BD AGRICULTURE (MALAYSIA) SDN BHD PEGUAM NEGARA

WA-25-437-07/2022 Kand. 34 07/03/2023 23:29:36 DALAM MAHKAMAH TINGGI MALAYA DI KUALA LUMPUR (BAHAGIAN KUASA-KUASA KHAS) PERMOHONAN SEMAKAN KEHAKIMAN NO: WA-25-437-07/2022 Dalam perkara suatu permohonan yang telah dibuat kepada Responden menurut Seksyen 135 dan Seksyen 127(3A) Akta Cukai Pendapatan 1967 yang bertarikh 6.7.2022 dan Keputusan Responden yang dianggap dibuat pada 25.5.2022; Dan Dalam perkara suatu permohonan untuk antara lain, suatu Perintah Certiorari; Dan Dalam perkara Aturan 53 Kaedah-Kaedah Mahkamah 2012 ANTARA BD AGRICULTURE (MALAYSIA) SDN BHD …PEMOHON DAN MENTERI KEWANGAN MALAYSIA …RESPONDEN JUDGMENT Background [1] The applicant company is engaged in manufacturing agricultural products and service installation of animal farming goods and equipment. [2] On 29.1.2007, the applicant company, with the assistance of one Wize Platform Sdn Bhd, applied for the Regional Distribution Centre (“RDC”) from the Malaysia Investment Development Authority (“MIDA”). The application was approved by MIDA on 7.4.2008. 1 S/N rYyHqp3H0UWeMbiAWf2lg **Note : Serial number will be used to verify the originality of this document via eFILING portal [3] By a letter dated 15.5.2008, MIDA confirmed that the applicant’s application to get tax exemption for 10 years under s 127 of the Income Tax Act 1967 (“ITA”) was approved by the Ministry of Finance (“MIDA’s Approval”). The letter inter alia states as follows: Sukacita dimaklumkan bahawa Kementerian Kewangan telah meluluskan permohonan syarikat BD AGRICULTURE (MALAYSIA) SDN BHD untuk mendapatkan pengecualian cukai pendapatan sepenuhnya selama 10 tahun di bawah Subseksyen 127(3)(b), Akta Cukai Pendapatan 1967 bagi menjalankan aktiviti Pusat Pengedaran Serantau. The MIDA’s Approval was granted pursuant to PU(A) 308/2005 Income Tax (Exemption) (No. 41) Order 2005 (“the Gazette Order”). [4] On 18.2.2022, the Director General of Inland Revenue (“DGIR”) issued an audit finding disallowing the applicant’s claim for RDC. In arriving at his decision, the DGIR asserted that the applicant had failed to comply with the requirements of para 2 of the Gazette Order and para 4 of the conditions of the MIDA’s approval. Para 4 of the MIDA’s approval states that the RDC must reach a total sales turnover of at least RM100 million by the 3rd year of assessment. [5] The applicant, via its tax agent, Messrs BDO Malaysia, provided a written reply vide its letter dated 7.3.2022 to the DGIR as to why the applicant’s claims for the tax exemption under the RDC incentive should be allowed. Messrs BDO inter alia explained that the OEM suppliers should be considered related companies of the Big Dutchman Group (including the applicant) based on s 2 of the Promotion of Investments Act 1986 (“PIA”). [6] Secondly, in respect of the total local sales that exceed the threshold of 20% for YA 2009, the excess has been brought to tax by virtue of the formula provided under the Income Tax (Exemption) (No. 41) Order 2005. [7] However, in his letter dated 20.4.2022, the DGIR replied and maintained his position on the audit findings. [8] Despite subsequent explanations made by the applicant, the DGIR maintained his position. The DGIR then issued Notices of Additional 2 S/N rYyHqp3H0UWeMbiAWf2lg **Note : Serial number will be used to verify the originality of this document via eFILING portal Assessment (“NAA”) for Years of Assessment (“YAs”) 2009 to 2018 amounting to RM113,300,009.30. [9] The applicant company then submitted a request to the putative respondent (“the Minister”) to give to the DGIR directions under s 135 of the ITA or to exempt the taxes raised under the NAA under s 127(3A) of the ITA. The Minister did not reply to the applicant’s letter dated 6.7.2022. The Application for Leave for Judicial Review [10] Aggrieved by the failure of the Minister to reply, the applicant company sought leave to commence a judicial review application against the Minister. [11] The application is supported by the affidavit of Hofstede, Jan, in Encl 2 (“AIS-2”). Mr Hofstede, Jan is the director of the applicant company. [12] In essence, the applicant applies for an order for the Minister to exercise his power under s 135 or s 127(3A) of the ITA to set aside or exempt the DGIR’s issuance of the NAA dated 25.5.2022. The Attorney General’s Objection [13] The Attorney General objects to this application for leave. [14] The grounds for the AG’s objection are as follows: (a) The applicant does have sufficient material to sustain a prima facie case to obtain leave for judicial review. The learned Senior Federal Counsel submitted that the applicant has failed to ascertain the impugned decision. (b) In any event, according to the learned SFC, the applicant had misinterpreted s 135 and s 127(3A) of the ITA. [15] As to the first ground, the learned SFC contended that the Minister has yet to reply to the applicant’s letter urging the Minister to exercise his discretion under the ITA. The learned SFC further submitted that 3 S/N rYyHqp3H0UWeMbiAWf2lg **Note : Serial number will be used to verify the originality of this document via eFILING portal the applicant cannot couch this application for a mandamus to compel the Minister to consider the applicant’s request when no such legal duty is imposed on the Minister. [16] My attention was then drawn to the judgment of the Court of Appeal in Abdul Rahman bin Abdullah Munir & Ors v Datuk Bandar Kuala Lumpur & Anor [2008] 6 MLJ 704 CA. In that case, the appellants contended that there was a “deemed decision” by the 1st respondent made on 5.1.2005 when it failed to revert to the appellants’ letter of 22.12.2004. The Court of Appeal held that the appellant’s interpretation of the first respondent’s non-response to their letter makes no sense and far stretches one’s imagination. This would give rise to an artificial meaning of the word “decision”. [17] Secondly, the learned SFC submitted that nothing in s 135 of the ITA gives the power to set aside the notice of assessment issued by the DGIR. [18] In any event, according to the learned SFC, the direction sought from the Minister is not of “general character” within the meaning of s 135. [19] The learned SFC further submitted that in urging the Minister to exercise his purported power under s 135 of the ITA, the applicant had attempted to circumvent the specific provision under s 99 of the ITA that would be able to address its grievance. S 99 of the ITA provides that a person aggrieved by an assessment made in respect of him may appeal to the Special Commissioners of Income Tax (“SCIT”) against the assessment by the DGIR. [20] S 99, according to the learned SFC, is a specific provision under the ITA, whereas s 135 is a general provision. [21] The SFC then urged this Court to apply the maxim of generalia specialibus non derogant and submitted that s 99 takes precedence over s 135 of the ITA. My attention was then drawn to the judgment of the Court of Appeal in Luggage Distributors (M) Sdn Bhd v Tan Hor Teng & Anor [1995] 1 MLJ 719 CA. The Court of Appeal held that where there are two provisions of written law, one general and the other specific, then, whether or not these two provisions are to be found in the same or different statutes, the special or specific provision excludes the operation of the general provision. 4 S/N rYyHqp3H0UWeMbiAWf2lg **Note : Serial number will be used to verify the originality of this document via eFILING portal [22] The learned SFC contended that the applicant’s application to the Minister for review or exemption under s 135 or s 127(3A) of the ITA is an attempt to avoid the legitimate domestic remedy housed in s 99 of the ITA. [23] The failure to appeal to the SCIT at first instance, according to the learned SFC, amounts to an abuse of process. Analysis [24] The judgment of the Court of Appeal in Abdul Rahman bin Abdullah Munir, a case relied on by the learned SFC, was based on the former O 53 r 2(4) of the Rules of High Court 1980 (“RHC”). It states as follows: Any person who is adversely affected by the decision 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. [25] As can be seen from the new O 53 r 2(4) of the ROC, the phrase “action or omission” was added to the word “decision”. In short, with the introduction of “action and omission”, the subject matter amenable to judicial review is not limited to the impugned decision only. It encompasses a non-response, a non-decision, an inaction or an omission to make any decision at all. [26] In my view, the omission or a non-decision of a public authority is amenable to judicial review. In Zainal bin Haji Nasiruddin v The Registrar of Societies [2013] 7 BLR 704, the applicant applied for registration of PAKAR under the Societies Act 1966. The decision to register or otherwise is within the discretion of the Registrar under the Societies Act. The Registrar is enjoined by the Societies Act to consider the application and make a decision. However, the Registrar had failed to make a decision – one way or the other. Ravinthran Paramaguru JC (now JCA) held that: 5 S/N rYyHqp3H0UWeMbiAWf2lg **Note : Serial number will be used to verify the originality of this document via eFILING portal In my opinion, the inordinate and continuing delay without good reason in the instant case is equivalent to refusal to make a decision. As the applicant has sufficient legal interest in the duty of the Registrar to make a decision on the application to register PAKAR, I hold that the refusal to make a decision is unlawful and ultra vires the Societies Act 1966. [27] Applying the said proposition to the facts of the case, the applicant urged the Minister to exercise his power under the ITA in its favour. The Minister may or may not agree with the request made by the applicant. That is entirely up to the Minister. After all, s 135 of the ITA employs the word “may”. The Minister is at liberty to refuse to accede to the request as long as he has reasonable grounds. [28] Under s 103 of the ITA, the tax payable under the NAA shall be due and payable on the due date whether or not that person appeals against the assessment. Under s 106, the Government may recover the tax due and payable by civil proceedings as a debt due to the Government. [29] Given the urgency of the matter, the applicant sought for the Minister to interfere. [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 I 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. From that perspective, the appeal to the SCIT under s 99 of the ITA does not arise since it does not involve the omission of the Minister, which is the subject matter of this leave application. The challenge in this judicial review is not against the decision of the DGIR but that of the Minister. [31] The learned SFC took pains to canvass on the issue that s 99 should prevail over s 135 of the ITA. To my mind, whether the maxim of generalia specialibus non derogant applies or whether the Minister was justified in his inaction goes to the merits of the application, which ought to be determined at the substantive stage. 6 S/N rYyHqp3H0UWeMbiAWf2lg **Note : Serial number will be used to verify the originality of this document via eFILING portal [32] Likewise, the question of whether the Minister should have exercised his discretion to exempt the applicant under s 127(3A) should be ventilated at the substantive stage. Findings [33] The threshold for the granting of such leave is very low. Leave is normally granted if the application is neither frivolous nor vexatious and justifies further argument on a substantive motion. [34] The applicant has crossed the low threshold based on the reasons stated herein. [35] Leave is hereby granted. [36] As to the stay application, I take cognisance that the amount of taxes is indisputably large. It is astronomical. Such an amount will cause irreparable damage to the applicant if the DGIR opts to recover the same through civil proceedings under s 106 of the ITA. This is affirmed by Hofstede, Han in AIS-2. [37] In Flextronics Shah Alam Sdn Bhd v Ketua Pengarah Hasil Dalam Negeri [2018] 7 CLJ 487, Vazeer Alam J (now JCA), in allowing the interim stay, remarked as follows: I had exercised my discretion to allow an interim stay primarily upon the consideration of the large amount of tax that had been raised by the respondent, ie, approximately RM62.9 million, which according to counsel would cause severe cash flow problems to the applicant and would adversely affect its financial position as a going business entity. [38] An example of this liberal approach can be seen in Inspirasi Elit Sdn Bhd v Ketua Pengarah Hasil Dalam Negeri [2021] 12 MLJ 536, where my learned sister Noorin Badaruddin J held that: The balance of convenience lies in the applicant’s favour. This court agrees with the applicant’s submission that if a stay is not granted the applicant will suffer damage and injury which cannot be remedied by the refund of taxes. On the other hand, 7 S/N rYyHqp3H0UWeMbiAWf2lg **Note : Serial number will be used to verify the originality of this document via eFILING portal the respondents would not be affected by the court’s decision to grant the stay until the full and final determination of the judicial review application because in the event the judicial review application is subsequently disallowed at the substantive stage, the respondent will still be able to collect the taxes imposed on the applicant. [39] I therefore grant an order of interim stay pending the disposal of this judicial review. The Minister is however, at liberty to set it aside. [40] Costs in the cause. Tarikh: 7 Mac 2023 (WAN AHMAD FARID BIN WAN SALLEH) Hakim Mahkamah Tinggi Kuala Lumpur. Pihak-pihak: Bagi Pihak Pemohon : S Saravana Kumar, Tan Jian Hua, Darshini Sharma Tetuan Rosli Dahlan Saravana Partnership Bagi Pihak Responden : Farah Shuhada SFC Jabatan Peguam Negara, Putrajaya 8 S/N rYyHqp3H0UWeMbiAWf2lg **Note : Serial number will be used to verify the originality of this document via eFILING portal