22 August 2023
KUALA LUMPUR (Aug 22): The High Court on Tuesday (Aug 22) granted Tenaga Nasional Bhd’s judicial review application to set aside RM3.977 billion in tax assessment for the years 2015 to 2017.
High Court judge Datuk Wan Ahmad Farid Wan Salleh agreed with TNB’s argument that it is in the business of manufacturing electricity and hence entitled to claim reinvestment allowance on the capital expenditure that it incurred, including for the three assessment years, to expand, modernise and automate its business.
It is understood that this is one of the biggest tax disputes decided by the courts. The energy company was also successful in its judicial review application in February last year to set aside a tax assessment of RM1.812 billion from the Inland Revenue Board (IRB) for 2018, on similar reinvestment allowance provisions.
TNB filed the judicial review application to challenge the RM3.977 billion assessment in December 2019, and obtained leave in May 2020 to have the merits of its application be heard.
In judicial review proceedings, leave (permission) has to be gained first before the full merits of the case are heard. This is to ensure the application filed is not frivolous, vexatious and an abuse of the court process.
The additional assessment was based on a notice dated Nov 28, 2019 issued by IRB, which stated that TNB owed additional taxes of RM1.429 billion for 2015, RM1.245 billion for 2016 and RM1.302 billion for 2017.
TNB, in its application, sought a certiorari order to quash the notices of additional assessment for the three years and to have the IRB's decision considered illegal, void, unlawful and in excess of authority, irrational and unreasonable.
It also wanted a declaration that it is entitled to claim reinvestment allowance under Schedule 7A of the Income Tax Act, for years 2015, 2016 and 2017.
Schedule 7A stipulates that a resident Malaysian company, which has been in operation for not less than 12 months and has incurred capital expenditure on a factory, plant or machinery shall be given for that year of assessment a reinvestment allowance of an amount equal to 60% of that expenditure.
TNB was represented by S Saravana Kumar and Nur Amira Azhar from Messrs Rosli Dahlan Saravana Partnership, while Ashrina Ramzan Ali appeared for the IRB.
Edited by Hafiz Yatim