PUTRAJAYA (May 10): The Federal Court on Tuesday (May 10) granted leave (permission) for former prime minister Datuk Seri Najib Razak and his son Datuk Nazifuddin Najib to challenge a summary judgement entered against them to pay RM1.69 billion and RM37.64 million respectively to the Inland Revenue Board (IRB). The matter will be heard on its full merits, a three-member bench led by Chief Justice Tun Tengku Maimun Tuan Mat decided.
The bench took only three minutes of recess after hearing submissions before unanimously granting leave for the nine questions of law posed by the duo. The leave questions were also supported by the Malaysian Bar despite opposition from the IRB.
“We are unanimous in our decision to grant leave as it has met Section 96 (a) and (b) of the Courts of Judicature Act 1964 (revised 1972) (CJA). We grant terms as with the enclosure [for the nine questions],” said Tengku Maimun, who sat with Justices Datuk Nalini Pathmanathan and Datuk Mary Lim Thiam Suan.
The apex court will fix a date to hear the full merits of the appeal.
Section 96 of the CJA reads that leave would only be given by the Federal Court or Court of Appeal:
(a) in civil cause involving a question of general principle decided for the first time or a question of importance upon which further argument and a decision of the Federal Court would be to public advantage; or
(b) from any decision as to the effect of any provision of the Constitution including the validity of any written law relating to any such provision.
The challenge mounted by the former premier and Pekan Member of Parliament and Nazifuddin relates to Section 106 (3) of the Income Tax Act 1967 (ITA) that the court shall not entertain any plea that the amount of tax sought to be recovered is excessive, incorrectly assessed, under appeal or incorrectly increased.
Section 106 (3) is considered an ouster clause as it denies the court any jurisdiction to hear matters concerning income tax calculation, appeals or payment.
On July 22, 2020, the High Court entered the summary judgement against Najib and Nazifuddin requiring them to pay the said amounts of RM1.69 billion and RM37.64 million respectively. The decision was upheld by the Court of Appeal on Oct 21, 2021 but the appellate court granted a stay of the summary judgement decision requiring them to pay the tax.
Senior counsel Tan Sri Muhammad Shafee Abdullah appearing for Najib and Nazifuddin argued that leave should be given for the apex court to decide as this is a novel issue that had yet to be decided by the apex court on the “atrocious claim”. He contended that a judgement would benefit taxpayers.
Central to the issue is that once a person receives the certificate of assessment, the person is liable to pay the amount and Section 106(3) makes it impossible for anyone to challenge it where it is the IRB that brings the action to the court.
“Once you obtain the certificate from the IRB, you are required to pay and this cannot be argued.”
“In light of the landmark decision on Semenyih Jaya (that ruled ouster clauses can be challenged), we argue that this should be looked at based on Articles 5 and 8 and also Article 121 of the Federal Constitution,” Shafee said.
Article 5 relates to the liberty of a person, Article 8 on equality and 121 on the judicial powers of the Federation.
IRB counsel Dr Hazlina Hussain in her submissions told the court that Najib and Nazifuddin had filed their appeal to the Special Commissioner of Income Tax (SCIT) to challenge the certificate requiring them to pay.
She said that it had already been a practice where in matters concerning the country's revenue, taxpayers are required to pay first. Moreover, they can take the matter up to the SCIT and not the court.
“Taxpayers cannot dispute the tax assessment,” Hazlina argued.
This prompted Tengku Maimun to question whether a judgement by the apex court on the issue would be beneficial to both the IRB and the public as this is a novel issue that had not been decided before at the apex level.
However, Hazlina maintained that the proper avenue for Najib and Nazifuddin remains at the SCIT as they had already filed an appeal and the hearing is pending.
Meanwhile, Anand Raj for the Malaysian Bar said a judgement from the apex court would benefit taxpayers and the IRB in general.
“This follows as at times, or most of the times, taxpayers could not pay the additional tax imposed and they could not challenge it.
“In this case, it is the IRB who had brought the action to seek a summary judgement and we say that the jurisdiction in such appeals should be returned to the courts. Waiting for the SCIT to decide may limit public access to dispute the tax assessment,” he added.
Shafee further added in his reply that the IRB had gone one step ahead after obtaining the summary judgement to apply for bankruptcy against his clients, which was not proper in this case.
When Najib and Nazifuddin filed the motion for leave to appeal, they posed nine questions of law that are central to Section 106 (3) of the ITA: