JUDGMENT

Aziah Ali J:

(1) The appellant appeals against the decision of the Special Commissioners of Income Tax ("SCIT") dated 2 April 2009 allowing the appeal by the respondent and setting aside the assessment of real property gains tax dated 25 November 2002 amounting to RM28,603,700 made by the appellant against the respondent.

(2) Relevant Facts Admitted Or Proved

(i) The respondent is a company in the United Kingdom and having a registered office at 400, Capability Green, Luton, Bedfordshire, England and in Malaysia at 4th Floor, Wisma Consplant 1, No. 2, Jalan SS 16/4, Subang Jaya, Selangor;

(ii) The respondent owned and operated the oil palm plantations known as West Estates, South Estate, North Estate and East Estate on several pieces of agricultural land described as Lot Nos. 2601, 2602, 2664, 2666, 2697, 2698 and 2700 all situated in Mukim Jugra, District of Selangor ("the said land"). The respondent acquired the said land before 1 January 1970;

(iii) By a sale and purchase agreement dated 23 April 1999 ("Sale and Purchase Agreement") executed between the appellant as vendor and its related company, Pulau Carey Properties Sdn. Bhd. as purchaser ("purchaser") the appellant agreed to sell and the purchaser agreed to purchase the said land at a total purchase consideration of RM202,500,000 ("purchase price");

(iv) The Sale and Purchase Agreement is a conditional agreement. Clause 2.1 of the Agreement reads as follows:

2.1 This Agreement is subject to and conditional upon the approval for the sale herein being duly obtained from the following:

(a) the Foreign Investment Committee (hereinafter referred to as the "FIC");

(b) if applicable the Estate Land Board (hereinafter referred to as "the Board").;

(v) None of the above approvals has been obtained within the six months period from the date of the Sale and Purchase Agreement (the "Approval Period"). No evidence the Approval Period has been extended. In fact the two approvals have never been obtained;

(vi) Other relevant terms of the Sale and Purchase Agreement are:

(a) the purchaser to pay a deposit of RM20,250,000 upon execution of the Sale and Purchase Agreement - see cl. 3.1(a); and

(b) the balance purchase price of RM182,250,000 to be paid within six months from Effective Date (the Completion Date);

Note that the "Effective Date" is defined in cl. 2.3 of the Sale and purchase Agreement to mean the date of approval of the FIC whichever is later or such extended date as mutually agreed in writing.

(vii) The purchaser had not made any payment at all towards the purchase price. Even the deposit was not paid. The payment of the deposit was later waived when the Sale and Purchase Agreement was cancelled.

(viii) The parties did not execute an instrument of transfer in Form 14A and the transfer of the said land to Pulau Carey Properties Sdn. Bhd. had never been registered in the relevant Land Office pursuant to the provision of the National Land Code;

(ix) The purchaser had not been given vacant possession of the said land but was allowed to incur expenses in connection with the carrying out of a feasibility study of a proposed project to be undertaken on the said land;

(x) The disposal was reflected in the Purchasers Audited Account from 31 December 1999 to 31 December 2002.

(xi) The purchaser (Pulau Carey Properties Sdn. Bhd.) had incurred RM12,993,495 as a development expenditure done to the said land;

(xii) The Directors Report and Audited Financial statement for financial year ended 30 Jun 2003 of the purchaser shows that the purchaser also rent out the said land to Golden Hope Plantations (Peninsular) Sdn. Bhd., a related company for an amount of RM1,080,000 per annum;

(xiii) The appellant had declared the said land as its asset in their account after the Sale and Purchase Agreement was signed;

(xiv) By letter dated 21 January 2003, Ernst & Young Consultants Sdn. Bhd. on behalf of the respondent urged the appellant to discharge the assessment