Schedule
Jadual 2 Dan Dalam perkara Perintah Cukai Keuntungan Harta Tanah (Pengecualian) 2009 P.U.(A) 376 Dan Dalam perkara Akta Cukai Pendapatan, 1967, khususnya Seksyen-Seksyen 3, 4, 90, 91, 99, 113 dan 140 Page 2 of 15 Dan Dalam perkara Aturan 53 Kaedah-Kaedah Mahkamah, 2012 dan Perenggan 1 Jadual Kepada Akta Mahkamah Kehakiman, 1964 ANTARA KIND ACTION (M) Sdn. Bhd. (No. Syarikat: 646416-T) …PEMOHON DAN KETUA PENGARAH HASIL DALAM NEGERI …RESPONDEN FREDRICK INDRAN X.A. NICHOLAS Judicial Commissioner High Court of Malaya at Johor Bahru Date: 25th APRIL 2021 Page 3 of 15 GROUNDS OF JUDGMENT Introduction [1] These grounds are prepared as a result of an appeal filed by the Respondent on 6.4.2021, against an Order of this Court dated 16.3.2021 which granted leave for judicial review; together with an interim stay under paragraph (t) of Encl. 1 (i.e. the Application for this leave for judicial review); with costs in the cause. The Matrix (Derived from the Applicant’s submission for ease of reference) [2] The Applicant is in the plantation business. [3] Vide a Sale and Purchase dated 24.5.2004 between the Applicant and its immediate parent company, i.e. Revertex Malaysia Sdn Bhd (“RMSB”), plantation lands used by RMSB for the purposes of plantation business activities in Kluang, Johor No. HS(D) 47663 Lot PTD 57386, HS(D) 47664 Lot PTD 57387 and HS(D) 47665 Lot PTD 57387 (hereinafter collectively referred to as “Mengkibol Estate”) were transferred to the Applicant in accordance with the Synthomer Group’s decision for the Applicant to carry out the plantation business previously carried out by RMSB in order for RMSB to focus on Synthomer Group’s core focus business activity which is the manufacture, trade and sale in chemicals (ie. Synthetic resin and alkyd resin). Page 4 of 15 [4] The Applicant has at all material times derived its income from its plantation business which was conducted on the Mengkibol Estate and had duly paid income tax upon the same and the Mengkibol Estate had always been recognized in the Applicant’s audited accounts as a fixed asset for the relevant years of assessment (“Y/As”). [5] In 2007, following a change in top management of the Applicant’s ultimate holding company in the United Kingdom (i.e. Synthomer plc), in light of the global financial crisis, the Synthomer Group made a strategic decision to streamline the business activities of the Synthomer Group and decided to withdraw itself from the plantation business altogether and focus on its chemicals manufacturing business. The memo of the Group Chief Executive of Yule Catto & Co Plc (now known as Synthomer Plc) dated 1.7.2008 stated that the Applicant is to realise its investments in Lot PTD 57386 and PTD 57387 (hereinafter referred to as “KASB’s Plantation Land”). [6] In accordance to the decision of the Synthomer Group, the Applicant proceeded to realise its investments KASB’s Plantation Land with the intention to exit the plantation business. The following transactions took place in line with the Applicant’s execution of Synthomer Group’s decision that the Applicant realise its investments in KASB’s Plantation Land and the KASB duly paid the applicable Real Property Gains Tax (“RPGT”) under the Real Property Gains Tax Act 1976 (“RPGTA”): Page 5 of 15 No. Date of Sale and Purchase Agreement Original Lot No. Lot No. at Mukim Kluang Acquirer Date of RPGTA Certificate of Clearance/Notice of Assessment/ Additional Assessment 1 12.12.2007 80576 Majupadu Development Sdn Bhd 21.9.2011 (Certificate of Clearance) 2 24.8.2011 89809 Kluang Setia Holdings Sdn Bhd 13.10.2015 (RPGTA Notice of Additional Assessment) 3 22.11.2013 93174 Technopark 1 Industries Sdn Bhd 12.10.2015 (RPGTA Notice of Assessment) 4 22.11.2013 93176 Fibon Electric (M) Sdn Bhd 12.10.2015 (RPGTA Notice of Additional Assessment) 5 22.11.2013 57387 (1,471 acres) 93175 & 93177 Sri Keris Jaya Sdn Bhd 13.10.2015 (RPGTA Notice of Additional Assessment) 6 6.12.2013 93173 Kemajuan Tong Tor Sdn Bhd 13.10.2015 (RPGTA Notice of Additional Assessment) 7 19.1.2015 93178 Parkland City Sdn Bhd (Kumpulan 5. Parkland) 11.2015 (RPGTA Notice of Additional Assessment) 8 19.1.2015 89814 Millenium Tulips Sdn Bhd (Kumpulan 15. Parkland) 10.2015 (RPGTA Notice of Additional Assessment) 9 19.1.2015 89810 Setegap Selasih Sdn Bhd 13.10.2015 (RPGTA Notice of Additional Assessment) 10 25.7.2017 57386 (427 acres) 57386 Atlantis Venture Sdn Bhd (Kumpulan 22. Parkland) 3.2018 (RPGTA Notice of Assessment Page 6 of 15 [7] In the course of a tax investigation by the Respondent (i.e. the Director General of Inland Revenue or DGIR in short), the Respondent took the purported position that the proceeds arising from the Applicant’s realization of its investments in KASB’s Plantation Land is subject to income tax under Section 4(a) of the Income Tax Act 1967 (“ITA”) on the basis, amongst others, that: a) notwithstanding that the Applicant is in the plantation business and has no expertise nor involvement in the business of land trading, the Applicant’s activities of realizing its investments in KASB’s Plantation Land was nevertheless in the nature of trade; b) the Applicant had the intention to sell KASB’s Plantation Land in 2007 notwithstanding that the first Sale and Purchase Agreement involved as part of the Applicant’s activities to realize its investments in KASB’s Plantation Land was only executed in 2011; c) the Applicant made applications to subdivide part of KASB’s Plantation Land in 2009; d) KASB’s Plantation Land are mostly sold to property developers; e) notwithstanding that the Applicant has at all material times held KASB’s Plantation Land as fixed assets, the Applicant’s realization of its investments in KASB’s Plantation Land is income in nature and not capital receipts; and Page 7 of 15 f) the Applicant’s income from its plantation business is less than the proceeds arising from the realization of its investments in KASB’s Plantation Land. [8] The Applicant disagreed with the above and had at all material times maintained its position that the gains derived from the realization of the Applicant’s investments in KASB’s Plantation Land should be and have already been subject to tax under the RPGTA because, amongst others: a) the transactions were transactions; b) the Applicant “inherited” the plantation business from RMSB and was principally engaged in selling fresh fruit bunches and natural rubber latex; c) the Applicant actively produced income from the plantation activities on KASB’s Plantation Land during the relevant years and since the Respondent had no qualms about bringing the Applicant’s plantation income to tax as business income under Section 4(a) of the ITA over the years without a single query being raised by the Respondent as to the type/nature of the Applicant’s business, it is clear that the Respondent had, by their conduct, accepted and agreed that the Applicant was carrying on a plantation business; d) the realization of the Applicant’s investments in KASB’s Plantation Land was to align with the Synthomer Group’s strategic decision to exit the plantation business; Page 8 of 15 e) so its is the norm that asset owners like the Applicant would realize their investments by selling to the entity or person who is able to offer the best price and it is purely a coincidence that property developers had the ability to offer a good price for KASB’s Plantation Land; f) the Applicant does not and never had any human, material and technical resources nor the requisite experience to carry on the business of land trading; g) Lot PTD 57387 had to be subdivided and sold in several transactions as the purchasers only expressed interest in purchasing smaller parcels of the said plot. Had a buyer indicated interest in purchasing the entirety of Lot 57387, the Applicant would have sold such plot in one piece. Given that the sub-division was made merely to expedite the realization of the Applicant’s investments in KASB’s Plantation Land in order to cease the plantation business within the shortest possible time, there is clearly no intention to engage in land trading business; and h) the Applicant’s investments in KASB’s Plantation Land were sold on an “as is” basis without any enhancement made. [9] However, the Respondent did not accept the explanation and justifications provided by the Applicant and raised Notices of Additional Assessment dated 3.12.2020 for Y/As 2010, 2015 and 2018 pursuant to which income tax and 60% penalties totaling more Page 9 of 15 than RM81 million were imposed by the Respondent upon the Applicant (“Disputed Notices”). [10] The Applicant then applied to the Respondent to make payment of the taxes and penalties under the Disputed Notices in instalments under protest. The Applicant also applied for such taxes and penalties to be set-off against tax refunds owing to the Synthomer Group of Companies as well as the RPGT previously paid by the Applicant following the realization of the Applicant’s investments in KASB’s Plantation Land. The Applicant also emphasized that the Disputed Notices for Y/A 2010 and any before Y/A 2015 are time-barred and in any event, the Respondent is not permitted by law to subject transactions for which the sale and purchase agreement were executed prior to Y/A 2015 to additional income tax assessment. [11] The Respondent allowed the Applicant’s instalment payment request whereby the disputed taxes and penalties are to be paid in 60 instalments are allowed for set-off against the tax refunds owing to RMSB only. The Respondent refused to allow the set-off against all RPGT previously paid by the Applicant, thereby resulting in the blatant illegality of offending the principle against taxing a transaction twice and offends the clear intention of the law that a transaction which has been subjected to RPGT (fully paid) should not be taxed again under the ITA. Page 10 of 15 The Representation [12] It should be noted that the Putative Respondent wished to be heard during the hearing of this application for leave; but this was strongly resisted by learned Counsel for the Applicant. [13] Abiding by the fact that Order 53, rule 3(2) Rules of Court 2012 (‘RoC’) provides that an application for leave must be made ex parte; subject to the Court’s discretion to invite the Putative Respondent to submit at the leave stage; it was directed by this Court that the learned Counsel for the Putative Respondent be admitted to this hearing via Zoom merely as an observer only; with no right of reply. [14] Correlated to the above, it must be observed that the Attorney-General’s Chambers was represented at this hearing by learned Senior Federal Counsel, who had submitted in objection to this application. [15] This Court took comfort in the direction above by reference to the following cases: i) ADVANCE SYNERGY CAPITAL Sdn. Bhd. v. THE MINISTER of FINANCE, MALAYSIA & Anor. [2011] 7 CLJ 557; ii) ORANGE REDERIET Aps v. KETUA PENGARAH HASIL DALAM NEGERI [2018] 1 LNS 384; and Page 11 of 15 iii) TANG KWOR HAM & Ors. v. PENGURUSAN DANAHARTA Bhd. & Ors. [2006] 5 MLJ 60. The Evaluation and Findings [16] Learned Counsel for the Applicant ranged in detail in his submissions in support of the proposition for leave; supported by a comprehensive list of substantiating authorities. [17] That the Putative Respondent did not counter these authorities with their own list could not be faulted upon them as they were allowed to be present at the hearing merely as observers; whilst learned Senior Federal Counsel did not present any authorities in substantiation toward his objection against leave. [18] Bearing in mind the above, I shall not extensively dissect the Applicant’s entire submission (which will no doubt be considered again and in full at the merits stage; along with arguments from the Respondent at that time); but relate herein below, the decision making process of this Court; and the points that led to the pronouncement made in granting the said leave; of which there are two. i) Adversely affected [19] Order 52, rule 2(4) RoC provides that any person adversely affected by a decision of any public authority shall be entitled to make an application for judicial review; and the Federal Court case of MALAYSIAN TRADE UNION CONGRESS & Ors. v. MENTERI Page 12 of 15 TENAGA, AIR dan KOMUNIKASI & Anor. [2014] 3 MLJ 145 held that this had to do with that person’s “real and genuine interest in the subject matter”. [20] The cases, amongst others, of QRS BRANDS Bhd. v. SURUHANJAYA SEKURITI & Anor. [2006] 3 MLJ 164 and FLEXTRONICS SHAH ALAM Sdn. Bhd. v. KETUA PENGARAH HASIL DALAM NEGERI [2018] 7 CLJ 487 affirmed that the Courts had to adopt a flexible approach when deciding if and when an Applicant was indeed “adversely affected”. [21] To cut to the chase, the Applicant’s learned Counsel submitted that the additional taxes and penalties to the tune of RM81 Million to be paid in short order by the Applicant in this case was clear and unequivocal demonstration of them being “adversely affected” by the decision of the Respondent ~ both in terms of alleged ‘grave injustice’ and ‘serious financial prejudice’. If for nothing else, leave should be granted on that ground alone. [22] On the facts and on this point, this Court stands satisfied that the Applicant has a real and genuine interest in the subject matter (i.e. the additional taxes and penalties sought to be imposed upon them); and thus have ostensibly been aggrieved by the decision of the Respondent (the latter point being subject to full ventilation by both sides at the merits stage of these proceedings). ii) Domestic Remedy Page 13 of 15 [23] Senior Federal Counsel, in his submission alluded to the fact that there exists a domestic remedy for the Applicant, which by right precludes this Court from granting leave for judicial review. Learned Counsel made reference to section 99 of the Income Tax Act and the existence of the Special Commissioners of Income Tax with regard to the availability of an appeal process that may be laid at the door of that entity by the Applicant herein. [24] In answer to that proposition learned Counsel for the Applicant drew reference to the cases of MAJLIS PERBANDARAN PULAU PINANG v. SYARIKAT BEKERJASAMA SERBAGUNA SUNGAI GELUGOR DENGAN TANGGUNGAN [1999] 3 MLJ 1 (FC); LAI CHENG CHEONG v. SOWARATNAM [1983] 2 MLJ 113 (FC); QRS BRANDS Bhd. v. SURUHANJAYA SEKURITI & Anor. (supra) (CoA); amongst several other cases, which held that the existence of a domestic remedy falls to be considered and decided upon at the merits stage of the proceedings and not at the leave stage. [25] In point of fact, it was held by the Court of Appeal in the case of TEH GUAT HONG v. PERBADANAN TABUNG PENDIDIKAN [2015] 3 AMR 35 as follows: “It was not necessary to go into the merits of the case at the leave stage because the threshold to establish whether leave should be granted is very low.” Page 14 of 15 Final Order [26] Pursuant to the foregoing, leave was granted for judicial review, together with an interim stay under paragraph (t) of Encl. 1 for self-evident reasons; with costs in the cause. Dated this 25th day of April, 2021 -Signed- ….………………………………………… (Fredrick Indran X.A. Nicholas) Judicial Commissioner High Court of Malaya At Johor Bahru Page 15 of 15 COUNSEL For the Applicant: Mr. Anand Raj, Ms. Foong Pui Chi (with him), Messrs. Shearn Delamore & Co, Advocates & Solicitors, 7th Floor, Wisma Hamzah-Kwong Hing, No. 1 Leboh Ampang, 50100 Kuala Lumpur [Ref: SD(TAX)3474160 (AR)] Attorney General Chambers: Tn. Hj. Jailaini Rahman (SFC), Pejabat Penasihat Undang-Undang Negeri Johor, Bangunan Dato’ Jaafar Muhammad, Kota Iskandar, Iskandar Puteri, Johor. (Observer status only); For and behalf of the Respondent: Ms. Kwan Huey Shin (Putative Respondent) and Pn. Ashrina Ramzan Ali (Peguam Kanan Hasil), Bahagian Litigasi Cukai, Jabatan Undang-Undang, Lembaga Hasil Dalam Negeri Malaysia, Menara Hasil, Aras 11 & 16, Persiaran Rimba Permai, Cyber 8, 63000 Cyberjaya.