High Court Dismisses Judicial Review of RPGT Assessment, Requires Exhaustion of Appeal to Special Commissioners Under Section 18 RPGT Act 1976

Introduction

The High Court of Malaysia, in a decision delivered by Judicial Commissioner Aslam Zainuddin J, dismissed an application for judicial review seeking to quash a Notice of Assessment issued under the Real Property Gains Tax Act 1976 (RPGT Act). The applicant, Emas Kiara Industries Berhad (formerly known as such), challenged a RM1.95 million tax and penalty assessment related to a share disposal transaction. The court ruled that the applicant must first exhaust the alternative statutory remedy of appealing to the Special Commissioners of Income Tax under Section 18 of the RPGT Act, rather than pursuing judicial review. This case underscores the preference for domestic remedies in tax disputes unless exceptional circumstances exist.

Case Background

Emas Kiara Industries Berhad, an investment holding company previously listed on Bursa Malaysia, was the immediate holding company of Noblecorp Land Sdn Bhd, which in turn held Noblecorp Property (Sabah) Sdn Bhd. In July 2013, Noblecorp Property entered into a Sale and Purchase Agreement to acquire approximately 94 acres of land in Sepangar Bay, Sabah, from K.K.I.P. Sdn Bhd (KKIP) for RM33.45 million. The land titles required approval from the Director of Lands and Surveys of Sabah for any transfer or subdivision, making the acquisition conditional on such government consent.

Due to initial subdivision rejections, a Supplementary Agreement was signed in October 2014, revising the land parcels to six subdivided plots. Meanwhile, in November 2014, Emas Kiara disposed of 100% shares in Noblecorp Land to Intan Kuala Lumpur Sdn Bhd for RM36.08 million (after adjustments), completing the transaction in September 2015. The land transfers were only approved in 2019.

The Inland Revenue Board (IRB, as respondent) issued a letter in March 2021 demanding an RPGT return for the share disposal, alleging it involved "real property company" (RPC) shares under the RPGT Act. Despite the applicant's explanations that no RPGT applied due to the conditional nature of the land acquisition under Paragraph 16 of Schedule 2 (requiring state approval), the IRB issued a Notice of Assessment in November 2021 for RM1,951,187.25 in tax and penalties. The applicant sought certiorari to quash this, declarations on Paragraph 16's applicability, and costs via judicial review.

The core legal questions were: (1) Whether the share disposal triggered RPGT liability, given the delayed state approval for land acquisition; (2) Applicability of Paragraph 16 of Schedule 2 (for acquisitions needing government approval) versus Paragraph 15(a) (general rule); and (3) Whether judicial review was appropriate or if the applicant must appeal to the Special Commissioners.

Arguments Presented

The applicant argued that the share disposal in November 2014 did not involve RPC shares because Noblecorp Property had not yet acquired the land under Paragraph 16 of Schedule 2, as state approval was only granted in 2019. They emphasized that the Sale and Purchase Agreement and Supplementary Agreement were conditional contracts, and the Supplementary Agreement did not waive the statutory requirement for Director of Lands and Surveys approval under the Sabah Land Ordinance. The applicant provided legal opinions from Sabah-based lawyers confirming this and submitted documents showing no "acquisition" occurred at disposal time. They contended the IRB's decision ignored these facts, applied the wrong provision (Paragraph 15(a)), and involved illegality, irrationality, and procedural impropriety, justifying judicial review without exhausting appeals.

The respondent (IRB) countered that judicial review should be dismissed for lack of exceptional circumstances, as the decision-making process was neither illegal, irrational, nor procedurally improper. They argued the disputes over facts and law—such as whether the Supplementary Agreement excluded state approval—should be resolved by the Special Commissioners via appeal under Section 18, not the High Court. The IRB maintained that Paragraph 15(a) applied since no state approval was explicitly required post-Supplementary Agreement, tainting the shares as RPC at disposal. They highlighted exchanges of correspondence and meetings where the applicant could have appealed but chose judicial review instead, and urged ventilation of issues before the specialized tax tribunal.

Legal Analysis

The court applied principles of judicial review under Order 53 of the Rules of Court 2012, focusing on whether certiorari should issue to quash the assessment. It emphasized that judicial review is discretionary and supervisory, not appellate, citing Council of Civil Service Unions v Minister for the Civil Service [1985] AC 374 (GCHQ case) for grounds of illegality, irrationality, and procedural impropriety. However, the overriding issue was the availability of an alternative remedy under Section 18 of the RPGT Act, which allows appeals to the Special Commissioners within 30 days of assessment service, mirroring income tax appeal procedures.

Drawing from Government of Malaysia v Jagdis Singh [1987] 1 MLJ 184, the court noted certiorari is not granted if an effective alternative remedy exists, as parties should exhaust domestic processes first. This was reinforced by Baldwin & Francis Ltd v Patents Appeal Tribunal [1959] AC 663, affirming the High Court's discretion, and R v Hillingdon London Borough, ex p Royco Homes Ltd [1974] QB 720, stating certiorari issues only absent an equally convenient remedy. In R v Hallstrom, ex p W [1986] 2 WLR 24, factors like remedy efficacy, speed, and technical expertise were considered, favoring the Special Commissioners for tax matters.

The court distinguished this from exceptional cases like Metacorp Development v Ketua Pengarah Hasil Dalam Negeri [2011] MSTC 30-024, where judicial review was allowed despite alternatives due to clear illegality, but found no such "scintilla of clear lack of jurisdiction or blatant failure" here. It rejected collateral attacks on non-null decisions, per Boddington v British Transport Police [1999] 2 AC 143, and noted the applicant's challenge involved merits (tax liability interpretation), better suited for appeal. Precedents like R Rama Chandran v Industrial Court [1997] 1 MLJ 147 underscored review's focus on process, not substance, absent constitutional violations.

The distinction between Paragraphs 15(a) and 16 turned on whether state approval was required—a factual/legal dispute for the Commissioners, not the court.

Key Observations

• On alternative remedies: "Therefore it is my view taken under advisement that the applicant should have appealed to the Special Commissioners instead of knocking on the doors of the High Court."
• On judicial review's nature: "Certiorari is an order which brings up into the High Court a decision... of an inferior court or tribunal or public authority for it to be quashed... it is an extraordinary and discretionary exercise of jurisdiction of the High Court."
• Dismissing without exceptional circumstances: "I dismissed this application due to the fact that I didn’t find a scintilla of clear lack of jurisdiction or blatant failure to perform some statutory duty or serious breach of principles of natural justice by the respondent."
• Preference for specialized bodies: "The issues and facts in dispute ought to be ventilated before the SCIT [Special Commissioners of Income Tax]."
• Final rationale: "The applicant is asking this court, via a judicial review route, to make a final determination of its rights... when, in effect, this is in the realm or domain of the Special Commissioners of Income Tax to decide upon."

Court's Decision

The High Court dismissed the judicial review application in its entirety, refusing certiorari, declarations, costs, and further reliefs. No stay of proceedings was granted, leaving the assessment intact pending appeal. Practically, this compels the applicant to file Form Q within 30 days (or seek extension) to the Special Commissioners, potentially leading to a full merits hearing on RPGT applicability. The decision reinforces that tax assessments under the RPGT Act are presumptively reviewable via statutory appeal, limiting judicial review to egregious cases of ultra vires or nullity. For future cases, it signals courts' reluctance to intervene in interpretive tax disputes, promoting efficiency in the tax adjudication system and reducing High Court overload, though taxpayers in clear illegality scenarios may still seek review as in Metacorp .