LAYAR BAIDURI SDN BHD MENTERI KEWANGAN MALAYSIA

WA-25-308-08/2021 Kand. 56 27/11/2022 14:00:42 DALAM MAHKAMAH TINGGI MALAYA DI KUALA LUMPUR (BAHAGIAN KUASA-KUASA KHAS) PERMOHONAN SEMAKAN KEHAKIMAN NO: WA-25-308-08/2021 Dalam perkara suatu permohonan yang telah dibuat kepada Responden menurut Seksyen 135 dan Seksyen 127(3A) Akta Cukai Pendapatan 1967 yang bertarikh 16.8.2021 dan keputusan Responden yang dianggap dibuat pada 24.8.2021; Dan Dalam perkara suatu permohonan untuk antara lain, suatu Perintah Certiorari; Dan Dalam perkara aturan 53 Kaedah- Kaedah Mahkamah 2012. ANTARA LAYAR BAIDURI SDN BHD …PEMOHON DAN MENTERI KEWANGAN MALAYSIA …RESPONDEN S/N DkYZuiQcYEWWdLF207P2w 1 **Note : Serial number will be used to verify the originality of this document via eFILING portal JUDGMENT [1] The applicant is in the business of property development and hotel operation and management. [2] In 2014, the applicant developed a building used solely for a hotel known as Dayang Bay Resorts in Kuah, Kedah (“the Hotel”). The applicant then leased the Hotel to its wholly owned subsidiary, Dayang Bay Resorts Sdn Bhd (“Dayang Bay Resorts”), to operate the Hotel from 2014 to 2015. [3] At the expiry of the lease in 2016, the applicant took over the operation of the Hotel. [4] Upon the application by the applicant in 2015, the Malaysian Investment Development Authority (“MIDA”) granted the applicant approval to claim an investment tax allowance (“ITA”) of 60% of the capital expenditure incurred to operate a hotel, subject to the conditions stipulated in the approval (the “MIDA Approval”). [5] The MIDA Approval inter alia states as follows: Adalah dimaklumkan bahawa Kerajaan Malaysia bersetuju meluluskan permohonan tuan untuk mendapatkan pengecualian cukai pendapatan bersamaan Elaun Cukai Pelaburan sebanyak 60% ke atas perbelanjaan modal yang layak dilakukan dalam tempoh 5 tahun di bawah P.U.(A) 113 S/N DkYZuiQcYEWWdLF207P2w 2 **Note : Serial number will be used to verify the originality of this document via eFILING portal Perintah Cukai Pendapatan (Pengecualian) (No.12) 2006, Akta Cukai Pendapatan 1967 bagi mengusahakan sebuah hotel bermula dari tarikh yang ditetapkan oleh Menteri Perdagangan Antarabangsa dan Industri. As indicated in the letter, which was dated 31.7.2015, the MIDA Approval was granted for a period of 5 years. [6] The applicant was allowed by MIDA to claim ITA on qualifying capital expenditure in relation to the Hotel, which was incurred during the 5-year period starting from 23.6.2012. On 13.6.2016, MIDA issued a letter to the applicant to approve the applicant’s Verification Application of Compliance to Investment Tax Allowance Conditions (“MIDA Confirmation”). [7] On 5.9.2018, the Inland Revenue Board (“the Revenue”) issued an audit finding on the applicant company. In the audit finding, the Revenue disallowed the applicant’s claim for the ITA pursuant to the MIDA Approval and industrial building allowance (“IBA”) in respect of the capital expenditure for Years of Assessment (“YAs”) 2014 and 2015. The finding was purportedly based on para 37F of Schedule 3 of the Income Tax Act 1967 (“ITA 1967”). [8] According to the Revenue, the applicant’s claim was disallowed because the applicant had leased the Hotel to Dayang Bay Resorts. S/N DkYZuiQcYEWWdLF207P2w 3 **Note : Serial number will be used to verify the originality of this document via eFILING portal [9] The applicant, through its tax agent, BDO Tax Services Sdn Bhd (“BDO”), had written to the Revenue and explained why the applicant’s claims for the ITA and IBA should be allowed. In one of the correspondences with the Revenue, BDO inter alia enclosed an email dated 2.11.2018 from MIDA. In the email, MIDA confirmed that: (a) The phrase “mengusahakan sebuah hotel” does not mean that the applicant, as the landowner needs to operate or manage the hotel business personally. It can be managed by a third party. (b) The proper test, according to MIDA, is whether the applicant undertakes and bears the risks of the business, including its profit and loss. [10] Notwithstanding the applicant’s explanation through BDO, the Revenue raised the assessments for YAs 2015 and 2016 (Notice of Assessment and Notice of Additional Assessment) for a total amount of RM3,102,764.71. [11] Aggrieved by the said Assessments (“the Assessments”), the applicant commenced a judicial review application at the High Court in Penang (“the Penang JR”). On 5.8.2020, the Revenue gave an undertaking, which the learned High Court Judge duly recorded, not to take any enforcement action on the Assessments. S/N DkYZuiQcYEWWdLF207P2w 4 **Note : Serial number will be used to verify the originality of this document via eFILING portal [12] On 16.8.2021, the applicant submitted a request to the putative respondent, the Minister of Finance (“the Minister”), for him to give directions under s 135 of the ITA 1967 or otherwise exempt the taxes raised under the Assessments under s 127(3A) of the same. [13] There was no response from the Minister. The Application for Leave for Judicial Review [14] Since there was no response from the Minister, the applicant commenced this application for leave for judicial review for an order for the Minister to exercise his power under s 135 of the ITA 1967. S 135 of the ITA 1967 empowers the Minister to issue directions of the general character to the Director General of the Inland Revenue (“DGIR”) in accordance with the ITA and such directions shall be given effect by the DGIR. [15] The application for leave for this judicial review is supported by the affidavit of Tan Kee Seng (“Tan”) in Encl 2 (“AIS-2”). Encik Tan is the executive director of the applicant company. [16] The grounds of the application for leave can be summarised as follows: (a) By failing to exercise his power under s 135 of the ITA 1967, the Minister had committed an error of law by ignoring the MIDA Approval and MIDA Confirmation. S/N DkYZuiQcYEWWdLF207P2w 5 **Note : Serial number will be used to verify the originality of this document via eFILING portal (b) There is nothing in paragraph 37F Schedule 3 of the ITA 1967 which requires the applicant to personally operate Dayang Bay Resorts for the purpose of claiming the IBA. In short, the Minister should have exercised his power under s 135 of the ITA 1967 by giving a general direction to the DGIR that there is no such requirement under paragraph 37F Schedule 3 of the ITA 1967. (c) In failing to exercise his power under s 135 of the ITA 1967, the Minister had taken into consideration irrelevant matters or had failed to consider relevant matters. (d) The Minister’s non-decision was made without considering the interpretation and construction of legislation which would constitute a denial of legitimate expectations of the applicant. The Objections from the Attorney General [17] As is with the requirement under O 52 r 3(3) of the Rules of Court 2012 (“ROC”), copies of the cause papers were lodged at the Attorney General’s Chambers (“AGC”). [18] The Attorney General (“AG”) is objecting to this application for leave. [19] The grounds of the AG’s objections can be summarised as follows: (a) The subject matter of the litigation in the Penang JR application is the same as the instant case. This application for leave is, therefore, an abuse of process as it creates S/N DkYZuiQcYEWWdLF207P2w 6 **Note : Serial number will be used to verify the originality of this document via eFILING portal duplicity of proceedings that warrant the application of the principle of res judicata. (b) The application for leave is frivolous and vexatious as no decision was made by the putative respondent. (c) The applicant failed to exhaust the domestic remedy provided under the ITA 1967. (d) There is no arguable case that can be ventilated at the substantive stage. The Penang JR Application [20] In her written submission in Encl 19, the learned SFC, representing the AG, stated as follows in para 6: Based on paragraph 9 of the Applicant’s Affidavit, the Applicant averred that the impugned Assessments was (sic) challenged via an originating summons and a judicial review application to the High Court. However, the Applicant had failed to disclose that the application for leave for judicial review which was filed in the High Court of Penang No: PA-25-36- 07/2019 was dismissed by the Court on 24.7.2020. The Applicant had filed Notice of Appeal on 30.7.2020 against the decision of the Court dated 24.7.2019. However, the appeal was withdrawn by the Applicant/Appellant. S/N DkYZuiQcYEWWdLF207P2w 7 **Note : Serial number will be used to verify the originality of this document via eFILING portal [21] The written submission was filed on 19.10.2021. [22] When the matter came up for case management on 2.12.2021, learned counsel for the applicant, who by then must have been aware of the written submission in Encl 19, did not seek leave from this Court to file a further affidavit to contradict the assertion made by the learned SFC which are in the Court records anyway. [23] This application for leave is ex parte in nature. [24] It is of utmost importance that in an application for judicial review, even as early as the leave stage, the applicant owes a duty to give full and frank disclosure in his affidavit and statement under O 53 r 3(2) of the ROC. Needless to say, the applicant is to act uberrimae fidei by making full and candid disclosure of all material facts. [25] It is my respectful view that failure to make on oath a full and candid disclosure of material facts is in itself a ground for refusing leave. [26] I could not put it better than to echo the speech of Lord Diplock in delivering the judgment of the House of Lords in O'Reilly v Mackman [1982] 3 WLR 1096 HL, who made the following observation: The application for leave which was ex parte but could be, and in practice often was, adjourned in order to enable the proposed respondent to be represented, had to be supported by a statement setting out, inter alia, the grounds on which the relief was sought and by affidavits verifying the S/N DkYZuiQcYEWWdLF207P2w 8 **Note : Serial number will be used to verify the originality of this document via eFILING portal facts relied on: so that a knowingly false statement of fact would amount to the criminal offence of perjury. Such affidavit was also required to satisfy the requirement of uberrima fides, with the consequence that failure to make on oath a full and candid disclosure of material facts was of itself a ground for refusing the relief sought in the substantive application for which leave had been obtained on the strength of the affidavit. [27] Save for exhibiting a copy of the interlocutory order dated 5.8.2020 in Eksh TKS-21, Encik Tan did not state the particulars of the Penang JR. [28] The interlocutory order inter alia states as follows: UPON THE APPLICATION of the Applicant abovenamed that is fixed for an online case management today, AND UPON READING the Application for Stay of Proceedings dated 30 July 2020, the Affidavit in Support affirmed by Tan Kee Chin on 30 July 2020 and Notice of Intention to Use Affidavit dated 30 July 2020, all filed herein AND UPON HEARING Chew Ying, counsel for the Applicant and Mohammad Hafidz bin Ahmad Senior Revenue Counsel for the Respondent, IT IS HEREBY ORDERED that the Respondent’s undertaking that no action will be taken, including the enforcement of the Respondent’s Decision is extended until the hearing of the stay application in Enclosure 53. S/N DkYZuiQcYEWWdLF207P2w 9 **Note : Serial number will be used to verify the originality of this document via eFILING portal [29] The learned SFC highlighted that the applicant had failed to disclose the following: (a) That the Court dismissed the Penang JR. (b) The Applicant had filed Notice of Appeal against the decision of the Court. (c) However, the appeal was withdrawn by the applicant. The applicant did not respond to this assertion made by the learned SFC, although it had every opportunity to do so. [30] In any event, I find AIS-2 to be wanting. The applicant did not exhibit the Penang JR application for the Court to make a comparison on the reliefs sought there and in this application for leave. The applicant also failed to exhibit the order that dismissed the Penang JR application. More importantly, the applicant failed to disclose that it did not proceed with the appeal at the Court of Appeal. It was the learned SFC who raised this matter first, and this Court has taken judicial notice. [31] The failure to appeal the dismissal of the Penang JT means that the applicant had accepted the correctness of the said decision; Syed Omar Syed Mohamed v. Perbadanan Nasional Bhd [2012] 9 CLJ 557 FC. The Court of Appeal, in its judgment in Frankey Leong Pit Fui v Foong Da Realty Sdn Bhd [2021] 4 MLJ 418 CA, held as follows: S/N DkYZuiQcYEWWdLF207P2w 10 **Note : Serial number will be used to verify the originality of this document via eFILING portal It has been adjudged to be a case where a bare trust exists in respect of the land. And the Court of Appeal has upheld the judgment of the High Court. In our view, rightly so. And by not going further to the Federal Court, Frankey is deemed to have accepted the correctness of the Court of Appeal’s decision and by extension, the High Court’s decision in Suit 92. [32] Having accepted the correctness of the decision in the Penang JR application, the applicant cannot now come to this Court to relitigate the same issue. It is trite that when a matter between two parties has been adjudicated by a court of competent jurisdiction, they and their privies are not permitted to litigate once more the res judicata, as the judgment becomes the truth between such parties. An estoppel per rem judicatum has been created as a result. [33] Peh Swee Chin FCJ, in delivering the judgment of the Supreme Court in Asia Commercial Finance (M) Bhd v Kawal Teliti Sdn Bhd [1995] 3 MLJ 189 SC remarked as follows: The cause of action estoppel arises when rights or liabilities involving a particular right to take a particular action in court for a particular remedy are determined in a final judgment and such right of action, ie the cause of action, merges into the said final judgment; in layman's language, the cause of action has turned into the said final judgment. The said cause of action may not be relitigated between the same parties because it is res judicata. S/N DkYZuiQcYEWWdLF207P2w 11 **Note : Serial number will be used to verify the originality of this document via eFILING portal [34] The applicant is also caught by another limb of estoppel per rem judicatum, which is referred to as issue estoppel. Issue estoppel prevents contradiction of the correctness of a final judgment by the same parties in a subsequent proceeding. [35] However, the putative respondent is not a party to the Penang JR application. Could the putative respondent or even the AG, at his leave stage, raise issue estoppel? The answer is in the affirmative. It can be found in the judgment of the Court of Appeal in Letchumanan a/l Gopal (representative for the estate of Rajammah a/p Muthusamy, deceased) v Pacific Orient & Co Sdn Bhd [2011] 5 CLJ 866 CA. Abdull Hamid Embong JCA (later FCJ), in delivering the judgment of the Court, held that: Literally translated, res judicata, is 'the fact has been decided'. It expresses a general public interest policy that the same issue (or cause of action) should not be litigated more than once even if the parties are different. It prevents vexatious litigation and any abuse of the courts' process on the premise that final judgments are binding and conclusive (see Henderson v Henderson (1843) 3 Hare 100). The criminal law equivalent is the doctrine of double jeopardy. S/N DkYZuiQcYEWWdLF207P2w 12 **Note : Serial number will be used to verify the originality of this document via eFILING portal Findings [36] For the reasons aforesaid, my findings are as follows: (a) The applicant, in not revealing the details of the Penang JR application in an ex parte application for leave, had failed in its duty to give full and frank disclosure in the affidavit of Encik Tan in AIS-2 and statement made pursuant to O 53 r 3(2) of the ROC. (b) The applicant has every opportunity to rebut the assertion made by the learned SFC in her written submission that the Penang JR was dismissed and the appeal to the Court of Appeal was discontinued. Failure to do so would mean that the assertion by the SFC is taken as correct. (c) On this ground alone, the application for leave should be refused in limine. (d) In any event, the applicant is caught by the principle of estoppel per rem judicatum, which includes cause of action estoppel and issue estoppel. (e) The applicant cannot launch a collateral attack to relitigate a final judgment, albeit on a different party, on an issue the applicant is deemed to have accepted as being correct in view of its failure to appeal on the Penang JR application. S/N DkYZuiQcYEWWdLF207P2w 13 **Note : Serial number will be used to verify the originality of this document via eFILING portal [37] In the circumstances, this application for leave amounts to an unjustified collateral attack and hence frivolous and vexatious. [38] The applicant has failed to cross the low threshold needed in an application for leave. [39] The leave application is refused. [40] Costs is fixed at RM20,000 subject to allocatur. [41] In view of my finding on the initial issues raised by the learned SFC, I will not address the remaining issues. Tarikh: 27 November 2022 (WAN AHMAD FARID BIN WAN SALLEH) Hakim Mahkamah Tinggi Kuala Lumpur. S/N DkYZuiQcYEWWdLF207P2w 14 **Note : Serial number will be used to verify the originality of this document via eFILING portal Pihak-pihak: Bagi Pihak Perayu : S Saravana Kumar, Elani Mazlan, Nur Amira Azhar & Dharshini Sharma Tetuan Rosli Dahlan Saravana Partnership Bagi Pihak Responden : Nik Isfahanie Tasnim SFC, Nur Idayu Amir SFC Jabatan Peguam Negara, Putrajaya S/N DkYZuiQcYEWWdLF207P2w 15 **Note : Serial number will be used to verify the originality of this document via eFILING portal