Did IRB exceed its legal powers in issuing the RM313.8m tax bill?

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The High Court Ruled the Inland Revenue Board Exceeded Its Legal Powers in Issuing the RM313.8 Million Tax Bill

The High Court has allowed Toh Puan Na’imah Abdul Khalid's judicial review application, quashing an additional tax assessment notice of RM313.8 million issued by the Inland Revenue Board (IRB). Judge Evawani Farisyta Mohammad determined that the IRB acted beyond its jurisdiction under the Income Tax Act 1967 when issuing the notice for the 2018 assessment year. The court found that the IRB's actions led to double taxation and that the assessment was based on an incorrect interpretation of taxable income.
Additional Tax Assessment Notice Deemed Unlawful

The High Court ruled that the additional tax assessment notice issued by the IRB on August 13, 2024, was unlawful. This was based on the finding that the Income Tax Act 1967 primarily applies to income earned in Malaysia or foreign-sourced income remitted into the country. The assets in question were Na’imah's overseas properties, which the court determined did not constitute income received within Malaysia. Furthermore, the amount of share ownership related to these assets had already been subject to assessment for the 2018 year through the joint assessment of Na’imah and the late Tun Daim Zainuddin.
Market Value of Foreign Assets Not Taxable Income

The court clarified that the market value of assets held abroad cannot be automatically treated as taxable income merely by virtue of ownership. Such a provision is not stipulated within the Income Tax Act 1967. The judge indicated that if the IRB believed undeclared income was involved at the time of asset acquisition in the 1990s, the assessment should have been made for that specific period, not retrospectively for the 2018 assessment year.
Unreasonable Demand for Old Documents and Double Taxation

Judge Evawani Farisyta found it unreasonable for the IRB to demand documents for assets acquired over 20 years ago, especially since the Income Tax Act 1967 only requires taxpayers to retain records for a period of seven years. The failure to provide documents that are no longer legally obligated to be kept cannot serve as justification for issuing an additional assessment notice. Consequently, the IRB's actions were deemed to have resulted in double taxation, which is contrary to the provisions of the Income Tax Act 1967.

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Did IRB exceed its legal powers in issuing the RM313.8m tax bill?

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