Udapakat Bina Sdn Bhd v Ketua Pengarah Hasil Dalam Negeri (WA-25-360-11/2023)

4 MLJ 753; [2023] 5 AMR 967; Page 2 of 19 (b) (d) (e) A Declaration that the taxes amounting to RM40,934,491.92 collected by the DGIR from the Applicant under Section 4C of the ITA are illegal and unlawful; A Declaration that the taxes amounting to RM40,934,491.92 collected by the DGIR under Section 4C of the ITA from the Applicant constitute an unjust enrichment; An Order that the DGIR shall return to the Applicant within 14 days from the order of this Honourable Court, the taxes amounting to RM40,934,491.92 collected from the Applicant under Section 4C of the ITA; and An Order that the DGIR shall pay interest accruing at the rate of 8% on the sum of RM40,934,491.92 (being the taxes that DGIR is to return to the Applicant) from the date the said sum was paid in full by the Applicant to the DGIR (i.e. on 13.7.2018) until the date the said sum is returned in full to the Applicant; 1.2 That all necessary and consequential directions and orders be given; 1.3 That the costs of this application be costs in the cause; and 1.4 All other and further relief which this Honourable Court deems fit and proper. 2. In essence, this is an application for leave to apply for, amongst others, an order for certiorari to quash the Respondent's decision to disallow the Applicant’s application for the return of the illegally paid taxes under Section 4C of the ITA (Decision). 3. After the hearing, | allowed the Applicant’s application for leave for judicial review (Enclosure 1). This judgment provides the rationale behind my decision. Page 3 of 19 Background Facts 4. The background facts of this case extracted from the Applicant’s Affidavit in Support with appropriate modifications, are as follows: - 4.1 The Applicant is Udapakat Bina Sdn Bhd, a company incorporated in Malaysia with an office address at 10 Floor, Yeoh Tiong Lay Plaza, 55, Jalan Bukit Bintang, 55100 Kuala Lumpur. The principal activity of the Applicant is property development. 4.2 The chronology of key events leading to the Respondent's decision, which is not disputed, is as follows: - | Date Event 7.4.2016 By Gazette Notification No. 8206 dated 7.4.2016, a declaration in Form D pursuant to Section 8(1) of the Land Acquisition Act 1960 | (LAA) was published to acquire the Applicant’s land at 296, Title Geran 29723, Seksyen 63, Bandar Kuala Lumpur Daerah Kuala Lumpur, Wilayah Persekutuan with PT13, HSD 50123 (the Land) for the construction of the Mass Rapid Transit project (the MRT Project). The Applicant had no prior knowledge of this | compulsory acquisition. 18.8.2016 A Notice of Enquiry known as Form E was | issued to the Applicant pursuant to Section 10 of the LAA in respect of the Land. A Notice in Form F was also issued to the Applicant pursuant to Section 11 of the LAA in respect of the Land. Page 4 of 19 11.1.2017 A Notice of Award of Compensation known as Form H was issued to the Applicant pursuant to Section 16 of the LAA in respect of the following- Area to be acquired | Land (square meters) PT 13 2290.3495 HSD50123 23.8.2017 The Notice that Possession Has Been Taken of Land known as Form K was issued pursuant | to Section 22 of the LAA. 28.3.2018 Upon receiving Form CP 204A and CP 205 dated 28.3.2018 from the IRB, the Applicant | made the first installment payment of income tax to the DGIR with the fourth, being the last tranche of payment being made on 13.7.2018. 21.12.2017 Subsequently, vide a Notice of Reduced | Assessment (Form JR) dated 21.12.2017, the amount of taxes to be paid was revised to RM40,934,491.92. 18.8.2023 Vide a letter dated 16.8.2023, the Applicant requested for a refund of the illegally paid taxes under Section 4C of the ITA. | However, to this date, the Respondent has not responded to the said letter and in doing so, decided not to allow the Applicant’s application for a refund (Respondent’s Decision). Page 5 of 19 The Respondent’s Decision 5. | The Respondent's Decision is consequent to its decision to disallow the Applicant’s application for the return of the illegally paid taxes under Section 4(C) of the ITA. 6. The Applicant contends that the Respondent has no legal and factual basis for its Decision based on the reasons summarized as follows: - (a) The Respondent has no legal and factual basis to disallow the Applicant’s application for return of illegally paid tax under Section 4C of the ITA as it contravenes the Applicant's fundamental right to receiving adequate compensation for the compulsory acquisition of land guaranteed by Article 13(2) of the Federal Constitution (FC); (b) Section 4C of the ITA has been deemed unconstitutional by the Honourable Federal Court recently and has consequently been struck down by the apex court of Malaysia; (c) Section 4C of the ITA is inapplicable as it contravenes the Applicant's fundamental right to receive adequate compensation for the compulsory acquisition of land guaranteed to the Applicant by Article 13(2) of the FC; (d) The Parliament cannot legislate to take away the fundamental right of an individual unless it is on a subject on which the FC has made an exception by giving Parliament the power to do so. However, this is clearly a case to the contrary. 7. Given the above, the Applicant contends that this matter falls squarely within the ambit of a judicial review application as there are no facts in dispute. The only issue at hand is purely a question of law i.e. is the Respondent entitled in law to disallow the Applicant's refund application for the return of illegally paid tax under Section 4C of the ITA when this particular section has been deemed unconstitutional and been struck down accordingly. Page 6 of 19 Grounds for judicial review 8. | The grounds of relief sought are based on the contention that the Respondent's decision was ultra vires, illegal, void, unlawful and/or in excess of authority for the reasons outlined below: - Illegality 8.1 The following is a summary of the matters that the Respondent had failed to take into account in arriving at its Decision: Unconstitutionality (a) Firstly, the Respondent had failed to realise that the trite law established by the Superior Courts in Wiramuda (supra), Metacorp Development Sdn Bhd v. Ketua Pengarah Hasil Dalam Negeri [2011] 10 MLRH 854;

CLUU 1002; [2011] 5 MLJ 447, Ketua Pengarah Hasil Dalam Negeri v. Penang Realty Sdn Bhd [2006] 1 MLRA 585; [2006] 3 MLJ 597 and Lower Perak Cooperative Housing Society Berhad v. Ketua Pengarah Hasil Dalam Negeri [1994] 1 MLRA 262;

3 CLJ 541; [1994] 2 AMR 1735; [1994] 2 MLJ 713 were binding authorities on the Respondent , being an arm of executive; (6) The Respondent had failed to acknowledge and give effect to the recent Federal Court decision in Wiramuda (supra) where the Federal Court had rightfully struck down Section 4C of the ITA due to its unconstitutionality as it contravenes Article 13 of the FC; (c) Secondly, the Respondent had failed to realise that the Applicant’s fundamental right to property is protected by Article 13 of the FC. While the right to property is not absolute, Article 13(2) of the FC provides a safeguard of “adequate compensation’ for the property that has been compulsorily acquired; Page 7 of 19 (d) Thirdly, the Respondent had failed to take into account the apex court’s decision in Semenyih Jaya Sdn Bhd v. Pentadbir Daerah Hulu Langat and another case

4 MLRA 554; [2017] 5 CLJ 526; [2017] 4 AMR 123; [2017] 3 MLJ 561 and Pentadbir Tanah Daerah Gombak Iwn Huat Heng (Lim Low & Sons) Sdn Bhd

2 MLRA 56; [1991] 1 CLJ (Rep) 356; [1990] 3 MLJ 282. In Semenyih Jaya (supra) the Federal Court had held that adequate compensation should place a person in the same financial position as he would have been had there been no question of his land being compulsorily acquired. This is opposite to if the land was sold and profit was earned. A person should receive compensation that is no more or no less than the loss resulting from the compulsory acquisition of his land; (e) Moreover, it has been held by the Court of Appeal in Penang Realty (supra) that the compensation received by the taxpayer was not subjected to income tax. The Court of Appeal in this case adopted the principle enunciated by the Supreme Court in Lower Perak (supra) that compulsory acquisition of land cannot constitute a sale as the element of compulsion essentially vitiated the intention to trade. Although these two cases were decided prior to the introduction of Section 4C of the ITA, the Federal Court in Wiramuda (supra) had rightfully pointed out that Section 4C of the ITA cannot be utilised as a tool to circumvent the trite principle established in Penang Realty (supra) and Lower Perak (supra); (f) Furthermore, subjecting the compensation to income tax by virtue of Section 4C of the ITA would effectively reduce the amount of compensation received by a person for the compulsory acquisition. Accordingly, the actual compensation received would be less than the loss resulting from the compulsory acquisition of land. Evidently, Section 4C of the ITA has taken away the safeguard of adequate compensation as afforded by Page 8 of 19 Article 13(2) of the FC and rendered the said Article illusory; (g) Undeniably, the payment of adequate compensation for the compulsory acquisition of land is a fundamental right guaranteed to a person by the FC. Accordingly, it would be unconstitutional for the Parliament to introduce Section 4C which purports to take away such fundamental right granted by the FC itself; (h) |The Respondent also failed to realise that the DGIR has disregarded the trite principle that in a taxing act, one can only look fairly at the language used and what is clearly said and that nothing is to be read in nor implied as held in National Land Finance Co-operative Society Ltd v. Director General of Inland Revenue

4 CLJ 339; and (i) | The Respondent failed to appreciate that the DGIR had ignored that a provision in a taxing statute must be read strictly is one that is to be applied against the IRB and not in its favour. If there is any doubt, it must be resolved in the taxpayer's favour. Unjust Enrichment (a) Further to the fact that the taxes paid under Section 4C of the ITA are now considered as taxes that were collected illegally by the DGIR, by not allowing the Applicant's refund of the money, the DGIR has been unjustly enriched from the illegally collected taxes. (b) It has been held by the Federal Court in Dream Property Sdn Bhd v. Atlas Housing Sdn Bhd [2015] 2 MLRA 247; [2015] 2 CLJ 453; [2015] 2 AMR 601;

2 MLJ 441 that the law of unjust enrichment has to be recognised in Malaysia in order for justice to be done in a range of factual circumstances, and that the restitution remedy is at all times applied to attain justice. Page 9 of 19 Although the Applicant had made the payment of taxes in good faith in accordance with the law, as the law stood at that point in time, it cannot be denied that the taxes were paid upon an unconstitutional and illegal law. (c) In Woolwich Building Society v. Inland Revenue Commissioners [1993] 2 All ER 737, the House of Lords held that the Applicants have the right to recover from the revenue the money paid whereby the law was ultra vires. 8.2 The Respondent's decision had been irrational and/or unreasonable for the following grounds — (i) | The Respondent's Decision is liable to be quashed on the ground that it is so unreasonable that no reasonable person could have come to that decision. This is especially true when the Respondent had failed to give any valid justification, reason or basis for its decision; (ii) | There is also a good basis for the Applicant to believe that the Respondent had exercised its authority arbitrarily and/or mechanically without applying its mind to the facts and circumstances of the Applicant as nothing in the Respondent's decision suggests that the Respondent had given even the briefest of thought to the explanation contained in the Applicant's letter dated 16.8.2023 which among others highlighted the unconstitutionality of Section 4C of the ITA; (iii) The Applicant at all material times acted in good faith, gave full co-operation, made full and frank disclosure and obtained professional advice in managing its finance and tax affairs; (iv) The decisions of the superior courts and this Honourable Court in relation to the interpretation and construction of legislation and case law are part of the laws of Malaysia and are binding on the Respondent. The Respondent had clearly failed to take cognizance of those decisions; and Page 10 of 19 (v) The failure to appreciate and give effect to the true effect and application of the ITA amounts to a clear contravention of Article 96 of the FC. Article 96 of the FC clearly states that: “No tax or rate shall be levied by or for the purposes of the Federation except by or under the authority of federal law’. 8.3. The Respondent’s Decision was made without having any regard to the legitimate expectations of the Applicant as the Respondent failed to consider the decisions of our superior courts and this Honourable Court in relation to the interpretation and construction of legislation and; hence, this constitutes a denial of the legitimate expectations of the Applicant and that the Respondent will take cognizance of the same. The Law 9. The Federal Court in WRP Asia Pacific Sdn Bhd v. Tenaga Nasional Bhd [2012] 4 CLJ 478; [2012] 4 MLRA 257; [2012] 4 MLJ 296 at 303, speaking through Suriyadi Halim Omar FCJ (as he then was) held: “...Leave may be granted if the leave application is not thought of as frivolous, and if leave is granted, an arguable case in favor of granting the relief sought at the substantive hearing may be the resultant outcome. A rider must be attached to the application though i.e. unless the matter for judicial review is amenable to judicial review absolutely no success may be envisaged.” 10. The test laid down for leave to commence a judicial review in WRP Asia Pacific Sdn Bhd (supra) are as follows: 10.1 whether the subject matter is amenable to judicial review; and if so 10.2 from the materials available, whether the application is frivolous and if not thought as frivolous, to consider that the applicant has an arguable case to obtain the relief sought at the substantive hearing. Page 11 of 19 11. The principles governing applications for leave to commence judicial review proceedings have also been set out in Tang Kwor Ham & Ors v. Pengurusan Danaharta Nasional Bhd & Ors [2006] 1 MLRH 507; [2006] 1 CLJ 927; [2006] 5 MLJ 60 at 69 where Gopal Sri Ram JCA (as he then was) held: [10]"...the High Court should not go into the merits of the case at the leave stage. Its role is only to see if the application for leave is frivolous... So too will the court be entitled to refuse leave if it is a case where the subject matter of the review is one which by settled law (either written law or the common law) is non-judiciable.” 12. It is trite that the Applicant has to satisfy the tests propounded in the abovementioned cases to secure the leave to commence the judicial review proceedings. At this stage, the court need not go into the merits of the case, but only to see if the subject matter is amenable to judicial review or whether the application for leave is frivolous. 13. In any event, a judicial review is the discretion of the court, the application for leave to commence judicial review may be allowed in exceptional circumstances as explained by the then Supreme Court in Government of Malaysia & Anor v. Jagdis Singh [1987] 2 MLJ 185; [1986] 1 MLRA 207; [1987] CLJ REP 110 which held: “Held: allowing the appeal: (1) the discretion is still with the courts to act by way of judicial review but where there is an appeal provision available to the applicant, certiorari should not normally issue unless there is shown a clear lack jurisdiction or a blatant failure to perform some statutory duty or in appropriate cases a serious breach of the principles of natural justice.” The case for the Putative Respondent 14. In gist, the Putative Respondent submits as follows: - (a) There is no action, decision or omission by the Respondent susceptible for a judicial review application; (6) The non-response to the Applicant’s letter dated 16.8.2023 does not amount to an action, decision or omission that is amenable to a judicial review application; Page 12 of 19 /N 3073sYOjSkKWXkY xoZyagDA ; (c) The Applicant is trying to use the letter as a medium to jumpstart a fresh action/timeline; and (d) As the basis for this Application is the Notice of Assessment. The Applicant should have taken a proper procedure of appeal provided under Section 99 and Section 100 of the ITA. The decision of the Court The Putative Respondent deemed the decision amenable to judicial review 15. 16. 17. 18. 19. Order 53 rule 2(4) of the ROC expressly allows persons who are “adversely affected” by the decision made by a public authority to initiate judicial review applications. For ease of reference, subrule 4 is reproduced as follows: “(4) | Any person who is adversely affected by the decision, action or omission in relation to the exercise of the public duty or function shall be entitled to make the application.” The requirements of Order 53 of the ROC are mandatory and must be complied with, failing which the application would not be entertained by the Court. The Putative Respondent submits that it has made no decision that is amenable to judicial review and that the Applicant’s application is premature. It is to say that the Putative Respondent’s non-reply to the Applicant’s letter does not amount to a decision amenable to judicial review under Order 53 of the ROC. It is trite law that failure or refusal by a public authority to make a decision is also amenable to judicial review. The Courts will have to allow the leave for judicial review in such circumstances. In Orange Rederiet Aps v. Ketua Pengarah Hasil Dalam Negeri

MLRHU 165; [2018] 1 LNS 384; [2018] MLJU 218, Azizah Nawawi J (now JCA) had allowed the leave application and had stated that: - Page 13 of 19 “[14] On the same day, the applicant also wrote to the DGIR stating its legal position that pursuant to Article IX of the Malaysia-Denmark DTA and the case laws, payments received by the applicant from Wira Swire are not subject to withholding tax. Furthermore, the applicant reiterated that Article IX of the Malaysia-Denmark DTA prevails over S. 4A (iii) of the ITA 1967. The applicant also expressly stated in the letter that if the DGIR fails to respond favourably to the applicant’s representation and appeal, then the applicant will treat its appeal and representation as being rejected by the DGIR.

When the DGIR fails to respond to the applicant's letter dated 29.12.2016, the applicant takes the position that the DGIR’s letter dated 29.12.2016 is the decision of the DGIR and deemed to be have been served on the applicant on 29.1.2017. Hence, the applicant filed this application for judicial review action.” (emphasis added) 20. Itis important to note that Order 53 of the ROC allows for a broader scope of reviewable decisions as compared to the previous provisions under the Rules of the High Court 1980. A decision deemed made by the Putative Respondent is sufficient to initiate an application for judicial review. In Tang Kwor Ham & Ors (supra) the Court of Appeal held: - “[60] The other point raised by learned counsel before us, with far less confidence, is that there was here no “decision” by anyone. And. Since O. 53 r. 2(4) speaks of a “decision”, the applicants have no cause to argue on an application for judicial review. Again, | cannot agree ... O. 53 r. 2(4) must not be read in isolation. It must be read contextually, together with O. 53 r. 3(6) which provides ...

If the sub-rules are read together and in their proper context, it can be seen that there need not always be an actual decision by someone.” (emphasis added) 21. | noticed that the High Court has adopted a similar position in allowing judicial review against deemed decisions made by public authorities. In this regard, the High Court has declined to rely on older decisions that were premised upon Order 53 rule 2(4) of the Rules of High Court 1980, where the ambit of reviewable decisions is limited. Page 14 of 19 22. | can provide no better reference than the case of Impian Seloka Sdn Bhd v. Menteri Kewangan Malaysia [2022] MLJU 3479;

AMEJ 2020 wherein my learned brother, Wan Ahmad Farid J held as follows: - “[27] The learned Senior Federal Counsel attracted my attention to the impugned letter and referred me to the judgment of the Court of Appeal Abdul Rahman bin Abdullah Munir & Ors v. Datuk Bandar Kuala Lumpur & Anor [2008] 6 MLJ 704 CA. The learned SFC then submitted that the Minister’s non-response to the impugned letter does not constitute a decision within the meaning of O 53 r 2(4). In short, the learned SFC contended that any attempt to convert a “deemed decision” would give rise to an artificial meaning to the word “decision.”

With respect, one should approach the decision on this specific issue in Abdul Rahman bin Abdullah Munir with caution. My reason is this. The decision of the Court of Appeal is premised on O 53 r 2(4) of the former Rules of High Court 1980. It states as follows: - Any person who is adversely affected by the decisions of any public authority shall be entitled to make the application. However, the new O 53 r 2(4) of the ROC provides as follows: - Any person who is adversely affected by the decision, action or omission in relation to the existence of the public duty or function shall be entitled to make the application.

The new O 53 r 2(4) of the ROC has added the phrase “decision, action or omission in relation to the existence of the public duty or function.” In my view, the word omission is simply a failure to make a decision. It is a non-decision. With the introduction of the word “omission” in the new O 53 r 2(4), the question of an “artificial decision” does not longer arise.” (emphasis added) a) (See: Syarikat Kapasi Sdn Bhd v. Menteri Kewangan Malaysia and other cases [2023] AMEJ 0471; [2023] MLJU 524; b) BD Agriculture (Malaysia) Sdn Bhd v. Menteri Kewangan Malaysia [2023] 4 AMR 963; [2023] MLJU 430; c) CMMT Investment Ltd v. Menteri Kewangan Malaysia

MLJU 360) Page 15 of 19 23. Based on the above, it is evident that the Putative Respondent’s deemed decision of 16.8.2023, arising from non-reply to the Applicant’s letter can be amenable to judicial review under order 53 rule 2(4) of the ROC. Out of time 24. The Putative Respondent contends that this application was made out of time as the date of the decision of the Putative Respondent for YA 2018 is made on 25.2.2019 and the date of the Applicant’s application is made on 9.11.2023, whereby there is a period of approximately 4 years delay from the date of the decision in making this application. 25. However, | find that the subject matter for this judicial review pertains to the Putative Respondent’s deemed decision to refuse the Applicant’s Discharge Application in compliance with Wiramuda Decision, and not the YA 2018 Assessment. 26. In BD Agriculture (supra) the High Court recognised this: - “[30] But not to make any decision, in the context of the urgency of the time frame, would amount to an omission within the context of O 53 r 2(4) of the ROC and | so hold. The Minister’s inaction or omission is now the subject matter of the leave application for judicial review. It is not the issuance of the NAA by the DGIR...” (emphasis added) 27. Inthe instant case, | find that the Applicant's Discharge Application to the Putative Respondent premised upon the Federal Court’s decision in Wiramuda dated 9.12.2022. The Applicant seeks compliance from the Putative Respondent with the Wiramuda Decision, as Enclosure 1 reflects the Putative Respondent’s refusal to comply. The application filed is not against the YA 2018 assessment, but it is against the Putative Respondent's Decision. Therefore, it is clear that this judicial review application has been filed within time and within three months from the date of the Putative Respondent’s Decision. Page 16 of 19 Alternative Remedy 28. The Putative Respondent contended that the Applicant must exhaust the alternative remedy of appealing to the SCIT. 29. The Applicant in the instant case seeks Mandamus orders for the Putative Respondent to refund the taxes paid in the previous YA, where gains from compulsory acquisition were previously subjected to tax. Therefore, | am of the view that the High Court has the authority to grant such reliefs. 30. Even in respect of judicial reviews against tax assessments under the ITA, the then Supreme Court has held in Jagdis Singh (supra) that the Revenue is not immune from judicial review notwithstanding the availability of an alternative remedy, so long as exceptional circumstances exist in the form of: “... a clear lack of jurisdiction or a blatant failure to perform some statutory duty or in appropriate cases a serious breach of the principles of natural justice...” (emphasis added) 31. The Court views that the Putative Respondent's failure to follow the Federal Court’s decision in Wiramuda renders its decision flawed. Moreover, | am of the view that the Putative Respondent has no right to retain the taxes paid by the Applicant for gains from the compulsory acquisition of the Land. Additionally, the Putative Respondent has also unjustly enriched from both the collection and retaining of such taxes. 32. Based on the above, it is my view that the Applicant’s case is neither frivolous nor vexatious. This application raises important questions of law: - (a) Whether the Putative Respondent can refuse to recognise and give effect to the Wiramuda Decision which has held, Section 4C of the ITA to be unconstitutional as it contravenes Art 13(2) of the FC? Page 17 of 19 (b) Whether the Putative Respondent can refuse to refund the Applicant the amount of taxes arising from and paid on the compensation received for the compulsory acquisition of the Land notwithstanding the Wiramuda Decision by the Federal Court? 33. The Court is of the view that the above questions of law are more suitable to be decided by this Court at the substantive stage. At the leave application, the Court is not supposed to descend into the substantive merits of the application. Conclusion 34. Bearing in mind, that this is an application for leave to commence judicial review proceeding under Order 53 of the ROC, it is trite that the test for leave to commence with judicial review be complied with 35. Having considered the application, it is my opinion that the Applicant has met the leave threshold of the judicial review. It is clear that there is a clear and arguable case presented by the Applicant. This application for leave is neither frivolous nor vexatious. 36. Accordingly, the application for leave to commence judicial review proceeding is hereby allowed with costs in the cause. Dated: 3\ July 2024 Ahmad Kamal bin Md. Shahid Judge High Court Kuala Lumpur Page 18 of 19 Counsels For the Applicant: For the Putative Respondent: En. S. Saravana Kumar (Cik Dharshini Sharma with him) Tetuan Rosi Partnership Peguambela dan Peguamcara Level 16, Menara 1, Dutamas, Solaris Dutamas, No. 1, Jalan Dutamas 1, 50480 Kuala Lumpur. Dahlan Saravana En. Mohd Harris bin Hanapi Senior Revenue Counsel (Cik Azleena bt Md Khairuddin, Revenue Counsel with him) Jabatan Undang-Undang, Lembaga Hasil Dalam Negeri, Menara Hasil, Aras 16, Persiaran Rimba Permai, Cyber 8, 63000 Cyberjaya, Selangor. Page 19 of 19