Tax must be paid regardless of ongoing disputes, affirming the 'pay first, dispute later' principle under the Income Tax Act 1967.

JUDGMENT

(Pertaining To An Application For Interim Stay)

Shahnaz Sulaiman J:

[1] This is an application for interim stay, pending the disposal of an application for judicial review by the applicant against the decision of the respondent in issuing Notices of Additional ("Form JA") for the Year of Assessment ("YA") 2018 dated 13 August 2024.

Applicant's Submissions

[2] Learned counsel for the applicant submitted this application for interim stay was to preserve the status quo of the applicant's judicial review application. This is so as not to deny the applicant the full benefit of a successful challenge. The applicant cited the case of Islamic Financial Services Board v. Marlin Fairol Mohd Faroque & Anor; 2010 MarsdenLR 818 ; [2010] 4 ILR 23; 2010 MarsdenLR 817 in support of this contention.

[3] It was further submitted by learned counsel for the applicant that this court has the jurisdiction to grant a stay in the present matter, notwithstanding that it is a tax matter.

[4] For this, the applicant alluded, among others, to the following cases where a stay was granted even though the subject matter was tax:

(i) Multi-Purpose International Limited v. Ketua Pengarah Hasil Dalam Negeri ;

(ii) Chong Woo Yit v. Government of Malaysia ; 1988 MarsdenLR 1062 ; [1989] 1 CLJ (Rep) 9 ;

(iii) Government Malaysia v. Jasanusa Sdn Bhd ; 1995 MarsdenLR 1895 ; [1995] 2 CLJ 701; 1994 MarsdenLR 1871 ;

(iv) Kerajaan Malaysia v. Raja K Veerasamy [2014] MSTC 30-0745 ;

(v) Kerajaan Malaysia lwn. Berjaya Times Square Sdn Bhd ; and

(vi) Flextronics Shah Alam Sdn Bhd v. Ketua Pengarah Hasil Dalam Negeri ; 2018 MarsdenLR 3389 .

[5] Alternatively, it was further submitted by learned counsel for the applicant that special circumstances existed in this application to allow an interim stay. [See: Kosma Palm Oil Mill Sdn Bhd & Ors v. Koperasi Serbausaha Makmur Bhd; 2003 MarsdenLR 1713 ; ]

[6] In this case, it was contended that special circumstances exist for the following reasons:

(a) the applicant's application for judicial review before the High court would be rendered nugatory should the stay be refused;

(b) the balance of convenience favours the granting of the stay;

(c) the large amount of tax sum raised by the respondent;

(d) the real threat of civil action and collection of unauthorised taxes by the respondent;

(e) the applicant will face irreparable damage and undue hardship should the stay be refused;

(f) the applicant's history as a law-abiding, responsible and good taxpayer;

(g) the respondent's failure to exercise its powers accordingly;

(h) there are merits to the applicant's applicant for judicial review; and

(i) no delay by the applicant in applying for a stay.

[7] It was further submitted by the applicant that there is a possibility that the respondent might invoke its powers to demand payment which may prevent the applicant from leaving the country should the sum not be paid.

Respondent's Submissions

[8] In response to the applicant's submissions, learned revenue counsel argued that the application for interim stay amounted to an injunction against the respondent in discharging the respondent's statutory duty conferred and provided under Income Tax Act 1967 (" ITA 1967").

[9] Pertaining to stay, the learned revenue counsel submitted that with effect from 1 January 2021, s 103B of the ITA 1967 has been inserted to the 1967 by virtue of s 20 of the Finance Act 2020 (Act 831).

[10] What this entails, according to learned revenue counsel is that tax payable is required to be paid although there is a proceeding filed in court by the taxpayer. Moreover, it was submitted that while s 103B of the ITA 1967 is a newly enacted provision, the principle that liability to pay tax subsists once the notice of assessment is served is not new.

[11] In this regard, reference was made to the handsard dated 16 December 2020 when the Bill was tabled at Parliament:

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