JUDGMENT

Azimah Omar JCA:

A. Background Facts & Tax Law On Waived Debts

[1] Normally, we would address the background facts separately before we delve into the laws surrounding the factual matrix. However, having heard the oral and written submissions by both parties, we find that the subject matter of this appeal is complex and overwhelming in concepts involving accounting, trading, and taxation (more so than it is a fact-laden case). Thus, we are of the view that it is appropriate for us to directly discuss the law and the technical concepts as and when they arise, as we gradually open up the facts of the Appeal.

[2] The Appeal before us is an Appeal against the Learned High Court Judge's ("Learned Judge") decision in affirming the Special Commissioner of Income Tax's ("SCIT") decision that the loan debts which were waived during the relevant/subject Year of Assessment shall be treated as taxable income despite the admitted and undisputed fact that the taxpayer already had been fully taxed on the loan amount (by not deducting the loan debt as a deductible operating expense/liability and instead treating the loan as a gross income) during the preceding Year of Assessment ("YA") before the loan debt was eventually waived.

[3] For the sake of brevity and clarity, the prior YA in which the loan debt was incurred shall be referred to as 'X' ("(X) / YA (X)") while the subject YA in which the loan debt was eventually waived shall be referred to as 'Y' ("(Y) / YA (Y)"). For a pictorial understanding of (X) and (Y), illustration A below refers:

[4] The entirety of the Appeal solely rested upon the proper interpretation and true effects of s 30(4) of the Income Tax Act 1967 ("ITA"). The dissonance and befuddling nature of the provision was so acute that even the parties were still at extreme odds with each other despite being in agreement that somehow the provision 'did not apply' in the Appeal before us. So much so, during the Hearing of the Appeal, the parties were ordered to submit further submissions specifically on their respective approaches on 'how' the provision 'did not apply' and how a forgiven debt should be treated in relation to their respective answers.

[5] We tread carefully upon all our references on how the provision 'did not apply' as it gradually became apparent to us that both parties clearly were not mutually referring to the singular locus classicus meaning of a provision being not applicable (in that the provision is not relevant to be considered upon the facts of the Appeal).

[6] It was clear to us that despite the taxpayer — Appellant's agreement of the provision being 'inapplicable', the taxpayer remained steadfast that the same provision remains 'relevant' as the lex specialis to determine how the waived debt during (Y) ought to be treated when there was no tax release (deduction) enjoyed during (X).

[7] As a matter of fact, the Revenue's admission and agreement of the inapplicability of the provision is the pinnacle of puzzlement, as the inapplicability of the provision to yield/charge the waived debt as taxable income under the very provision would directly contradict the Revenue's insistence on taxing the waived debt as income.

[8] This conundrum shall be yielded to legal logic and reason further in this judgment. At this early juncture, it is only apt for us to appreciate the background facts culminating in this Appeal.

[9] During the YA (X), Multi-Purpose Credit Sdn Bhd ("Taxpayer/ Appellant") owed loan borrowings to the sum of RM77,305,831.00 to Multi-Purpose Capital Holdings Berhad ("MP Capital") and RM1,157,036.00 to Multi-Purpose Venture Partners Sdn Bhd ("MP Venture") totalling up to RM78,462,867.00 ("Debt sum / Waived sum / Loan sum / fiat benefit").

[10] The Taxpayer's primary business is essentially trading and dealing with credit services, facilities, and loans. The Debt sum was incurred in the form of loans granted by MP Capital and MP Venture to the Taxpayer in order to enable the Taxpayer to conduct i