Judicial Review: Stay Granted To Taxpayer

September 21, 2020


HHD Sdn Bhd v Ketua Pengarah Hasil Dalam Negeri

On 17 September 2020, the High Court allowed a stay of proceedings application against the payment of disputed taxes. The stay was granted pending the determination of the taxpayer’s judicial review application to challenge the legality of the disputed tax assessments raised by the Director General of Inland Revenue (DGIR).


The taxpayer was successfully represented by the firm’s Tax, SST & Customs partner S. Saravana Kumar, who was assisted by pupil, Nur Hanina bt Mohd Azham.


Brief Facts

On 27 August 2020, the taxpayer, a property developer based in Johor, was granted leave by the High Court to commence judicial review application against the DGIR. The taxpayer was aggrieved by the DGIR’s decision in disallowing the deduction of the cash contributions made to the Johor State Government for the release of Bumiputera lots.


Consequent to the granting of leave to set aside the DGIR’s assessments, the taxpayer also prayed for a stay order against the payment of the disputed taxes which amounted to more than RM 8 million.


The Taxpayer’s Submission

Our Tax, SST & Customs partner successfully submitted on behalf of the taxpayer that:

  1. The law in relation to the granting of stay is settled whereby the High Court has inherent jurisdiction to grant stay in judicial review proceedings and also in tax matters.

  2. There were special circumstances that warrant the granting of stay in the present matter and the key reason for the stay is to preserve the integrity of the judicial review application.

  3. The taxpayer sought for a stay order against the payment of the disputed taxes only until the disposal of the judicial review application and this should not be construed as an injunction to prevent the DGIR from performing their statutory duties.

  4. Section 103(1) and Section 106(3) of the Income Tax Act 1967 (“ITA”) do not bar the High Court from exercising its inherent jurisdiction to grant a stay.

The DGIR’s Response

The DGIR’s principal argument was that the granting of stay will prevent the DGIR from performing their statutory duties as provided under Section 103 and Section 106 of the ITA 1967.


High Court’s Oral Decision

In delivering the decision immediately after the hearing, the High Court granted a stay of proceedings pending the full and final determination of the taxpayer’s judicial review application, which otherwise would be rendered nugatory. Moving forward, the granting of the stay of proceedings will allow the taxpayer the opportunity to have its judicial review application to be determined first before any payment is made in relation to the disputed taxes.

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