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2011 MarsdenLR 2661
HIGH COURT MALAYA KUALA LUMPUR
METACORP DEVELOPMENT – Appellant
Versus
KETUA PENGARAH HASIL DALAM NEGERI – Respondent
[Application For Judicial Review No: R2-25-389-2009]
Compensation for compulsory acquisition of land is not subject to income tax as it does not arise from trading activities, negating taxable gains.
Headnote:(A) Income Tax Act 1967 - Section 91 - Land Acquisition Act 1960 - Section 16 - Tax liability of compensation for compulsory land acquisition - The Respondent's additional tax assessment on compensation received from compulsory acquisition was quashed for violating principles established by superior courts that such compensation is not taxable. (Paras 11-25)
(B) Judicial Review - Availability - Judicial review is available despite the presence of alternative remedies when excess jurisdiction, error of law, or a violation of natural justice is demonstrated. (Paras 4-10)
Facts of the case:
The Applicant sought judicial review against additional tax assessments on compensation received for compulsory acquisition of land, asserting that such compensation is not subject to income tax based on prior court rulings. (Paras 2-3)
Findings of Court:
The Court determined that the Respondent acted beyond authority by not adhering to the principles established in prior judicial decisions, resulting in the quashing of the tax assessment. (Paras 24-25)
Issues: Whether compensation for compulsory acquisition is liable to tax and whether the Respondent's assessment was legally justifiable given past court rulings. (Paras 1, 11)
Ratio Decidendi: The court held that compensation for compulsory acquisition does not constitute taxable income as compulsion negates the intent to trade, affirming the necessity for adherence to superior court precedents. (Paras 11-24)
Result: Application allowed; Respondent's tax assessment quashed.
| Table of Content |
|---|
| 1. judicial review application and facts. (Para 1 , 2 , 3) |
| 2. arguments on alternative remedies. (Para 4 , 5) |
| 3. merits of taxation of compensation. (Para 11 , 12 , 13 , 14) |
| 4. respondent's compliance with law. (Para 15 , 16) |
| 5. interpretation of court decisions. (Para 18 , 19 , 22 , 23) |
| 6. court's final ruling and conclusion. (Para 24) |
Decision
[1] This was an application by the Applicant made under O 53 of the Rules of the High 1980 seeking for a declaration as appearing in paras (a) to (d) of encl 1. The prayers sought in the application are as follows:
(a) A Declaration that the Respondent is bound by and shall give effect to the decisions of the Supreme Court in Lower Perak Co-operative Housing Society Berhad v. Ketua Pengarah Hasil Dalam Negeri , and the Court of Appeal in Ketua Pengarah Hasil Dalam Negeri v. Penang Realty Sdn Bhd , [2006] 3 MLJ 597 , which held that gains arising from the compensation for compulsory acquisition of land are not subject to income tax as the element of compulsion vitiates the intention to trade;
(b) A Declaration that the Decision Impact Statement issued by the Respondent has no legal effect and cannot override the Courts' decisions in Lower Perak and Penang Realty;
(c) A Declaration that in the event there is a conflict between the Decision Impact Statement and Courts' decisions in Lower Perak and Penang Realty, the Courts' decisions shall prevail over the Decision Impact Statement by virtue of being part of Malaysian laws; and
(d) An Order of certiorari to remove into this Honourable Court for the purpose of it being quashed the decision of Respondent to raise notices of additional assessment dated 9 December 2009 for the years of assessment 2004 a 2005 against the Applicant as the Respondent had acted ultra vires and without any factual or legal basis in raising the said notices;
Background Facts
[2] The Applicant is a property developer In 1994, the Applicant purchased two parcels of land in Mukim Ayer Keroh, Melaka. On two different occasions, one on 31 October 2003, and another on 26 October 2004, the State Government of Malacca issued notices of award and offered compensation pursuant s 16 of the Land Acquisition Act 1960 to compulsorily acquire the Applicant's land. The Applicant received the compensation but did not subject the compensation to income tax.
[3] The Respondent issued notice of additional assessment JA Form, for Year Assessment 2004 a 2005 with penalty. The Applicant did not appeal against the assessment to the Special Commissioners of Income Tax in accordance with s 99 of the Income Tax Act 1967 ("the Act"). Instead, the Applicant filed for a judicial review and had obtained leave from this Court on 6 January 2010.
Alternative Remedy And Judicial Review
[4] Learned counsel for Inland Revenue Encik Ahmad Ishak bin Hassan contended that this Application cannot be entertained by this Court because there is an alternative remedy in that an appeal process is available under the Act. Thus, he said there is no basis for the Court to exercise its jurisdiction on this matter, relying on the authority of the Supreme Court decision in Government of Malaysia v. Jagdis Singh , . This decision was again followed in Ta Wu Realty Sdn Bhd v. Ketua Pengarah Hasil Dalam Negeri & Anor; [2009] 1 MLJ 555 ; [2008] 6 CLJ 235 ; [2004] 4 AMR 521 . The Court of Appeal in Ta Wu Realty rejected the application for certiorari based on the principle established in Jagdis Singh. The established principle is that when there is an appeal procedure available certiorari should not normally be issued unless there are exceptional circumstances. He further contended that the assessment made by the Director General of Income Tax is within the jurisdiction empowered under s 91 of the Act and there is no failure on the part of the Respondent to perform statutory duty, and no breach of natural justice had occurred.
[5] For the Applicant, learned Counsel Datuk DP Naban (Encik Saravan Kumar wit
