Part 91 (4) (a) Earnings Tax Act 1967: A Delicate Allusion to Judicial Assessment?

In the past year, tax disputes continued to be heavily litigated despite the COVID-19 pandemic, including as part of the judicial review. The courts are more prudent when it comes to granting leave, but have not shied away from doing so in appropriate cases.1 In such proceedings, it is common practice for the tax office (IRB) to:

(a) Enter the vacation phase and vigorously oppose the vacation request, which often makes what is called “quick and cheap” 2 a lengthy and expensive proposition.

(b) The IRB’s main (and often only) objection is that the taxpayer’s request constitutes “abuse of procedure” as it should have resorted to the alternative form of appeal of a Form Q objection.3

The hypocritical nature of such objections becomes evident when one considers that the 2012 Rules of Procedure of the Court of Justice (ROC). his duties, has probably expressly recognized the possibility of a judicial review to contest tax assessments.

IRB ignores the ex parte nature of vacation requests

The order 53 r 3 (2) of the ROC clearly stipulates that a vacation application is made “ex parte”. Regarding the judicial review process during the vacation period, the Kanawagi High Court said the following:

“The wording makes it very clear that this motion is only ex parte, which means that the respondent has no right to appear.

“Life becomes easier for all of us when the parties just follow the rules instead of making it difficult for you by adopting rules that don’t exist.

“The regulations explicitly state that the initial phase of judicial review is ex parte, and if the court alone decides on threshold jurisdiction whether the claimant has a contentious case, a lot of time, labor and costs would be saved for all parties and would have the Legislators wanted the respondents to be given the opportunity at this point in time, so this would have been stated in the statutes, but the statutes expressly point out that this request is made with the definitive intention of saving time and costs, which is normally contested , ex parte is a bipartisan application. This rule is not a dead letter and serves to ensure compliance by the parties. “

In particular, the High Court urged attorneys to have confidence in their competence in deciding ex parte claims:

The attorney should be confident that the judge has the power to rule when hearing an ex parte motion whether this application should be continued in the inter parte phase or this application should be completed in the ex parte phase. The appearance of the defendant’s attorney at the ex parte stage puts an unnecessary burden on these legal proceedings which would otherwise be decided very quickly. “

Against this background, however, the IRB has publicly reported in the past that “all requests for judicial review will now be rejected by the IRB” and that “the IRB will work with the Attorney General’s Chambers to object to the leave request”. .6

Granted, not all judicial review requests filed by taxpayers are created equal. However, the purpose of the “leave” (ie, permission) phase is precisely to weed out the spurious or frivolous challenges, 7 and to that end the High Court justices are more than capable of doing it on their own.

It is interesting that not all tax assessments issued by the IRB are contested in court. In contrast, the IRB’s publicly stated position is that it would “reject all requests for judicial review”. It seems that this is a promise taxpayers can expect the IRB to honor.

For example, the IRB in T v KPHDN (see our LHAG Insights dated March 4, 2021) rejected certain expenses by the taxpayer that the High Court had expressly classified as deductible in a previous case. The High Court, despite the strong objection from the IRB, gave permission to hear the dispute from the SCIT. However, the IRB appealed to the Court of Appeal while maintaining the same objections in the substantive review process.

This approach (ie the indiscriminate objection to all leave requests) can also be seen in other cases, e.g. B. Magnum Holdings8, where the taxpayer alleged that the IRB did not obey the High Court’s decision in Multi-Purpose Holdings.9 This also appears to contradict the IRB’s own stated position that “cases where the IRB does not follow a Supreme Court decision or its own public decision, eligible cases for judicial review would be ”.10

Section 91 (4) (a) ITA: A Recognition of Judicial Review?

In contrast to the express “ex parte” character of leave of absence procedures, the ITA seems to recognize the possibility of a judicial review to contest tax assessments of the IRB. Section 91 (4) (a) of the ITA provides that:

“(4) Where in an evaluation year –

(a) any evaluation under this Act or the Real Property Gains Tax Act 1976 [Act 169] in relation to a person for any year of evaluation Was decided From the court for objection or review;

can the general director in the first-mentioned assessment year or within five years after its expiry give an assessment in relation to this person for each evaluation year for the purpose of the effectiveness of the determination, the revocation, the revocation or the cancellation, as the case may be. “

Our observations:

(a) At the risk of saying the obvious, the “review” in s 91 (4) (a) ITA refers to a “review” “by the court”. This differs from a review by the General Director of Inland Revenue, which is provided separately in accordance with Section 101 ITA. Note 15 of the explanatory notes on the 2005 Finance Act further confirms this.

(b) Section 91 (4) (a) of the ITA appears to expressly recognize that a judgment may be determined by the appeals court (ie via an Appeal Form Q under s 99 of the ITA) or by judicial review. It should be noted that s 102 and Annex 5 of the ITA, which regulates the hearings of “appeals” by the SCIT, do not give any indication of a “review procedure”.

(c) Comparisons are possible, for example, with Section 143 of the Customs Act of 1967 and Section 47 of the Consumption Tax Act of 1976, which apparently also includes the possibility of appealing directly to the High Court against decisions of the General Director of Customs.

(d) Deviating from other legal provisions in Malaysia that expressly exclude judicial review. For example, s 59A of the Immigration Act 1959 is clearly entitled “Exclusion of Judicial Review” and clearly begins with “No judicial review shall be made …”.

Other similar provisions include s 15B of the Crime Prevention Act 1959; s 120 of the Water Services Industry Act 2006; s 23 of the Witness Protection Act 2009; Sections 17 and 19 of the Strategic Commercial Act 2010; s 65 of the Occupational Safety and Health Act of 1994; and Section 23 of the Fisheries Act 317.

(e) If Parliament had intended to exclude judicial review, it would have done so in the express wording it had incorporated into provisions such as s 59A of the Immigration Act 1959 “review” of a tax bill “by the court”.

(f) Even if, which is not the case, the ITA actually contained an express suppression clause, the Federal Court of Justice has ruled that “according to established case law, the judicial supervisory authority to determine the legality of administrative acts cannot be excluded”. through an express exit clause “.11

(g) At this point, however, the interpretation of Section 91 (4) (a) must be examined before our courts on a suitable occasion.


The current trend of the IRB to raise objections to “all applications for judicial review” during the leave of absence phase has probably had an impact on the “speed” and cost efficiency12 of the leave of absence phase. This despite:

(a) the clearly ex parte nature of the leave system;

(b) the “very low” threshold for leave also in tax matters; 13

(c) that the justices of the High Court are more than able to rule on vacation requests on an ex parte basis; and

(d) The ITA itself clearly recognizes the possibility of “review” “by the courts”.

Equipped with the “massive and bottomless purse of the state” 14 (unless it appears when it comes to tax refunds15), the IRB can also have several bites of the proverbial apple during the vacation phase (and subsequent appeals, i.e. the vacation issue) and again in the substantive phase (and subsequent appeal).

With the greatest respect, if the authorities are genuinely convinced of the correctness of their decisions, a direct judicial decision on the matter would certainly increase the speed of the settlement of tax disputes and at the same time encourage the continued development of tax law.