Etiqa Family Takaful Berhad (Dahulunya Dikenali Sebagai Etiqa Takaful Berhad) v Ketua Pengarah Hasil dalam Negeri (W-01(A)-726-09/2022)

There are two appeals being heard together. Appeal 726 is the appeal of Etiqa Family Takaful Berhad (Taxpayer) against the decision of the High Court (HC) dismissing its appeal for Year of Assessment (YA) 2011,2012 and 2013. Appeal 746 is the appeal by the Director General of Inland Revenue (Revenue) against the decision of the HC in allowing the Taxpayer's appeal for YAs 2008,2009 and 2010.

The Taxpayer is in the principal business of managing the general and family takaful business. From 1-12-2007, the Taxpayer also commenced managing Takaful investment-linked business upon the transfer of the Takaful assets, liabilities and business of Mayban Takaful Berhad to it.

The Revenue raised notices of additional assessment (Form JA) for YAs 2008 to 2013 with additional tax payable and penalties as set out below: DateYAAdditional assessment including penalties18.7.20162008RM2,624,936.9730.12.20162009RM3,589,065.8730.12.20162010RM6,279,723.8927.12.20162011RM10,383,369.2528.12.2062012RM26,007,964.7328.12.20162013RM26,810,914.96 The Taxpayer being aggrieved by the Revenue's decision filed notices of appeal (Form Q) for the YAs in question.

On 19-2-2021, the Special Commissioners of Income Tax (SCIT) disallowed the Taxpayer's appeal. An appeal to the HC ensued. On 14- 9-2022, the HC allowed in part the Taxpayer's appeal.

The Grounds of Judgment (GOJ) of the HC Judge dated 15-11-2022 is to be found in encl. 27/10-25.

The HCJ dealt with the $ 1^{\mathrm{st}} $ issue of whether the SCIT was right in holding that the commission expenses on the Wakalah Fee could not be deducted as the expenses of the Shareholders Fund under section 33 Income Tax Act 1967 (ITA). It was accepted in paragraph 27 that the Taxpayer must have incurred the commission expenses paid to the Takaful agents but the question was whether section 33(1) ITA automatically applies.

The HCJ had no problem accepting the Taxpayer's submission that section 33(1) ITA is a basket provision where all outgoings and expenses exclusively incurred in the production of gross income are tax deductible (paragraphs 28 and 32). In the same paragraph 32, the HCJ posed the real question to be "will this basket provision cover the commission expenses in the context of a Takaful business" to which the HCJ answered "I do not think so".

This was next stated in paragraphs 33, 34 and 35:

The learned SRC submitted that the ITA treats the Takaful business as a separate and distinct business. It is for this reason, according to the learned SRC, that Parliament inserted section 60AA of the ITA to deal with the specific business of a Takaful operator. Thus, the issue of the allowable expense of a takaful operator must be construed in light of the purpose and intention behind the specific provisions contained in section 60AA of the ITA that governs the takaful business.

I find merits in this line of argument. If indeed s 33(1), the so-called basket provision, is sufficient to cover the commission expenses incurred by the appellant, why is the necessity for Parliament to enact s 60AA of the ITA in the first place? It is trite that Parliament is assumed to know the law that it enacts. Parliament does not act in vain by legislating for the sake of legislating.

I find support in the said proposition in the judgment of Abdoolcader SCJ in Foo Loke Ying & Anor v Television Broadcasts Ltd & Ors [1985] 2 MLJ 35 SC, who held that: The court however is not at liberty to treat words in a statute as mere tautology or surplusage unless they are wholly meaningless. On the presumption that Parliament does nothing in vain, the court must endeavour to give significance to every word of an enactment, and it is presumed that if a word or phrase appears in a statute, it was put there for a purpose and must not be disregarded."

The HCJ then went to consider whether the SCIT had correctly concluded that the Taxpayer was negligent within the meaning of section 91(3) ITA. It was noted in paragraph 38 that the Taxpayer's returns were filed within the statutorily prescribed time and the documents requested by the Revenue were duly provided despite the tax audit being conducted 6 years upon the expiration of YAs 2008 to 2010. The HCJ found the only fault, if at all, of the Taxpayer to be the different interpretation of the law which was an erroneous impression but a reasonable one. It was concluded at paragraph 41:

With respect, a reasonably different interpretation of the relevant provisions in the ITA can hardly be held as negligence within the meaning of s 91(3) of the ITA. There is nothing in the notes of proceedings that shows that there was a breach of the duty of care on the part of the appellant."

Accordingly, the SCIT was found to have erred in concluding that the Taxpayer was negligent and that the Revenue had not successfully discharged its burden of proof under section 91(3) ITA in relation to the notices of additional assessment for YAs 2008 to 2010.

For the same reason under section 113(2) ITA, the SCIT had erred in concluding the Revenue was right in imposing the penalties.

In paragraph 45, the findings of the HC were as follows:

For the reasons aforesaid, the finding of this Court is as follows:

The commission expenses incurred by the appellant in the Shareholders' Fund for the YAs 2008 to 2013 to earn the Wakalah Fee from the General Takaful Fund are not deductible as the expenses of the Shareholders' Fund under s 33 of the ITA.

In the absence of any proof of intentional wrongdoing on the appellant's part the DGIR had not successfully discharged its burden of proof under s 91(3) of the ITA. There was no legal basis for the DGIR to exercise his discretion in imposing a penalty against the appellant under s 113(2) of the ITA for the YAs 2008 to 2013." Order of the HC [13] The Order of the HC is to be found in encl. 27/30-32: "... HEREBY ORDERED that:

The Appellant's appeal in relation to the Notice of Additional Assessment ("Form JA") for the year of assessment ("YA") 2008 dated 18.7.2016, Form JA for the YA 2009 dated 30.12.2016 and Form JA for the YA 2010 dated 30.12.2016 is allowed on the basis that the said assessments are time-barred under Section 91(3) of the Income Tax Act 1967 ("ITA");

The Appellant's appeal regarding the penalty imposed by the Respondent under Section 113(2) of the ITA in relation to Form JA for the YA 2008 dated 18.7.2016, Form JA for the YA 2009 dated 30.12.2016 and Form JA for the YA 2010 dated 30.12.2016 is allowed as a whole;" Our decision [14] At the start of proceedings, we were informed that in the Order of the HC, the Taxpayer's appeal regarding the penalty was only allowed for YAs 2008, 2009 and 2010. However, in the GOJ, the finding was one of no basis for the imposition of penalties for YAs 2008 to 2013. Parties were directed to proceed on the basis of the Order. Appeal 726 by the Taxpayer Whether commission expenses are deducted under section 33(1) ITA [15] The sole issue to be decided in appeal 726 is whether the commission expenses incurred by the Taxpayer in the Shareholders Fund for YAs 2008 to 2013 to earn the Wakalah Fee from the General Takaful Fund are deductible as the expenses of the Shareholders Fund under section 33(1) ITA. [16] The determination of this issue would also require a consideration of section 60AA(9) ITA. For ease of reference, we now set out sections 33(1) and 60AA(1) and (9). "Adjusted income generally

(1) Subject to this Act, the adjusted income of a person from a source for the basis period for a year of assessment shall be an amount ascertained by deducting from the gross income of that person from that source for that period all outgoings and expenses wholly and exclusively incurred during that period by that person in the production of gross income from that source, including-... Takaful Business 60AA. (1) This section shall apply for ascertaining the adjusted income for the basis period for a year of assessment from the takaful business of an operator.

The adjusted income of the shareholders' fund, for the basis period for a year of assessment of a takaful operator resident for the basis year for that year of assessment shall be ascertained by-

taking the aggregate of-

deducting from that aggregate-

where subparagraph (a)(ii) is applicable for that period to gross proceeds receivable in connection with any investment or right, the cost of acquiring and realizing the investments or rights;

(ii) so much of the amount of qard incurred in that period in connection with the family fund;

(iii) the amount of management expenses incurred by him in that period in connection with his family and general businesses." (Emphasis added) With regard to section 60AA(1) and (9), the legal provision is as it stood at the relevant time since there were subsequent amendments. [17] The details and the amount of the commission expenses incurred by the Taxpayer are not in dispute. The HCJ noted in paragraph 17 GOJ that the Revenue through its witness RW1 did not dispute that commission fees were incurred by the Taxpayer to earn the Wakalah Fee. The HCJ had in paragraph 27 also accepted that the Taxpayer must have incurred the commission expenses paid to the Takaful agents. Section 33(1) vis-a vis section 60AA(9) [18] The shoulder note to section 33 reads "adjusted income generally". [19] The shoulder note to section 60AA states "Takaful business" such that it cannot be gainsaid that it is a specific provision dealing with takaful business. Further, it appears under Chapter 8 on special cases. Then comes subsection (9) where it provides that the adjusted income of the shareholders' fund shall be ascertained by taking the aggregate amount of specified items deducting from that aggregate specified items" (all emphasis added). The only items allowed to be deducted of the shareholders fund are those specified in subsection (9)(b) which are 3 items, namely cost of acquisition and realising of investment, qard and management expenses. It clearly does not include commission expenses. [20] That was the prevailing law then as at YA2008 and the ensuing years until YA2014. The YAs in question for this appeal are for 2008 to 2013. [21] Section 60AA was inserted by Finance Act 2007 (Act 683). Its intention can be seen in the Explanatory Statement (ES) to the Bill as follows: "12. Clause 15 seeks to amend section 60AA of Act 53 to provide for the specific provisions for ascertaining the taxability of takaful business which comprises of family solidarity business, general business, inward retakaful business, offshore takaful business and re-takaful business. The proposed amendment also seeks to address syariah compliance requirements such as the payment of wakalah fee paid by participants to the takaful operator for managing the takaful funds, the distribution of profits to participants in accordance with the mudharabah model, the treatment on qard paid by the operator and the management fees incurred by the operator. This amendment has effect for the year of assessment 2008 and subsequent years of assessment." (Emphasis added) [22] It will be clear that the intention was to have a specific provision to ascertain the taxability of takaful business and to address syariah compliance requirements. Parliament's intention then was to treat takaful business as a separate and distinct business vide section 60AA. It is this provision that one turns to when dealing with takaful business rather than to section 33(1). [23] Section 60AA is to be construed in a manner that would promote the purpose or object underlying it. This would accord with section 17A Interpretation Acts 1948 and 1967 which provides that: "Regard to be had to the purpose of Act

In the interpretation of a provision of an Act, a construction that would promote the purpose or object underlying the Act (whether that purpose or object is expressly stated in the Act or not) shall be preferred to a construction that would not promote that purpose or object." [24] The purposive approach behind a taxing law has also been accepted by our courts. In Lembaga Hasil Dalam Negeri Malaysia v Alam Maritim Sdn Bhd [2014] 3 CLJ 421, FC, it was said as follows at page 433: [20] After tracing the history of how courts treat the interpretation of taxing Acts, culminating with the promulgation of s.17A of the Interpretation Acts 1948 and 1967 and subsequent cases, the purposive approach is here to stay. The intention of Parliament therefore cannot be discounted even if the matter in the Act pertained to taxing issues." (Emphasis added) [25] In paragraph 19 of the same case, it was also stated: [19] In Palm Oil Research and Development Board Malaysia & Anor v Premium Vegetable Oils Sdn Bhd [2004] 2 CLJ 265; [2005] 3 MLJ 97, Steve Shim CJSS when discussing s. 17A of the Interpretation Acts 1948 and 1967 enjoined the purposive approach to statutory interpretation, in that it equally applied to taxing statutes. His Lordship in no uncertain terms said: The duty of a court is, in my opinion, in all cases the same; whether the Act to be construed relates to taxation or any other subject, viz. to give effect to the intention of Legislature." (Emphasis added) [26] Taking the Taxpayer's contention that section 33(1) ITA is a basket provision where all outgoings and expenses exclusively incurred in the production of gross income, and that it covers commission expenses; the question still arises as to why was it necessary for Parliament to enact section 60AA vide Finance Act 2007. The HCJ was correct to have seen the issue in that context. [27] If it is not clear enough that section 60AA((9)(b) would be the definitive section on allowable expenses for a takaful business operator for which commission expenses are not deductible, section 60AA(9)(b) was subsequently amended to insert a new subparagraph (b)(iv) to allow for such deduction. This amendment was done through Finance Act 2014 (Act 761). [28] Section 60AA(9)(b) with the original (i), (ii) and (iii) and the newly inserted (iv) in bold, is set out as follows: "(b) deducting from that aggregate-

where subparagraph (a) (ii) is applicable for that period to gross proceeds receivable in connection with any investment or right, the cost of acquiring and realizing the investments or rights;

(ii) so much of the amount of qard incurred in that period in connection with the family fund;

(iii) the amount of management expenses incurred by him in that period in connection with his family and general business; and

(iv) commission payable and discounts allowed by him in that period in connection with his family and general business" The amendment was from YA2014. [29] It follows that if the then unamended section 60AA(9)(b)(i), (ii) and (iii) allowed the deduction of commission expenses, there would be no necessity to insert subparagraph (iv) to now again allow it. If indeed Parliament had the intention to allow the deduction of commission expenses before YA2014, it would have done so earlier in Finance Act 2007 when it introduced the specific provision to ascertain the taxability of takaful business for YA2008 onwards. [30] We refer to the ES to the Bill enacting Finance Act 2014 explaining the rationale for the amendment: Clause 16 further seeks to insert sub subparagraphs 60AA(9)(b)(iv) and (10)(b)(iv) into Act 53 to provide that commission payable or discounts allowed by the operator in connection with the operator's general business is allowed as a deduction in arriving at the adjusted income of the operator. These amendments have effect for the year of assessment 2014 and subsequent years of assessment." (Emphasis added) [31] This time, the intention was to provide that commission expenses are allowed to be deducted. [32] Parliament certainly does not act in vain and is presumed to know the law it enacts. It did not act in vain in enacting Finance Act 2007 and Finance Act 2014 with regard to takaful business and what was allowed to be deducted. Principle of generalia specialibus non derogant [33] Having found that section 60AA(9)(b) is the specific provision dealing with takaful business and the taxability thereof, it follows that this being a specific provision, prevails over the general provision of section 33(1). [34] For the principle of generalia specialibus non derogant and its application we refer to Majlis Agama Islam Selangor v Bong Boon Cheun & Ors [2009] 6 CLJ 405 as follows: [16] ... it is evident that the Rules Committee had intended to establish a specific framework for the determination of applications for judicial review. In my view O.53 of the RHC was specifically drafted for that purpose. ... As a specific rule was put in place for judicial review proceedings, the more general basis for intervention under O.15 r. 6(2)(b) of the RHC cannot be invoked. The maxim "generalia specialibus non derogant" would apply. ..." (Emphasis added) [35] Although this was a judicial review matter under the then Rules of High Court 1980, we find there is no good reason why the principle of a specific provision prevailing over a general provision cannot apply equally in a tax legislation. This is all the more so when the purposive approach behind tax legislation has been accepted. Application of section 52 [36] It was the Taxpayer's contention that the principle of generalia specialibus non derogant does not apply due to section 52 ITA. [37] The aforesaid provision states as follows: "Modification of Part III in certain special cases

In a case where any provision of this Chapter applies, the foregoing Chapters shall also apply but shall be modified in their application to the extent necessary to conform with that provision; and, if in that case there is any inconsistency between that provision and any provision of the foregoing Chapters, that provision of those Chapters shall be void to the extent of the inconsistency." (Emphasis added) [38] We turn to the arrangement of sections under which Part 111 ITA is to be found and the various Chapters under it:

Adjusted income generally

Modification of Part III in certain special cases 60AA. Application of section 60 and 60A to a takaful business" [39] Section 33 is in Chapter 3 and section 60AA is in Chapter 8, and both sections are in Part 111. The Taxpayer submitted that section 52 enables section 33, being in the foregoing Chapter, to apply over that of section 60AA. Reference was made to the Privy Council in The Great Eastern Life Assurance Co Ltd v Director General of Inland Revenue [1987] 2 MLJ 529 which found that there was no inconsistency between section 60 on insurance with the general provisions of sections 3 and 4, and thus these sections 3 and 4 were applicable. At pages 531-532 this was stated: "The Special Commissioners dealt with the argument very simply. Section 60, in their view, was not concerned with chargeability to tax but merely with the computation of the adjusted income upon which tax is to be charged. ... There is no inconsistency between section 60 and sections 3 and 4, the former being merely concerned with the method of computation of the income chargeable to tax under the latter." [40] Applying the above principle, there being no inconsistency in the present matter, it was submitted that the Taxpayer should be allowed to claim a tax deduction on the commission expenses under section 33(1). [41] A reading of section 52 shows it can allow section 33(1) to apply in which case, section 33(1) has to be modified. Section 52 further states that if there is any inconsistency between "that provision" which, on the facts, is section 60AA(9) and "any provision of the foregoing Chapter" which is section 33(1), section 33(1) as modified, shall be void to the extent of that inconsistency. We have earlier found that section 33(1) is a general provision and section 60AA is a specific provision for takaful business. Therefore, any modification of section 33(1) will give rise to an inconsistency of provisions and renders section 33(1) when modified, void to the extent of that inconsistency. In this regard, section 52 does not assist the Taxpayer. [42] This contrasts with The Great Eastern Life Assurance Co Ltd where there was found to be no inconsistency. [43] It follows that the principle of generalia specialibus non derogant still applies. [44] The next case referred to by the Taxpayer was Fernrite Sdn Bhd v Ketua Pengarah Hasil Dalam Negeri [2004] 7 MLJ 600 that section 33(1) can apply to an investment holding company to which section 60F applies. At pages 625 and 627 it was stated: "[64] ... It is patent that the learned Special Commissioners misdirected themselves:

Third, the deduction s 33(1) of the Act applies to all sources of income and, thus, the learned Special Commissioners cannot reject the Appellant's arguments as above.

...

Thus, expenses not deductible under s 33 are allowed under s 60F upon the formula as above and in respect of defined expenses. Expenses falling under s 33 of the Act are still allowable under that section." [45] One must not lose sight that section 60F(2) provided that "permitted expenses" are as defined and which are not deductible under section 33(1)". That was what was meant by "thus expenses not deductible under section 33 are allowed under section 60F". Therefore, section 60F is the specific provision relating to an investment company and how the permitted expenses are to be treated. [46] In any event, section 52 was not raised. [47] A further case referred to was Tune Insurance Malaysia Bhd v Ketua Pengarah Hasil Dalam Negeri (2019) MSTC 30-305. Here section 52 was mentioned and the issue was whether expenses for Provision of Risk Margin for Adverse Deviation (PRAD) are deductible under sections 33(1) and 60(5)(b)(i). At paragraphs 20 and 21, the following was said: "20. Here, there is nothing under this provision that precludes the application of section 33(1) and I agree with the applicant's contention that section 60(5)(b)(i) supplements and applies over and above section 33(1). This too is consistent with section 52 of the ITA 1967 which states: ...

In the circumstances, section 60(5)(b)(i) and section 33(1) of ITA 1967 are applicable in relation to this issue of deduction of PRAD expenses." [48] Although reference was made to section 52, the High Court did not appear to consider the requirement of inconsistency. This is made clear in the subsequent paragraph 22 where the provisions of section 33(1) and 60(5)(b)(i) are said to have similar conditions. Paragraph 20 states the following: "20. Here, there is nothing under this provision that precludes the application of section 33(1) and I agree with the applicant's contention that section 60(5)(b)(i) supplements and applies over and above section 33(1). This too is consistent with section 52 of the ITA 1967 which states: ..." That section 60AA(9)(b) does not preclude section 33(1) [49] The Taxpayer's submission was that section 60AA(9)(b) does not exclude the application of section 33(1) and neither does section 33(1) expressly preclude such deduction. This meant that if Parliament had intended to exclude the application of section 33(1), it would have used express words to that effect. Examples were provided. So for instance, section 60H(6) states "Sections 33 and 34 shall not apply to a closed-end fund" and section 65E(12) provides that "Sections 33 and 34 shall not apply to gains or profits from disposal of a capital asset". Reference was also made to sections 34(8), 34A(5), 34B(3), 34C(2) and 38(5). [50] We find this submission to be without merit. This is because there is already in section 60AA(9(b)) what is to be deducted. Hence it cannot be argued that there can be a claim for commission expenses to be deducted under section 33(1) as section 60AA(9) does not prohibit it or that section 33(1) does not expressly preclude it. In those examples provided where there were express words of exclusion used, the same sections have allowed for special deductions to be made. Hence in the example of section 60H(6), there is provision for "permitted expenses". [51] We would thus find that the commission expenses incurred by the Taxpayer in the Shareholders Fund for YAs 2008 to 2013 to earn the Wakalah Fee from the General Takaful Fund are not deductible as the expenses of the Shareholders Fund under section 33(1) ITA. Appeal 746 by the Revenue [52] The issues for determination in this appeal are as follows:

Whether the Revenue has successfully discharged its burden of proof under section 91(3) ITA in relation to the notices of additional assessment for YAs 2008 to 2010; and

Whether there is any factual or legal basis for the Revenue to impose a penalty against the Taxpayer under section 113(2) ITA for YAs 2008 to 2010. Imposition of penalty under section 91(3) ITA [53] The notices of additional assessment were issued beyond 5 years from YAs 2008 to 2010. Section 91(1) ITA allows such additional assessment to be made within 5 years. However, where there has been fraud, wilful default or negligence on the part of the Taxpayer, such assessment made be made at any time. Section 91(3) ITA provides as follows: "91(3) The Director General where it appears to him that—

any form of fraud or wilful default has been committed by or on behalf of any person; or

any person has been negligent, in connection with or in relation to tax, may at any time make an assessment in respect of that person for any year of assessment for the purpose of making good any loss of tax attributable to the fraud, wilful default or negligence in question." (Emphasis added) [54] It may be recalled that the HCJ noted that the Taxpayer's returns were filed within the statutorily prescribed time and the documents requested by the Revenue were duly provided despite the tax audit being conducted 6 years upon the expiration of YAs 2008 to 2010. The HCJ found the only fault, if at all, of the Taxpayer to be the different interpretation of the law which was an erroneous impression but a reasonable one and did not amount to negligence. [55] The Taxpayer is said to be negligent in preparing its tax computation and reporting its income in its tax returns for YAs 2008 to 2010. The HC had found that the only fault of the Taxpayer was in having a different interpretation of the law. [56] Negligence has not been defined in ITA. Whiteman on Income Tax (3rd Edition) has often been relied on for the meaning of neglect as follows: "neglect' means negligence or a failure to give any notice, make any return, statement or declaration or to produce or furnish any list, document or other information required by the Income Tax Act, but a person is not deemed to have failed to do anything required in a limited time if he does it within such extended time as the Commissioner or officer concerned may allow, where a person has a reasonable excuse for not doing anything required he is deemed not to have failed do it if he does it without any reasonable delay. It should be noted that even though an incorrect return was not made fraudulently or negligently originally, a subsequent failure to remedy it without reasonable delay may result in the return being treated as having been made negligently ab initio." [57] The Taxpayer relied on a recent decision of this Court in Keysight Technologies Malaysia Sdn Bhd v Ketua Pengarah Hasil Dalam Negeri [2024] MLJU 1271. On the other hand, the Revenue relied on Opus International (M) Berhad v Ketua Pengarah Hasil Dalam Negeri [2019] MLJU 598. [58] In Keysight Technologies it was held in the following paragraphs: [176] Contrary to the allegation, the Appellant had in fact duly reported the gain of RM821,615,000 on the sale of the IP Rights in its tax returns and computations for YA 2008 as filed with the Respondent. [177] The Appellant's employed a tax agent namely, PricewaterhouseCoopers, who had noted in the Appellant's tax computation regarding the RM821,615,000 gain as follows: "The above relates to gain on disposal of intellectual property by ATMP to ATIS. This gain is capital in nature." [178] The Respondent's allegation of negligence was based entirely upon their disagreement with the Appellant's tax treatment of the said sum as a capital gain in its tax returns. [179] The Appellant was obviously advised by its solicitors and PricewaterhouseCoopers that the RM821,615,000 gain was a non taxable capital gain. [180] The Appellant thus had not willy nilly classified the sum received as capital without the benefit of the relevant advice from specialists in the field. [181] We do not see how therefore the Appellant can be said to be negligent for making a return on a tax position by relying upon professional advice." (Emphasis added) [59] On the other hand, Opus essentially stated that reliance on professional advice was not sufficient to absolve the Taxpayer of negligence nor technical adjustment. We refer to the following paragraphs 33 and 34 where the HCJ had considered the very same type of reasons raised: [33] The Appellant had submitted that there was no negligence on their part as they had acted in good faith, had made full and frank disclosure, cooperated with the DGIR at all material times and had engaged the services of an independent and professional tax agents in preparing and submitting their income tax returns. [34] However, the SCIT has made a finding of fact that the balance sum of RM19,473,324.13, which the Appellant only received vide the Invoice No. ST 2019 dated 24.12.1999 and Invoice No. ST 2069 dated 6.4.2000 was not for post construction works, but the amount was ascertained for works already done, which can only be ascertained upon the finalization of Linkedua and the Appellant's account. Therefore, the failure of the Appellant to make amendments to the actual recognition of income for YA 1999 amounts to negligence. (Emphasis added) [60] There are grounds for the Opus decision in the HC. Although the decision of the HC was affirmed by this Court on 7-9-2020, there are no grounds of judgment by this Court. Thus, we cannot be certain as to the reasoning behind the decision. [61] There are however grounds of decision given by this Court in Keysight Technologies. We agree with the cogent reasons given. It was said that the Taxpayer could not be negligent by relying upon professional advice and had not willy nilly classified the sum received without the benefit of relevant advice from specialists. Coincidentally, the tax specialist advising the appellant in Keysight Technologies and the Taxpayer here is the same, PricewaterhouseCoopers and PWC. [62] There are also other authorities which align with the above proposition. In Piramid Intan Sdn Bhd v Ketua Pengarah Hasil Dalam Negeri [2015] 10 MLJ 436, which was also referred to by the HCJ, it was said at pages 455 and 456: [38] The differing interpretation of whether the payments made are capital or revenue expenditure is very much an issue in this case. And here the appellant had interpreted that they were entitled to treat the payments they made to STIDC as revenue expenditure which if their interpretation was correct would be allowable as deduction and I may also add that the appellant in this case had relied on professional tax consultant. ... [39] ...Surely these views constitute differing interpretation because it was the appellant's interpretation that the payments they had made could be considered as deductions believing that the payments were revenue expenditure. Certainly such differing interpretation cannot be view as escaping from paying tax. This surely cannot be equated with the facts of Syarikat IbracoPeremba Sdn Bhd, where ... 'the facts as found by SCIT showed that there was tax avoidance when the transactions entered into by the appellant through the shell companies revealed the factual situation that the tax position was altered; that STIC found the appellant had in fact implemented a scheme following the advice of the Tax Consultant in perpetuating one original intention of selling of the properties as intended to do from the start' (para 27 line 4 p 24 of the judgment). There was none of this in the present case." Differing interpretations and reliance on professional tax consultant were held to be not negligent. [63] Ketua Pengarah Hasil Dalam Negeri v CIMB Group Holdings Berhad (2024) MTSC 30-727 has also taken that approach. At paragraphs 10 and 11 this was stated: [10] So, in light of the prevailing circumstances, the question to be determined here is; in taking the ordinary meaning of negligence, whether the respondent has been careless or reckless in his responsibility to submit his tax returns for the YAs 2009, 2010, and 2011. Here, the DGIR and the respondent, who is advised by independent tax advisors and who are competent in the field of tax law, have taken different views with regard to a tax provision i.e. the provisions referred to by the DGIR. This is not unusual. It happens every day. In such circumstances, unless something more is shown, the taxpayer ie the respondent cannot be said to have been negligent in having a different view (see Gedir v Revenue and Customs Commissioners [2016] UKFTT 188 (TC) and Anderson v Revenue and Customs Commissioners [2016] UKFTT 335 (TC)). [11] The facts of the instant case do not come within the Whiteman instances of being negligent. The instant case is also not a case where the respondent has acted against the ordinary dictionary meaning of being negligent. Having a different view from the DGIR does not tantamount to being negligent something more is required. I hold that the taxpayer in the instant case did not omit to do something that a reasonable person would do or did something that a reasonable person would not do, neither did it do anything that is careless or reckless. (Emphasis added) [64] We were also referred to Jarett Gedir v Revenue and Customs Comrs [2016] UKFTT 188 (TC) where the following was said: "117. What of the related, but different, point which arises in this case where a particular piece of legislation is open to different interpretations and there is no authority on the point and/or where the application of the legislation is uncertain? It is, unfortunate, far from unusual for a particular piece of tax legislation to contain a "grey area". It is commonplace for there to be more than one tenable interpretation of a provision or its application and for an advisor to "take a view" as to which interpretation should be adopted. That will generally be the interpretation which is most favourable to the taxpayer. It may be acknowledged that interpretation is not beyond challenge, but provided the view is a reasonable one, the advisor is entitled to take it and to advise the taxpayer on that basis and the taxpayer is entitled to rely on that advice.

We do not consider that a taxpayer is obliged to take advice from another advisor in this situation. Where there is scope for different views about a provision, there is no guarantee that another advisor's opinion will be the "correct" interpretation. We are, by definition, considering a situation where there is uncertainly which may ultimately need to be resolved by the tribunals or the courts; different people may well take different views, all of which are tenable." (Emphasis added) [65] There thus seems to be a recognition that differing views and taking a more favourable view to a taxpayer is acceptable and reasonable care is regarded as being taken when there is consultation with a competent advisor. Here the differing view is whether section 33(1) ITA applies rather than section 60AA(9)(b) where the Taxpayer had been advised by a renowned tax specialist. [66] Under the circumstances, we find that the Taxpayer was not negligent and the Revenue has not successfully discharged its burden of proof under section 91(3) in relation to the notices of additional assessment for YAs 2008 to 2010. Imposition of penalty under section 113(2) ITA [67] Section 113(2) ITA provides as follows: "(2) Where a person—

makes an incorrect return by omitting or understating any income of which he is required by this Act to make a return on behalf of himself or another person; or

gives any incorrect information in relation to any matter affecting his own chargeability to tax or the chargeability to tax of any other person, then, if no prosecution under subsection (1) has been instituted in respect of the incorrect return or incorrect information, the Director General may require that person to pay a penalty equal to the amount of tax which has been undercharged in consequence of the incorrect return or incorrect information or which would have been undercharged if the return or information had been accepted as correct; ..." [68] Given our above finding on section 91(3), we are of the considered opinion that the penalty under section 113(2) was incorrectly imposed. Conclusion [69] For all the above reasons, we find no merit in both appeals and the appeals are dismissed. We make no order as to costs. [70] My learned sister, Justice Azizah Binti Haji Nawawi JCA, has read this judgment in draft and expressed her agreement with it whereas my learned brother, Justice Lim Chong Fong JCA, has dissented on Appeal 726, and has written a separate judgment. (SEE MEE CHUN) Judge Court of Appeal Malaysia Dated: 28-11-2024 Appeal 726 Counsel for the Taxpayer/Appellant: S Saravana Kumar (Yap Wen Hui with him) Messrs Rosli Dahlan Saravana Partnership Kuala Lumpur Counsel for the Revenue/Respondent: Ashrina Binti Ramzan Ali (Surani Binti Che Ismail with her) Inland Revenue Board of Malaysia Cyberjaya Appeal 746 Counsel for the Revenue/Appellant: Ashrina Binti Ramzan Ali (Surani Binti Che Ismail with her) Inland Revenue Board of Malaysia Cyberjaya Counsel for the Taxpayer/Respondent: S Saravana Kumar (Yap Wen Hui with him) Messrs Rosli Dhlan Saravana Partnership Kuala Lumpur Cases referred to: Lembaga Hasil Dalam Negeri Malaysia v Alam Maritim Sdn Bhd [2014] 3 CLJ 421, FC Majlis Agama Islam Selangor v Bong Boon Cheun & Ors [2009] 6 CLJ 405 The Great Eastern Life Assurance Co Ltd v Director General of Inland Revenue [1987] 2 MLJ 529 Fernrite Sdn Bhd v Ketua Pengarah Hasil Dalam Negeri [2004] 7 MLJ 600 Tune Insurance Malaysia Bhd v Ketua Pengarah Hasil Dalam Negeri (2019) MSTC 30-305 Keysight Technologies Malaysia Sdn Bhd v Ketua Pengarah Hasil Dalam Negeri [2024] MLJU 1271 Opus International (M) Berhad v Ketua Pengarah Hasil Dalam Negeri [2019] MLJU 598 Piramid Intan Sdn Bhd v Ketua Pengarah Hasil Dalam Negeri [2015] 10 MLJ 436 Ketua Pengarah Hasil Dalam Negeri v CIMB Group Holdings Berhad (2024) MTSC 30-727 Jarett Gedir v Revenue and Customs Comrs [2016] UKFTT 188 (TC) Legislation referred to: Income Tax Act 1967, sections 33(1), 52, 60AA, 60H(6) and 65E(12) Finance Act 2007 Finance Act 2014 Text book referred to: Whiteman on Income Tax (3 $ ^{rd} $ Edition)