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2023 MarsdenLR 1422
HIGH COURT MALAYA SHAH ALAM
KERAJAAN MALAYSIA – Appellant
Versus
KOTA LAKSAMANA 2 SDN BHD (ENCL 8) – Respondent
[Civil Suit No: BA-21NCvC-18-02/2021]
The court affirmed that tax debts under the Income Tax Act are due upon assessment, regardless of appeal, and the summary judgment procedure is not applicable to tax recovery claims.
Headnote:(A) Income Tax Act, 1967 - Sections 90(3), 103(2), 106(1), 106(3), 145 - Summary judgment for tax recovery - The Plaintiff sought RM6,919,230.63 from the Defendant under the Income Tax Act, asserting entitlement to summary judgment without a plenary trial - The Defendant claimed an assessment of RM0.00 and filed an appeal - The court held that the statutory debt is due and payable upon assessment, irrespective of appeal, under the 'Pay first, dispute later' principle - The court found that the summary judgment procedure does not apply to tax recovery claims as the statutory provisions govern recovery. (Paras 4, 24, 27)
(B) Summary Judgment - The court clarified that the conventional requirement for a trial does not apply in tax recovery cases under the Income Tax Act, emphasizing the statutory nature of tax debts and the limitations on defenses during recovery proceedings. (Paras 20, 24, 27)
Facts of the case:
The Plaintiff sought recovery of unpaid tax from the Defendant for the Year of Assessment 2018, asserting that the amount became due upon assessment despite any appeal. The Defendant contended the assessment was incorrect and had filed an appeal.
Findings of Court:
Summary judgment granted in favor of the Plaintiff for the tax amount sought, with costs awarded.
Issues: The main issues were whether the Government is entitled to summary judgment and whether the Defendant has valid defenses against the claim.
Ratio Decidendi: The court ruled that the Income Tax Act provisions create a statutory debt due upon assessment, and the summary judgment procedure is not applicable to tax recovery claims, preserving the taxpayer's right to appeal later.
Result: Application allowed with costs of RM10,000.
| Table of Content |
|---|
| 1. defendant faces tax recovery claim. (Para 1 , 2 , 3) |
| 2. plaintiff's entitlement under income tax act. (Para 5 , 6 , 7 , 9 , 10 , 11) |
| 3. defendant's challenge to tax assessment. (Para 17 , 18 , 19) |
| 4. summary judgment rules in tax recovery. (Para 20 , 21 , 22 , 23 , 24) |
| 5. court's observations on notice of assessment. (Para 27 , 28 , 29 , 30 , 31 , 32 , 33) |
| 6. federal court's interpretation of s 106. (Para 34 , 35 , 36 , 37) |
Introduction
[1] It has been said that death and taxes are the two certainties in life. The Defendant can attest to the latter.
[2] In the matter before this Court, the Defendant has to confront the reality of not just having to resist a claim for recovery of tax by the Government of Malaysia for a sum of RM6,919,230.63 but with a claim for summary judgment to boot.
[3] The Defendant is certainly not the first and will undoubtedly not be the last to face a claim for the recovery of tax by way of summary procedure by the Government of Malaysia.
The Primary Issues
[4] The dual vital issues for consideration in this case are
(a) whether the Government of Malaysia is entitled to summary judgment for the sum that it is seeking to recover from the Defendant; and
(b) whether there are defences that the Defendant may rely on to challenge the claim by the Plaintiff.
The Case For The Plaintiff
[5] The case for the Plaintiff is simply that it is entitled under the law to claim, as in this case, for income tax assessed for the Year of Assessment 2018 including increases under the Income Tax Act, 1967.
[6] The position of the Plaintiff is that not only is it entitled to claim for the amount of tax claimed, it is entitled to summary judgment, that is, without a plenary trial of the action.
[7] The Plaintiff is relying on the various provisions of the Income Tax Act 1967.
[8] The starting point for the Plaintiff is s 90(3) of the Income Tax Act 1967. It provides as follows:
(3) Where a person for a year of assessment has not furnished a return in accordance with s 77 or 77A, the Director General may according to the best of his judgment determine the amount of the chargeable income of that person for that year and make an assessment accordingly: Provided that the making of an assessment in respect of a person under this subsection shall not affect any liability otherwise incurred by that person by reason of his failure to deliver the return.
[9] It was contended on behalf of the Plaintiff that an assessment for Year of Assessment 2018 has been made pursuant to s 90(3) of the Income Tax Act 1967.
[10] The Plaintiff further averred that the relevant Notice of Assessment has been sent to the Defendant in accordance with the provisions of section 145(1) and (2)(a) of the Income Tax Act 1967. Section 145, which govern the Service of Notices, provides as follows:
145. (1) Subject to any express provision of this Act, for the purposes of this Act notices may be served personally or by ordinary or registered post.
(2) A notice relating to tax which is sent by ordinary or registered post shall be deemed to have been served on the person (including a partnership) to whom it is addressed on the day succeeding the day on which the notice would have been received in the ordinary course of post if it is addressed:
(a) in the case of a company, partnership or body of persons having a registered office in Malaysia:
(i) to that registered office;
(ii) to its last known address; or
(iii) to any person authorized by it to accept service of process;
(b) in the case of a company, partnership or body of persons not having a registered office in Malaysia:
(i) to any registered office of the company, partnership or body (wherever that office may be situated);
(ii) to the principal place of business or other activity of the company, partnership or body (wherever that place may be situated); or
(iii) to any individual authorized (by or under the law of any place where the company, partnership or body is incorporated, registered or establis
