The court emphasized that findings of fact by Special Commissioners are unassailable, and that income derived from franchisees operating outside Malaysia is exempt from taxation under specific provisions of the Income Tax Act.

Hamid Sultan Bin Abu Backer J

Hamid Sultan Bin Abu Backer J

(Delivering Judgment of The Court)

[1]This is our judgment in respect of the appellant's appeal and the respondent's cross appeal. We heard both the appeals on 5.12.2012 and allowed the appellant's appeal and dismissed the respondent's cross appeal with costs to the appellant. My learned brothers, Datuk Linton Albert and Datuk Wira Mohtarudin bin Baki, have read the judgment in draft form and approved the same.

[2]The appeal revolves on a complaint of the appellant that the learned High Court judge interfered in the finding of facts of the Special Commissioners of Income Tax (SCIT) and to drive home the point relies on the case of Chua Lip Kong v Director-General of Inland Revenue

"Their Lordships cannot stress too strongly how important it is that, in every Case Stated for the opinion of the High Court, the Special Commissioners should state clearly and explicitly what are the findings of fact upon which their decision is based and not the evidence upon which those findings, so far as they consist of primary facts, are founded. Findings of primary facts by the Special Commissioners are unassailable. They can be neither overruled nor supplemented by the High Court itself; occasionally they may be insufficient to enable the High Court to decide the question of law sought to be raised by the Case Stated, but in that event it will be necessary for the Case to be remitted to the Commissioners themselves for further findings. " (emphasis added)

[3]At this stage of our judgment itself, we must say that courts exercising the appellate jurisdiction have over the years placed upon themselves various levels of self-imposed restrictions for appellate interference on the finding of facts of trial courts or tribunal, or statutory appeal by case stated as in the instant case [see Colgate Palmolive (M) Sdn Bhd v Yap Kok Foong and Another Appeal Hari Shankar v Rao Girdhari Lai AIR 1963 SC 698 ].

[4]When dealing with appellate interference on finding of facts, it is important to appreciate that the Evidence Act 1950 categorises facts into two types. They are physical fact and psychological fact. Physical facts under the Act refer to anything, state of thing, or relations of thing capable of being perceived by the senses. Psychological facts refer to any mental condition of which any person is conscious of.

[5]As a general rule finding of facts of trier of facts is rarely disturbed by appellate court more so when it relates to physical facts. As long as the trier of facts has directed his mind to the relevant issues, and had acted in accordance with the law and the decision passes the test of reasonableness, the finding of facts relating to physical facts will not be ordinarily disturbed notwithstanding the judgment is brief and direct to the point. However, when it relates to psychological facts the trier of facts is expected to give more cogent reasons to ensure every aspect of the relevant evidence has been considered in the right perspective to pass the test of reasonableness, [see Lee Ing Chin @ Lee Teck Seng & Ors v Gan Yook Chin & Anor animus testandi, undue influence or fraud etc. or in civil cases relating to conspiracy or motive etc. When it relates to statutory appeals concerning SCIT the test for appellate interference is much stricter [see Edwards v Bairstow & Harrison 36 TC 207 ].

Brief Facts

[6]The SCIT unanimously allowed the appellant's appeal before them on the following issues, namely: (i) whether or not the following payments (overseas) received under the franchise agreement entered by the appellant with foreign entities are exempted under Paragraph 28 Sc