The court affirmed the entitlement to interest on unlawfully retained funds, highlighting compensatory principles and the unlawfulness of the respondent's actions under the relevant tax law.

[1] The applicant in encl 1 successfully applied for a judicial review seeking for declaration which in effect made the decision of the respondent to be unlawful since it does not follow the law. Consequent to that, the applicant sought for a refund of the sum of RM2,360,723.82 unlawfully retained, by the respondent together with interest.

[2] The applicant contended that under s 11 of the Civil Law Act 1956 the court is rested with discretion to order interest to be given together with judgement sum. Interest according to the applicant has been awarded by the Federal court in Lim Eng Kay v. Jaafar bin Mohamed Said , 1982 MarsdenLR 4 ; [1982] CLJ Rep 190, on the basis of compensating for deprivation of the use of money. This is also the position in Karpal Singh a/l Ram Singh v. DP Vijandran ; [2003] 2 MLJ 385 ; [2003] 2 CLJ 77 (see also English decision in Benedetti v. Sawiris and Ors; [2010] EWCA Civ 1427, Mangalore Chemicals & Fertilisers Ltd v. Deputy Commissioner of Commercial Taxes 1992 (4) KarLJ 760 and D Cruiser of Commercial Tax, and case of Jaggar v. Lyttelton Marina Holdings Ltd (in Receivership) 1992 New Zeal [2006] 2 NZLR 87).

[3] The English case of Woolwich Equitable Building Society v. Inland Revenue Commissioners (No 2) [1992] 3 All ER 737 is a landmark ruling by House of Lords which upheld a tax payer's entitlement to interest on sums repaid by revenue to tax payer. In that case the court also relied on the concept of unjust enrichment, which was accepted by our court of Appeal in Koh Siew Keng & Anor v. Kok Heng Jin, [2008] 3 MLJ 822. The applicant also relied on art 13 as well as art 96, which states that tax can only be levied under the authority of law.

[4] As regards the date of interest payable, the applicant relied on Kon Thean Soong (p) v. Tan Eng Nam, [1982] 1 MLJ 232; [1982] CLJ (Rep) 149 a decision of the Federal court which takes the view that it should run from the date the applicant in that case had the use of the money.

[5] For the respondent it was contended that the order sought by applicant is in the nature of mandamus and cannot be granted against the respondent being a public authority. There is no written law imposing this duty on the respondent to refund with interest and a writ of mandamus cannot be, made by the court against the respondent. The respondent further, contended that the applicant is not entitled to be refunded as yet by virtue of s 111 of the Income Tax Act 1967 ('ITA'). This section empowers the director general to refund an over payment, 30 days of being notified on the amount of appeal to the Special Commissioners of Income Tax. Further under s 111(1A) the respondent cannot be compelled to refund until the excess in respect of assessment is finally determined under s 97, that is until the party has reached a stage where there is no further appeal. In this case the party has a right of further, appeal to the court of Appeal. The respondent relied on Director General of Inland Revenue v. Ooi Guan Hoe , 1986 MarsdenLR 881 . Furthermore, the applicant cannot be said to be deprived of use of the money paid because the taxpayer had to comply with assessment issued. Once issued it is payable and recoverable as debt under s 103(1) of the .

Findings

[6] I have considered the argument of both counsel on the issue of interest. First, it is important to determine whether the basis of interest claimed by the applicant tentamount to an order of mandamus under s 44 of the Specific Relief Act 1950 . It is clear from the application of the applicant that the prayer for interest is consequent to the unlawful imposition of tax on it by the respondent, which this court based on the another decision of similar facts ha