Kerajaan Malaysia v FOO HOLDINGS SDN. BHD. (AA-21NCvC-13-03/2021)

This is an application by the Plaintiff, via enclosure 10, for a summary judgment under O. 14 r. 1 of the Rules of Court 2012 ("RC 2012") against the Defendant for tax due and payable for the year of assessment 2013 for the total sum of RM5,515,225.51.

The Defendant had, through a tax estimation form dated 29.11.2012, submitted to the Plaintiff the estimation of Defendant’s income tax for the year of assessment 2013 which was estimated at RM0.00.

The Plaintiff had thereafter issued Surat Perakuan Tidak Dikenakan

Cukai (CKHT 5A) for the year of assessment 2013 dated 28.2.2014,

2.2014 and 13.6.2014 (“the CKHT 5A”). [4] Subsequently to the CKHT 5A, the Defendant had issued a Borang Cukai Pendapatan (“Borang C”) for the year of assessment 2013 to the Plaintiff and the assessment was not subject to tax. [5] However, in 2017, the Plaintiff had issued Notice of Assessment for the year of 2013 (“the NOA”) dated 18.8.2017 which shows the total income tax due and payable for the year of assessment 2013 for the total sum of RM4,775,278.84. [6] As a result of the Defendant’s failure to settle the said sum, an increase in tax amounting to RM477,508.70 was imposed on the Defendant pursuant to section 103 (5) of the Income Tax 1967 (“ITA”). The Plaintiff therefore claimed against the Defendant the total income tax due and payable for the year of assessment 2013 for the total sum of RM5,515,225.51. [7] The Defendants submitted that the NOA issued by the Plaintiff was arbitrary and/or wrongful and/or double taxation and/or an afterthought on the following grounds:-

That the Defendant was charged with RPGT at a rate of 0% by the Plaintiff;

(ii) That the CKHT 5A issued by the Plaintiff affirmed that there was no taxable gain from the disposal of assets by the Defendant in the year 2013;

(iii) That the said CKHT 5A exempting the Defendant from tax was never revoked and remains enforceable;

(iv) That the NOA dated 18.8.2017 was issued 4 years after the year of assessment 2013 and served to a third-party address and was never delivered to the Defendant’s registered address or the Defendant’s last known address as required under section 145(2) of the ITA;

The Defendant’s appeal to the Special Commissioners of Income Tax under Appeal No. PKCP(R)139/2018 to challenge the NOA dated 18.7.2018 was still pending and is set for case management on 12.8.2020;

(vi) That the action filed by the Plaintiff was premature and/or wrongful and/or without basis as the ITA was not applicable to the Defendant. [8] At the outset, the Defendants aver that this suit is not one suited for an order of summary judgment as the assessments claimed by the Plaintiff are without basis giving rise to triable issues which ought to be considered by this court, rendering this suit unsuitable for summary determination. [9] Before I proceed to consider the Plaintiff’s application, I find it appropriate to first address the preliminary issue raised by the Defendant pertaining to the late filing of this application for summary judgment by the Plaintiff. PRELIMINARY OBJECTION [10] It was the Defendant’s submission that the application for summary judgment should be made before the statement of defence is filed. The Plaintiff although not precluded from filing its application after statement of defence is filed, must however justify the delay. [11] The Plaintiff had in this case filed this application about 14 days after the Defendant had filed his statement of defence. It was the Defendant’s contention that the Plaintiff had however failed to provide any reasonable reason for the delay. [12] As argued by the Defendant himself, there is no mandatory requirement for the Plaintiff to file an application for summary judgment before the filing of the Statement of Defence. It is also trite law that preliminary objections solely based on non-compliance are disallowed and/or barred from being raised as provided under O.2 r.3 of RC 2012 which states as follows:- “A Court or Judge shall not allow any preliminary objection by any party to any cause or matter or proceedings only on the ground of non-compliance of any provision of these Rules unless the Court or Judge is of the opinion that such non-compliance has occasioned a substantial miscarriage of justice or occasioned prejudice that cannot be cured either by amendment or an appropriate order for costs or both.” [13] Reference was also made to the Court of Appeal case of Kejora Aman Sdn Bhd v. HMS Corporation Sdn Bhd [2016] 6 CLJ 1 where it was held as follows:- “[14] In our view the preliminary objection ought to be dismissed. In this case the non-compliance with the rules is only a technical non-compliance which does not cause any prejudice to the respondent. It is pertinent to note the three enclosures are related and they were heard together and disposed of at the same time by the learned JC. Moreover in the notice of appeal the appellant had clearly specified which and what decision is being appealed against. There is no ambiguity and the respondent is not misled. Under O. 2 r. 1(1) of the ROC the effect of non-compliance is only an irregularity and shall not nullify the proceedings, any step taken in the proceedings, or any document, judgment or order therein. Foremost the court must consider the overriding interest of justice and not just the technical compliance of the rules...” [14] Based on the foregoing provisions, it is in my considered view that the Defendant had failed to show the prejudice or injustice caused to him by the delay. In the interest of justice and to enable the Plaintiff to fully ventilate its case, this court therefore disallowed the preliminary objection and proceeded to consider this application made. THE LAW ON SUMMARY JUDGMENT [15] The application of summary judgment is governed under O.14 RC 2012 which provides as follows:- “Application by plaintiff for summary judgment (O. 14, r. 1)

Where in an action to which this rule applies a statement of claim has been served on a defendant and that defendant has entered an appearance in the action, the plaintiff may, on the ground that the defendant has no defence to a claim included in the writ, or to a particular part of such a claim, or has no defence to such a claim or part thereof except as to the amount of any damages claimed, apply to the Court for judgment against that defendant.

Subject to paragraph (3), this rule applies to every action begun by writ other than—

a claim by the plaintiff for libel, slander, malicious prosecution, false imprisonment, seduction or breach of promise of marriage; or

a claim by the plaintiff based on an allegation of fraud. Manner in which application under rule 1 shall be made (O. 14, r. 2)

An application under rule 1 must be supported by an affidavit in Form 13 verifying the facts on which the claim, or the part of a claim, to which the application relates is based and stating that in the deponent’s belief there is no defence to that claim or part, as the case may be, or no defence except as to the amount of damages claimed.

Unless the Court otherwise directs, an affidavit for the purposes of this rule may contain statements of information or belief with the sources and grounds thereof.

The notice of application, a copy of the affidavit in support and of any exhibits referred to therein must be served on the defendant within fourteen days from the date of receipt of the sealed notice of application by the applicant.

Order 32, rule 13(2) shall apply mutatis mutandis to all affidavits in respect of an application under this rule. Judgment for plaintiff (O.14 r. 3) Unless on the hearing of an application under rule 1 either the Court dismisses the application or the defendant satisfies the Court with respect to the claim, or the part of a claim, to which the application relates that there is an issue or question in dispute which ought to be tried or that there ought for some other reason to be a trial of that claim or part, the Court may give such judgment for the plaintiff against that defendant on that claim or part as may be just having regard to the nature of the remedy or relief claimed.” [16] The Defendant had in this case heavily contended that the NOA dated 18.8.2017 was served on a third party and not at the Defendant’s registered address or the Defendant’s last known address as required under section 145(2) of the ITA. [17] Section 145(2) of the ITA reads as follows:- “(2) A notice relating to tax which is sent by ordinary or registered post shall be deemed to have been served on the person (including a partnership) to whom it is addressed on the day succeeding the day on which the notice would have been received in the ordinary course of post if it is addressed—

in the case of a company, partnership or body of persons having a registered office in Malaysia—

to that registered office;

(ii) to its last known address; or

(iii) to any person authorized by it to accept service of process;” [18] It was not disputed that the Plaintiff had served the NOA at the Defendant’s tax agent and/or auditor’s address which was in compliance to section 145 subsection (iii) of the ITA 1976. The fact that the Defendant had filed an appeal against the said NOA within the period of 30 days from the date of the said NOA clearly shows that the Defendant had knowledge of the said NOA. It is thus in my considered view that service as required under section 145 of the ITA 1976 had been complied with by the Plaintiff. [19] It is well established that once an Order 14 application is demonstrated to be correctly and properly filed, the burden shifts and thus rests on the Defendant who seeks to resist the application to show bona fide triable issues which would justify and warrant a full trial of the matter. [20] This court was guided by the principles laid down in the case of National Company For Foreign Trade v. Kayu Raya Sdn Bhd [1984] 1 CLJ Rep 283; [1984] 2 CLJ 220; [1984] 2 MLJ 300 where it was authoritatively ruled by the Federal Court as follows:- “We think it appropriate to remind ourselves once again that in every application under Order 14 the first considerations are (1) whether the case comes within the Order and (b) whether the plaintiff has satisfied the preliminary requirements for proceeding under Order 14. For the purposes of an application under Order 14 the preliminary requirements are:-

the defendant must have entered an appearance;

(ii) the statement of claim must have been served on the defendant; and

(iii) the affidavit in support of the application must comply with the requirements of Rule 2 of the Order 14". It is to be observed that a case is not within O. 14: (a) where no statement of claim has been served on the defendant; (b) where the indorsement on the writ includes a claim or claims outside the scope of O. 14 as coming within r. 1(2); (c) where the affidavit in support of the application is defective, e.g. in omitting to state the deponent's belief that there is no defence to the claim or part to which the application relates;

where the application is made in an action against the Government [O. 73 r. 5(1) ]. If the plaintiff fails to satisfy either of these considerations, the summons may be dismissed. If however, these considerations are satisfied, the plaintiff will have established a prima facie case and he becomes entitled to judgment. The burden then shifts to the defendant to satisfy the Court why judgment should not be given against him.” See also the case of Cempaka Finance Bhd v. Ho Lai Ying (trading as KH Trading) & Anor [2006] 3 CLJ 544; [2006] 2 MLJ 685. [21] It is trite law that an Order 14 application would only be granted in exceptional cases where the plaintiff's case is plain and obvious, there are no triable issues to justify a trial and no defence on the merits has been shown. This basic principle applicable to an Order 14 judgment was clearly explained by the Supreme Court in Malayan Insurance (M) Sdn. Bhd. v. Asia Hotel Sdn. Bhd. [1987] CLJ Rep 182; [1987] 2 MLJ 183 where it was held: “... the underlying philosophy in the Order 14 provision is to prevent a Plaintiffs clearly entitled to the money from being delayed his judgment where there is no fairly arguable defence to the claim. The provision should only be applied to cases where there is no reasonable doubt that the Plaintiffs is entitled to judgment. Order 14 is not intended to shut out a defendant. The jurisdiction should only be exercised in very clear cases.” [22] I find it pertinent to note at this juncture that by the operation of s. 106(3) of the ITA, when the proceedings are commenced under Order 14 RC 2012, the trite legal principle that the Defendant has to raise triable issues in order to avoid a summary judgment being entered, does not apply as expounded by the Supreme Court in the case of Choong Woo Yit v. Government of Malaysia [1989] 1 CLJ (Rep 9) which affirmed the principle enunciated in the case of Government of Malaysia v. Abdul Rahman [1974] 1 LNS 40; [1975] 1 MLJ 276 as follows:- “When proceedings are commenced under O. 14 the normal rules for triable issues do not apply to cases of this nature because of the provisions of the Income Tax Act. Normally when defence raised triable issues it is a rule of law that unconditional leave to defend should be given but under s. 106 (3) of the Income Tax Act it clearly states that in any proceedings commenced by the Government under s. 106 (1) of the Act for the recovery of tax by civil proceedings as a debt due to the Government the Court shall not entertain any plea that the amount of tax sought to be recovered is excessive, incorrectly assessed, under appeal or incorrectly increased under s.

or (5).” CASE ANALYSIS [23] By virtue of section 106 ITA, the Government is conferred with the power to recover tax due and payable, inclusive of the penalties imposed for late payment, by way of civil proceedings as a debt due to the Government. [24] Based on my findings above, I bear repetition in stating that this court finds that the NOA was delivered to the Defendant’s tax agent and had never been returned undelivered to the Plaintiff. The Defendant had further filed an appeal against the NOA which clearly shows that the Defendant had knowledge of the NOA and the content therein. By virtue of s. 145(2)(c) ITA, the NOA shall be deemed to have been duly served on the Defendant. [25] Once NOA had been duly received by the Defendant, the Defendant is under an obligation to pay the tax payable under the NOA received notwithstanding if the amount is disputed and/or if there is a pending appeal against the assessment as held in the Federal Court case of In Arumugam Pillai v. Government of Malaysia [1975] 1 LNS 2; [1975] 2 MLJ 29 as follows:- “... He would nevertheless be bound by the decision of this Court in Sun Man Tobacco Co. Ltd. v. Government of Malaysia [1973] 1 LNS 144; [1973] 2 MLJ 163, which upheld the view that by reason of the operation of section 106(3) of the Income Tax Act, 1967, the Court, to put it bluntly, had only one function to perform, and that was to give judgment in favour of the Government.” [26] The Defendants had however failed to pay the aforesaid outstanding sums. Such failure on the part of the Defendants warrants the imposition of penalty pursuant to Section 103 (5) of the ITA 1967 as imposed by the Plaintiff in the present case. In this respect, this Court refers to the relevant case of Government of Malaysia v. Abdul Rahman [1974] 1 LNS 40; [1975] 1 MLJ 276, in which the Court held: “Since the amount was not paid within thirty days, further penalties were added and since that was not paid civil proceedings were brought to recover the tax as a debt due to the government.” [27] Also in the case of Kerajaan Malaysia v. Ong Kar Beau [2003] 1 LNS 188; [2003] 6 MLJ 225, it was held as follows:- “The scheme of the Income Tax Legislation is clearly that, upon service of a notice of assessment on the person assessed, the tax payable under the assessment becomes due and payable at the place specified in the notice, whether or not that person appeals against the assessment. Failure to pay within the time prescribed would attract the provisions of the penalties provided and penalty imposed can be recovered by way of civil proceedings as a debt due to the government.” (Emphasis added) [28] Having carefully analysed the cause papers herein together with the submission of parties particularly that of the Defendant, this court finds that the triable issues raised by the Defendants may be confined to the following issues:-

That the NOA issued by the Plaintiff was arbitrary and/or wrongful and/or double taxation on the following grounds:-

that the Defendant had already been charged with RPGT at a rate of 0% by the Plaintiff;

that the CKHT 5A issued by the Plaintiff affirmed that the Defendant was exempted from making any payment for RPGT from the disposal of assets by the Defendant in the year 2013 (“Tax

(ii) That the NOA dated 18.8.2017 was issued 4 years after the year of assessment 2013 and served to a third party address and was never delivered to the Defendant’s registered address or the Defendant’s last known address as required under section 145(2) of the ITA (“Issue of Service”);

(iii) That the Defendant’s appeal to the Special Commissioners of Income Tax under Appeal No. PKCP(R)139/2018 to challenge the NOA dated 18.7.2018 was still pending and is set for case management on 12.8.2020 (“NOA Pending Appeal”).

Whether the issuance of NOA was arbitrary and/or wrongful and/or double taxation [29] It was the Defendant’s contention that the NOA issued by the Plaintiff was arbitrary and/or wrongful and/or double taxation when the Defendant had already been charged with RPGT at the rate of 0% by the Plaintiff and that the Defendant’s income in this case was not bound by section 4 of the ITA. [30] On this issue, this court was referred to the Court of Appeal case of Teruntum Theatre Sdn Bhd v. Ketua Pengarah Hasil Dalam Negeri [2006] 3 CLJ 123 where it was held as follows:- “[18] Estoppel is a rule of evidence which can only be invoked in special circumstances. The estoppel relied upon by the taxpayer against revenue in this case is that of estoppel in pais, ie, estoppel by words or conduct. In our view the Special Commissioners were not wrong to reject the suggestion that the assessment by the respondent of a taxpayer under the RPGT was an irrevocable act. Estoppel cannot be invoked against the Director General of Income Tax when he is put to notice that an incorrect assessment has been made under the RPGT. The Director General cannot raise an estoppel against himself from discharging his statutory duty to raise a correct assessment under the appropriate law if the basis of treating the gain as a capital gain was not within the meaning ascribed to it by the RPGT and no real property gains tax is payable. In such a situation the Director General is not absolved from discharging his duty of raising the correct assessment in accordance with the relevant law. No person can raise an estoppel against himself so as to defeat a positive duty imposed upon him by a statute (Maritime Electric Co. Ltd v. General Diaries Ltd. [1937] AC 610 at pp. 620-621). The duty of both parties, the Director General and the taxpayer, is to obey the law. [19] We therefore agree with the conclusion that there is no rule of law precluding revenue from discharging the assessment under the RPGT and proceeding with an assessment under the ITA. That revenue is, if the facts and circumstances warrant it, free to revise and discharge the assessment under the RPGT and to then raise an assessment under the ITA. [20] On the issue of double taxation, we agree that the position in Malaysia is different from that in England. The ITA applies only to income, whilst the RPGT applies only to capital gains on real property. It has to be either one or the other, it cannot be both. Unlike in England, the question of subjecting a taxpayer to both taxes in respect of the same receipt cannot arise here. The authorities cited by the appellant on this issue are clearly distinguishable.[21] We agree that the appellant has not been subjected for double taxation in this case. The appellant is not subjected to two different charges in respect of the same receipt as it has not been charged for both real property gains tax under the RPGT and income tax under the ITA. The evidence shows that revenue, upon taking the position that the gains arising from the sales was to be the subject of income tax, notified the appellant that the real property gains tax paid would be transferred to the appellant's account. The complaint is thus unwarranted.” [31] In view of the above authorities, it is in my considered view that the Director General is permitted in law to revise and discharge the assessment under RPGT and raise an assessment under the ITA (see also the case of Government of Malaysia v. Sarawak Properties Sdn Bhd [1994] 1 CLJ 514.) [32] It is also in my considered opinion that the issue whether the gains from the disposal of the properties should be subject to income tax or RPGT goes to the merit of the assessment which ought to be determined by the SCIT as was held in the Federal Court case of Kerajaan Malaysia v. Mudek Sdn Bhd [2017] 10 CLJ 158; [2017] 6 MLRA 25 where it was held as follows:- “[12] We hold that pursuant to s. 21(1) of the said Act, once a notice of assessment has been served, the tax payable will be due and payable. If the respondent felt aggrieved by the issue of no chargeable gain arising, the respondent should have lodged an appeal to the Special Commissioners of Income Tax pursuant to s. 18 of the said Act. Since no appeal was lodged, this issue was precluded from being raised as a triable issue pursuant to s. 23(3) of the said Act. We find that the majority judgment of the Court of Appeal failed to consider all the relevant provisions of the said Act particularly s. 18 and s. 23(3) of the same; it is therefore per incuriam the provisions of the said Act. … [14] In the upshot:

If a notice of assessment is raised, and if a taxpayer wishes to raise issues pertaining to the amount, the correctness or the legality of the assessment raised, the taxpayer should invoke s. of the said Act. If this is resolved in the taxpayer's favour then whatever tax paid can be refunded as an overpayment pursuant to s. 24 of the said Act.

(ii) If the taxpayer fails to do so, then these issues cannot be raised as triable issues in an application for summary judgment by virtue of s. 23(3) of the said Act.” (see also the case of Ta Wu Realty Sdn Bhd v. Ketua Pengarah Hasil Dalam Negeri & Anor [2008] 6 CLJ 235; [2009] 1 MLJ 555.) [33] In the premises, for the above reasons, this court holds the view that the pleas or purported defence as raised, or as asserted, by the Defendant are questions of facts which are to be referred to and decided by the SCIT and that this court cannot entertain any plea regarding the amount of tax sought to be recovered on the ground that they are excessive, incorrectly assessed, under appeal as asserted by the Defendant. [34] The Defendant are not left without remedy. These challenges against the assessments carried out should be mounted by the Defendant before the SCIT of which the Defendant had duly done. Reference on this point was made to the Federal Court case of Sun Man Tobacco Co Ltd v. Government of Malaysia [1973] 1 LNS 144 where it was held as follows:- “In place of a Board of Review we now have the Special Commissioners of Income Tax. It is open to a taxpayer to go before them and prove that he is not liable to assessment. The doors of justice are not shut to him merely because the claimant is the Government, but he has to enter the doors of the Special Commissioners first to raise the plea of non-observance of the principle of natural justice or to establish that the Director-General acted arbitrarily and in a non-judicial manner. It is only after he has availed himself of that remedy as laid down by the law that he has a right to come to the Courts.”

(ii) Issue of Service [35] In view of my findings above in respect of service, this court finds the issue of service as raised by the Defendant to be bereft of any merits.

(iii) NOA pending appeal [36] As stated earlier, where an action for the recovery of tax is filed by way of summary judgment as in the present case, the Defendant is refrained under section 106(3) of the ITA from alleging as triable issues that the sum claimed is excessive, incorrectly assessed, under appeal or incorrectly increased. In the case of Kerajaan Malaysia v. Abdul Rahim Mohd Aki [1994] 4 BLJ 376 the court ruled: “[1] Section 106(3) of the Income Tax provides that in any civil proceedings to recover income tax allegedly due and payable, the court must close its ears and shut its eyes to any suggestion or indication that the amount claimed is excessive or incorrectly assessed. The said section has the effect of making the amount claimed conclusively correct and unchallengeable in the civil proceedings to recover it and, consequently, of making the judgment subsequently entered immune from subsequent challenge on the ground that the amount of judgment was excessive or incorrectly assessed.” (Emphasis added) [37] It is clear from s.103 and the above authorities that the Act does not contemplate any finality of assessment (see the case of Kerajaan Malaysia v. De Brilliant (M) Sdn Bhd [2010] 1 LNS 1310). I bear repetition in stating that the Defendant is obliged to pay the assessment and the increases once the NOA had been served upon them notwithstanding any protest, appeal or even negotiation. I find support in the case of Government of Malaysia v. D.C [1972] 1 LNS 37; [1973] 1 MLJ 161 at 164 where Chang Min Tat J (later FJ) had quoted with approval the judgment of Choor Singh J in Comptroller of Income Tax v. A. Co. Ltd. [1966] 1 LNS 43; [1966] 2 MLJ 282 as follows:- “The net effect of the legislation must then be in the words of Choor Singh J. in his judgment quoted above:- When the Comptroller of Income Tax sues a tax payer to recover tax due under a notice of assessment, the tax payer cannot be heard to say that the assessment on which the tax has been levied was not made in accordance with the provisions of the ordinance. Such a complaint must in the first instance be laid before the Board of Review. The provisions of Order XIV of the Rules of the Supreme Court must be read together with the provisions of the Income Tax Ordinance. If this is not done every unwilling tax payer will refuse to pay tax and when sued in Court will challenge the merits of the assessment thus causing considerable delay in the collection of the tax. The proper course for every aggrieved tax payer is to pay his tax and present his arguments against the assessment made upon him before the Board of Review.” CONCLUSION [38] In the final analysis, applying the test and threshold requirement in an application for summary judgment as explained in the above cited authorities and considering the totality of the facts and circumstances of the case as disclosed in the affidavit evidence, I thus conclude that the issues raised by the Defendant do not amount to triable issues or constitute any reasonable defence. I am therefore of the opinion that issues raised by the Defendant are unsustainable to dispute the Plaintiff’s application for a summary judgment. Accordingly, I allow the Plaintiff’s application and grant the Order 14 summary judgment for the Plaintiff with costs. Dated: 22.06.2022 -signed- (ABDUL WAHAB BIN MOHAMED) JUDGE HIGH COURT OF MALAYA IPOH, PERAK Peguamcara: Tetuan Selvam, Nanda and Partners bagi pihak Perayu. Peguambela dan Peguamcara No. 27A, Jalan Tun Sambantahan Tingkat Satu, Bangunan Perak Han Kang Kong Hoey 30000 Ipoh Perak Darul Ridzuan Tel:

05.2435811 Faks: 05.2433988 Email: snpIpoh@gmail.com Peguam Persekutuan bagi pihak Responden Peguamcara Lembaga Hasil Dalam Negeri Malaysia Cawangan Ipoh Tingkat 4, Menara Hasil