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2022 MarsdenLR 2772
HIGH COURT MALAYA KUALA LUMPUR
IDAMAN PELITA SDN BHD – Appellant
Versus
KETUA PENGARAH HASIL DALAM NEGERI – Respondent
[Civil Appeal No: R1-14-12-09-2013]
Public law requires accurate disclosure of income and permits assessments beyond statutory periods in cases of neglect or fraud.
Headnote:(A) Income Tax Act 1967 – Section 34 of Schedule 5 – Assessment for Year of Assessment 2001 – Appeal to High Court initiated by taxpayer against Special Commissioners of Income Tax (SCIT) ruling – Taxpayer's claim regarding joint venture agreement versus outright sale – SCIT determined that income should be recognized in YA 2001 post fulfillment of conditions precedent on 28 May 2001. (Paras 4, 8, 12, 66)
(B) Legal principles – The construction of a contract is a question of law, not of fact – contraventions leading to neglect or wilful default allow for assessments post statutory periods under Section 91(3). (Paras 69, 149)
(C) Findings of Court: The SCIT found taxpayer to have committed wilful default by not declaring income from agreement timely and incorrectly filing tax returns from 1999 to 2005. (Paras 110, 156)
(D) Issues: Did the taxpayer misreport income and fulfill conditions needed for tax assessment? (Paras 53, 159)
(E) Ratio Decidendi: Court upheld SCIT's interpretation of income assessment timing and application of income tax laws regarding immediate income recognition from the agreement. (Paras 67, 149)
(F) Result: Appeal dismissed, assessment upheld, penalty validated. (Paras 162)
JUDGMENT
Introduction
[1] This is an appeal to the High Court by Idaman Pelita Sdn Bhd ("the taxpayer") by way of case stated by the Special Commissioners of Income Tax ("SCIT") against the SCIT's deciding order made on 30 November 2012 ("deciding order").
[2] The taxpayer had filed an appeal to the SCIT against a notice of assessment dated 23 March 2010 raised by the Director General of Income Tax ("DGIR") against the taxpayer for the year of assessment 2001 ("YA 2001") comprising of income tax payable in the sum of RM4,484,259.64 and penalty in the sum of RM1,345,277.89.
[3] After the hearing of the appeal, the SCIT dismissed the taxpayer's appeal and upheld the DGIR's assessment for YA 2001.
[4] Dissatisfied with the SCIT's decision, the taxpayer filed this appeal to the High Court under para 34 of Schedule 5 of the Income Tax Act 1967 (" ITA ").
[5] The law is settled that appeals to the High Court against the deciding orders of the SCIT are on questions of law only: see Edwards (HM Inspector of Taxes) v. Bairstow & Harrison [1955] 36 TC 207; [1956] AC 14; Chua Lip Kong v. Director-General Of Inland Revenue , [1982] 1 MLJ 235, PC; UHG v. Director-General Of Inland Revenue , [1973] 2 MLJ 88, FC.
[6] Paragraph 34 of Schedule 5 of ITA states that parties to the proceedings before the SCIT may appeal on a question of law against the deciding order. Paragraph 34 of Schedule 5 reads as follows:
34.(1) Either party to the proceedings before the Special Commissioners may appeal to the High Court on a question of law against a deciding order made in those proceedings (including a deciding order made pursuant to sub-paragraph 26(b) or (c) by requiring the Special Commissioners to state a case for the opinion of the High Court and by paying to the Clerk at the time of making the requisition such fee as may be prescribed from time to time by the Minister in respect of each deciding order against which he seeks to appeal.
[Emphasis Added]
[7] In this instant appeal, the question of law referred to the High Court by the SCIT in their case stated dated 20 August 2013 ("case stated") was:
The question for the opinion of the High Court is whether on the facts as stated by us, our decision is correct in law.
[8] At the conclusion of the appeal, this Court found that the SCIT's deciding order was correct in law, and accordingly, dismissed the taxpayer's appeal.
[9] The Court's findings were highlighted in the written decision issued at the conclusion of the hearing of the appeal. The full reasons for the Court's findings and dismissal of the appeal are set out in this judgment.
The Facts
[10] In every case stated, the SCIT are required to state the findings of facts on which their decision is based. Paragraph 37(a) of Schedule 5 of ITA stipulates that case stated under para 34 of Schedule 5 of "shall set forth the facts as found by the Special Commissioners, the deciding order and the grounds of their decision."
[11] The findings of facts in the case stated consist of admitted or agreed facts and proved facts before the SCIT. These admitted/agreed facts and proved facts are primary facts found by the SCIT. The SCIT may make inferences from the admitted/agreed facts and the proved facts. And where these inferences by the SCIT involve assumptions as to the legal effect or consequences of the primary facts, they are questions of law, for the High Court's consideration in an appeal by way of case stated. If it is shown that the SCIT had proceeded upon an erroneous assumption as to the relevant law, it is a function of the High Court on consideration of the case stated to correct the SCIT: see Lord Diplock's dicta in Chua Lip Kong v. Director-General Of Inland Revenue , [1982] 1 MLJ 235, PC, an appeal to the Privy Council from Malaysia.
[12] The Federal Court in UHG v. Director-General Of Inland Revenue , [1973] 2 MLJ 88, FC, held that the SCIT could not be erroneous in point of law unless (i) it appeared they acted without any evidence; or
