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2025 MarsdenLR 4523
HIGH COURT MALAYA SHAH ALAM
CENTRALFIELDS SDN BHD – Appellant
Versus
KETUA PENGARAH HASIL DALAM NEGERI – Respondent
[Judicial Review No: BA-25-54-08/2023]
Judicial declarations of unconstitutionality typically apply prospectively, preserving the validity of past transactions under prior laws to maintain legal certainty and avoid unjust disruption.
Headnote:(A) Income Tax Act 1967 - Section 4C - Judicial Review - The Federal Court declared Section 4C unconstitutional, affecting the validity of tax collected under it. The applicant sought refunds totaling RM7,692,569.04, claiming illegal collection. The Court ruled the Federal Court’s judgment to be prospective, upholding the tax assessment for the Year of Assessment 2016 as valid at the time. (Paras 1, 9, 50)
(B) Legal principles - Judicial review grounds include illegality, irrationality, procedural impropriety, and the doctrine of prospective overruling as noted by Lord Diplock. (Paras 13, 14)
Facts of the case:
The applicant, Centralfields Sdn Bhd, claimed tax refunds due to the unconstitutionality of Section 4C, positing that taxes were unjustly collected under this provision as per a Federal Court ruling. (Paras 3, 4, 9)
Findings of Court:
The taxes were validly levied when due to the law’s enactment; the Federal Court’s ruling would only apply prospectively, affirming the applicant's obligation to the taxes previously paid. (Paras 50, 51)
Issues: Whether the Federal Court's ruling on constitutionality applies retrospectively or prospectively and if the tax collection was legal. (Paras 2, 17)
Ratio Decidendi: The Court held that judicial decisions should not operate retrospectively unless exceptional public interest justifies such, aligning with established principles of legal certainty. (Paras 44, 46)
Result: Application for judicial review dismissed.
| Table of Content |
|---|
| 1. judicial review application scope. (Para 1 , 2) |
| 2. overview of the facts of the case. (Para 3 , 4 , 5 , 6 , 7 , 8 , 9 , 11) |
| 3. judicial review grounds established. (Para 12 , 13 , 14 , 15) |
| 4. judgment retrospective vs prospective. (Para 17 , 18 , 19) |
| 5. right to tax refund on unlawful taxes. (Para 21 , 22 , 23 , 24) |
| 6. prospective application of federal court rulings. (Para 25 , 26 , 29) |
| 7. compliance with law at the time of assessment. (Para 30 , 32) |
| 8. timeliness and merits of the judicial review claim. (Para 33 , 34 , 35 , 36) |
| 9. distinguishing pertinent facts between cases. (Para 37 , 38 , 39 , 40) |
| 10. legal certainty in retrospective declarations. (Para 41 , 44) |
| 11. public interest in prospective applications. (Para 45 , 46 , 47 , 48) |
| 12. final ruling on the application. (Para 50) |
Introduction
[1] This application for judicial review relates to s 4C of the Income Tax Act 1967 (" ITA ") which the Federal Court in Wiramuda (M) Sdn Bhd v. Ketua Pengarah Hasil Dalam Negeri ; held to be unconstitutional.
[2] The only issue before this Court for determination is whether the respondent had committed an error of law in disallowing the applicant's application for refund of taxes paid under s 4C of the ITA .
Reliefs Sought
[3] The reliefs sought by the applicant in this application are reproduced below:
"(i) A Declaration that the taxes collected by the Director General of Inland Revenue ("DGIR") pursuant to s 4C of the Income Tax Act 1967 (" ITA ") is unconstitutional pursuant to the decision of the Federal Court in Wiramuda (M) Sdn Bhd v. Ketua Pengarah Hasil Dalam Negeri ; (Civil Appeal No: 01(f)-38-08/2022 (W));
(ii) A Declaration that the taxes amounting to RM7,692,569.04 collected by the DGIR from the applicant under s 4C of the ITA are illegal and unlawful;
(iii)A Declaration that the taxes amounting to RM7,692,569.04 collected by the DGIR under s 4C of the ITA from the applicant constitute an unjust enrichment;
(iv)An Order that the DGIR shall return to the applicant within 14 days from the order of this Honourable Court the taxes amounting to RM7,692,569.04 collected from the applicant under s 4C of the ITA ; and
(v) An Order that the DGIR shall pay interest accruing at the rate of 8% on the sum of RM7,692,569.04 (being the taxes that DGIR is to return to the applicant) from the date the said sum was paid in full by the applicant to the DGIR (i.e on 15 March 2018) until the date of the said sum is returned in full to the applicant;
(vi)THAT all necessary and consequential directions and orders be given;
(vii)THAT the costs of this application be costs in the cause; and
(viii) ALL other and further relief which this Honourable Court deems fit and proper."
Factual Background
[4] Centralfields Sdn Bhd is engaged in property development and investment. On 31 May 2016, it received compensation from the Selangor State Authority for land (PT 3790, HSD 155803, Mukim Sungai Buloh, Daerah Petaling) under s 16 of the Land Acquisition Act 1960 . The land was held as stock-in-trade by the company.
[5] On 21 August 2017, the company submitted its tax return (Borang C) for the Year of Assessment 2016 in compliance with s 77A of the Income Tax Act 1967 .
[6] The applicant declared in its YA 2016 tax return that the compensation from the compulsory land acquisition was taxable under s 4C of the Income Tax Act 1967 .
[7] As the tax return was filed, the assessment for YA 2016 is deemed to have been made under s 90 of the same Act.
[8] No appeal was lodged by the applicant to the Special Commissioner of Income Tax (SCIT) against the assessment raised on 21 August 2017 for YA 2016 under s 99 of ITA 1967.
[9] On 9 December 2022, the Federal Court ruled in the Wiramuda (M) Sdn Bhd v. Ketua Pengarah Hasil Dalam Negeri ; case that s 4C of the Income Tax Act 1967 is unconstitutional.
[10] Citing this decision, the applicant wrote to the respondent on 27 June 2023 requesting a tax refund for YA 2016 and demanded a response by 25 July
