputera housing units to the non- Bumiputera and for that purpose, the Applicant stated that it made contribution to the Johor State Government and the latter agreed to receive the contribution from the Applicant.
[5] On 4 March 2020, the Respondent conducted a tax audit on the Applicant.
[6] On 13 May 2020, the Respondent issued its audit finding letter for YA 2014 to 2017.
[7] On 27 May 2020 the Applicant responded with a detailed explanation to the Respondent. Among others, the Applicant explained that the Contribution are payments for the purpose of releasing the Bumiputera status units.
[8] On 29 May 2020, the Respondent rejected the Applicant's explanation. Among others, the Respondent alleged that the contribution is not allowable for tax deductions as they are capital expenditure for the right to sell the Bumiputera units.
[9] On 1 June 2020 and 4 June 2020, the Applicant responded with a letter maintaining their positions that the contributions are expenses deductible under the ITA .
[10] On 9 June 2020 and 10 June 2020, the Respondent, through email, provided the Applicant's tax computation for the year of assessment 2014 to 2018.
[11] On 12 June 2020, the Respondent disregarded the Applicant's explanation and raised the impugned notice of assessment for YA 2017 and notices of additional assessment for the YAs 2014, 2015 and 2018 all dated 12 June 2020. The Respondent's Decision is consequent to its position of disallowing the contribution amount for the release of the Bumiputera quota ("Contribution") as a deduction in determining the Applicant's income under s 44(6) of the Income Tax Act 1967 (" ITA "). According to the Respondent, the Contribution is not deductible as it is capital in nature.
[12] On 30 September 2020, this Court granted leave to the Applicant for judicial review and an interim stay of all further proceedings and effect in relation to the Respondent's Decision.
[13] The Applicant was granted leave by this Court to file the judicial review application based on the following prayers:
(a) An order for Certiorari to Respondent's decision in the form of notice of assessment for the year of assessment 2017 and notices of additional assessment for the years of assessment ("YAs") 2014, 2015 and 2018 all dated 12 June 2020 ("Decision") on the grounds that the said Decision of the Respondent was ultra vires, illegal, void, unlawful and/or in excess of authority, irrational and/or unreasonable and made without having any regard to the Applicant's legitimate expectations,
