JUDGMENT

Gopal Sri Ram JCA:

The Background

The appellant is a private limited company. It is one of several wholly owned subsidiaries of the Yayasan Sabah or the Sabah Foundation ("the Foundation"). The respondent is the Director General of Inland Revenue.

In 1966, the Foundation was approved as an institution of a public character under the provisions of the Sabah Income Tax Ordinance 1956 ("the Ordinance"). That meant that gifts of money made to the Foundation were tax deductible in the hands of the donor. Later, when Parliament enacted the Income Tax Act 1967 ("the Act"), it repealed the Ordinance. But the approval that the Foundation received under the Ordinance remained intact.

Between 1979 and 1985, the Chief Minister of the State of Sabah was the chairman of the Foundation as well as the chairman of the appellant. During that period, there was written a letter from the State Ministry of Finance to the managing director of the group of companies that were the subsidiaries of the Foundation. It is dated 28 December 1979. It is an important document from the respondent's point of view. The learned judge produced it in his judgment. I shall do likewise. In essence, this is wha