KETUA PENGARAH LEMBAGA HASIL DALAM NEGERI v Maxis Berhad

Case Significance

Illustrates the deference the High Court accords to the Special Commissioners of Income Tax and the confined, error-of-law scope of a tax appeal: absent a misdirection on the facts or law, the SCIT's findings on a section 33(2) dividend disallowance and a section 113(2) penalty will not be disturbed.

This decision of the High Court of Malaya at Kuala Lumpur (Appellate and Special Powers Division) concerns an appeal by the Director General of Inland Revenue against a Deciding Order of the Special Commissioners of Income Tax (SCIT). The respondent, Maxis Berhad, is a Malaysian investment-holding company whose group provides mobile, fixed-line and related telecommunications services. The dispute concerned the tax treatment of the respondent's affairs for the relevant years of assessment, including the Director General's disallowance of an amount referable to dividends under section 33(2) of the Income Tax Act 1967 and the imposition of a penalty of 45% under section 113(2) of that Act on the footing that incorrect returns had been filed. The SCIT had decided the matter in the taxpayer's favour, and the Director General appealed to the High Court.

An appeal from the SCIT lies on questions of law, and the High Court approached its task on the settled basis that it should not disturb the SCIT's findings of fact and mixed fact and law unless the SCIT had misdirected itself. Reviewing the cause papers and the parties' written submissions, the court considered the SCIT's analysis of the section 33(2) treatment of the dividend position and of the section 113(2) penalty — the SCIT having examined whether the statutory preconditions for a penalty were satisfied, including that the taxpayer had submitted incorrect returns or provided inaccurate information affecting the assessment, in the absence of any prosecution under section 113(1). The court found that the SCIT had not misdirected herself on the facts or the law and that there was no reason to disturb her findings. It accordingly dismissed the Director General's appeal, making no order as to costs. The judgment illustrates the deference the High Court accords to the Special Commissioners' findings and the confined, error-of-law scope of a tax appeal from the SCIT.