2 April, 2018
Pursuant to the Income Tax Act 1967 (“ITA”), a Malaysian taxpayer has the right to appeal any tax assessment raised on him to the Special Commissioners of Income Tax (“SCIT”). Over and above that, there is also the High Court’s discretionary power to review decisions of a public authority (including that of the Inland Revenue Board (“IRB”) upon the application of an affected person).
Under the ITA, a taxpayer who is assessed to tax and is aggrieved by the assessment has a right to appeal to the SCIT should he so desire[1] (“the domestic remedy”). However, the lodgment of the right to appeal does not release him from the obligation to pay the amount so assessed[2]. This has led taxpayers to consider an application for Judicial Review (“JR”), as there is an opportunity to seek a stay of proceedings, which includes a stay of the obligation to pay the tax assessed, under a JR application.
It has long been recognised that JR is the remedy when a public authority had acted without any jurisdiction, failed to perform some statutory duty or where there was a serious breach of the principles of natural justice[3]. JR should not be resorted to merely to gain an opportunity to get a stay of the payment of the tax assessed. JR is not meant to be used to supplant the domestic remedy process and is reserved for the exceptional circumstances aforementioned[4].
Due to the indiscriminate use of JR applications in tax matters, the IRB and the Attorney General’s Chambers (“AGC”) have opposed applications for JR with greater tenacity in recent times.
The IRB and the AGC take the position that the superior courts of the country have not allowed JR on the merits where a domestic remedy exists and, therefore, taxpayers should not even be allowed leave to seek JR. Cases such as Ketua Pengarah Hasil Dalam Negeri v Alcatel-Lucent Malaysia Sdn Bhd & Anor[5] (“Alcatel”) and Ketua Pengarah Hasil Dalam Negeri v Mudah.my Sdn Bhd[6] (“Mudah.my”) are often cited as examples in this regard.
However, that view is not an accurate description of the state of the law. Even in cases where the Court has found against a taxpayer for seeking JR even when a domestic remedy was available, great care was placed by the Court in emphasising that JR is still available should the circumstances warrant it.
Idrus Harun JCA in the Court of Appeal in Mudah.my stated that supplanting the domestic remedy and seeking JR has led to the Court being flooded with frivolous cases and such was a clear abuse of Court process.
However the learned Judge did emphasise that JR is still available for the abovementioned exceptional circumstances and that “if the taxpayer can demonstrate illegality or unlawful treatment, then it would be wrong to insist on exhaustion of a local remedy”.
Suriyadi FCJ delivering judgment of the Court in Alcatel also stated that “… it is obvious that if the circumstances warrant it, and after having considered all the relevant factors, judicial interference is permissible”.
The influx of JR applications have given rise to differing views on the test to be applied in granting leave for JR.
For instance in the Court of Appeal case of QSR Brands Bhd v Suruhanjaya Sekuriti & Anor[7], Gopal Sri Ram JCA stated that:
“it is manifestly clear that it is only at the hearing of the substantive motion for judicial review that the existence of an alternative remedy becomes relevant. A fortiori, it is a matter which does not fall to be considered on a leave application.”
In effect, the domestic remedy ought not to be considered at the leave stage.
James Foong JCA in the Court of Appeal case of Chin Mee Keong & Ors v Pesuruhjaya Sukan[8] took a more restrictive approach and stated that the relevance of the domestic remedy at the leave stage had to be considered to the same standard of “whether the application for leave is frivolous to merit the refusal of leave in limine”.
In Ta Wu Realty Sdn Bhd v Ketua Pengarah Hasil Dalam Negeri & Anor[9] (“Tan Wu Realty”), Suriyadi JCA suggested that there must be an arguable case on the issue of whether exceptional circumstances exist (although in that case no exceptional circumstances were found to exist). However, the case of Mudah.my appears to take this even further by suggesting that Ta Wu Realty stands for the proposition that the exceptional circumstances have to be established even at the leave stage.
These inconsistencies have led to complexities and difficulties in obtaining leave for JR applications. What must, however, be borne in mind in many of the cases raised by the AGC and the IRB to oppose leave, is that even though there may be cases where the existence of a domestic remedy prevented a finding in favour of a taxpayer on the merits of JR, there are still cases where leave was nevertheless granted and the merits considered.
Conclusion
Ultimately, the appropriate forum for challenging tax assessments would depend on the specific facts of each case.
[1] Section 99(1) of the ITA.
[2] Section 103(1) of the ITA.
[3] Government Of Malaysia & Anor v Jagdis Singh [1987] 2 MLJ 185
[4] Government Of Malaysia & Anor v Jagdis Singh [1987] 2 MLJ 185, Ta Wu Realty Sdn Bhd v Ketua Pengarah Hasil Dalam Negeri & Anor [2009] 1 MLJ 555, Ketua Pengarah Hasil Dalam Negeri v Alcatel-Lucent Malaysia Sdn Bhd & Anor [2017] 1 MLJ 563
[5] [2017] 1 MLJ 563
[6] [2017] 2 MLJ 197
[7] [2006] 3 MLJ 164
[8] [2007] 6 MLJ 193
[9] [2009] 1 MLJ 555
For further information, please contact:
Abhilaash Subramaniam, Shearn Delamore & Co
abhi@shearndelamore.com
