The court upheld the Director General's discretion in determining tax basis periods, emphasizing the need for fairness among taxpayers and adherence to statutory provisions.

GROUNDS OF JUDGMENT

Introduction

By way of enclosure one (1), the plaintiff sought for the following prayers:

“1. Declarations that:

(a)The Director General of (the) Inland Revenue Board has wrongfully determined under Section 21 of the Income Tax Act 1967 (Act 53) (Revised 1971) that the basis period of the Plaintiff is as follows:

1st May 1998 to 30th April 1999 to be taxed for the year of assessment 2000 on preceding year basis;

1st May 1999 to 31st December 2000 to be taxed for the year of assessment 2000 on current year basis;

1st January 2001 to 31st December 2001 to betaxed for the year of assessment 2001;

and such determination by the Director General of Inland Revenue Board is consequently invalid and/or null and void.

(b)Alternatively, the Director General of the Inland Revenue Board in arriving at his decision (as) set out in paragraph (a) above, erred in law and on the facts in invoking the anti avoidance provisions embodied in Section 10 of the Income Tax (Amendment) Act 1999.

(c) The Director General of the Inland Revenue Board ought to have determined the basis periods for the Plaintiff as follows:

1stMay 1998 to 31st December 1999 to be taxed for the year of assessment 2000 on preceding year basis;

1st January 2000 to 31stDecember 2000 to be taxed for the year of assessment 2000 on current year basis.

(d) The Plaintiff should be exempted from tax for the period from 1st May 1998 to 31st December 1999.

(e) In the event the Plaintiff has paid any monies as tax for the basis period as determined by the Director General of (the) Inland Revenue Board as set out in paragraph (a) above,such monies (shall) be refunded forthwith to the Plaintiff.

2. Costs; and

3. Such further or other relief as the Court deems fit and proper.”

Facts of the case

The plaintiff was formerly known as Berjaya Prudential Assurance Berhad which was incorporated on December 6, 1983. On April 6, 1998, a company known as Sri Han Suria Sdn Bhd (“SHSSB”),which was incorporated on December 8, 1997, acquired 100% of the shares of Berjaya Prudential Assurance Berhad thereby making it a wholly owned subsidiary of SHSSB. Thereafter, Berjaya Prudential Assurance Berhad changed its name to Prudential Assurance MalaysiaBerhad -- the present plaintiff.

Prior to the acquisition of the shares of the plaintiff by SHSSB, the plaintiff's financial year end was April 30th -- which was in line with the year end ofits holding company known as Berjaya Capital Berhad. Whereas SHSSB's year end is on December 31st . As provided for under section 168 (1) (b) of the Companies Act, 1965, the plaintiff being a subsidiary company of SHSSBwas obliged to change its financial year so that it coincides with that of its holding company, namely, SHSSB. Thus, according to the plaintiff with its change in the accounting year end to that of December 31st , the accountsof the plaintiff would be made up as follows:

By letter dated July 13, 1998, the plaintiff wrote to Bank Negara Malaysia and informedthe Governor that the plaintiff was changing its name to Prudential Assurance Malaysia Berhad and further that the plaintiff was also changing its financial year end to December 31st . So, according to the plaintiff,its accounts for 1998 would be from May 1, 1998 to December 31 1998 -- a period of 8 months. On October 23, 1998 -- which was the budget day, the Minister of Finance whilst presenting the 1999 budget in Parliament announced that the tax assessment system basedon income derived in the preceding year would be changed to the current year, beginning from the year 2000. In order to facilitate this change, the Minister of Finance also announced a tax waiver of income derived in 1999. So it was pointed out that by rea