PUTRAJAYA (Oct 28): The Court of Appeal has on Monday granted Toh Puan Na’imah Abdul Khalid, the wife of former finance minister Tun Daim Zainuddin, a temporary stay over the Shah Alam High Court’s rejection of her application for a stay of having to pay the Inland Revenue Board (IRB) RM313.82 million in additional tax assessment for the year 2018.
A three-member bench, led by Datuk Supang Lian, said the bench was unanimous in its decision.
Another member of the bench, Datuk Dr Choo Kah Seng, ruled that Na’imah’s application was meritorious, and hence, the bench granted the ad interim (temporary) stay until the hearing of the appeal proper, over last month’s High Court rejection.
Choo ordered the costs to follow the event (the hearing of the appeal) on the stay at the Court of Appeal.
The other judge who sat with Supang and Choo was Datuk Hashim Hamzah.
Normally, an applicant is required to pay to the IRB the additional tax within 30 days of the IRB’s notice, failing which the IRB can institute bankruptcy proceedings.
Earlier this month, High Court judge Dr Shahnaz Sulaiman refused to grant an interim stay against an order by the IRB for Na’imah to pay the RM313.82 million in additional tax.
Na’imah was seeking an interim stay, pending a judicial review application to quash the IRB’s order dated Aug 13.
Her application for leave for judicial review is fixed on Feb 12 next year.
Na’imah filed the application on Aug 19 via Messrs Rosli Dahlan Saravana Partnership.
In the application, Na’imah is seeking to quash the IRB order dated Aug 13, deeming it as ultra vires, illegal, void, unlawful and in excess of authority, irrational and unreasonable.
She also sought a declaration that the Income Tax Act (ITA) operates on a territorial basis, and it cannot be stretched so far as to require her to give information on assets which are under foreign jurisdiction, when there is no income received in Malaysia.
In addition, Na’imah is seeking a declaration that the ITA is a law on the imposition of tax, and not a law for the disclosure of financial sources used to fund investments. She further sought a declaration that the IRB had no basis to arbitrarily deem the assets in foreign jurisdiction were acquired in 2018.
Double taxation and frozen assets
Her counsel, S Saravana Kumar, told the three-member bench that there were special circumstances for the appellate court to grant an ad-interim stay.
“This follows that her assets and that of her husband and children in the country have been frozen since June 7, last year, and following that, our client would not be able to come up with the sum.
“Furthermore, Na’imah has also applied for joint taxation with her husband Daim in 2018, of which Daim was imposed an additional tax of RM31.49 million between 2017 and 2019. So, this additional amount which she declared with her husband amounts to double taxation,” he said.
Under Section 45(2) of the Income Tax Act, Saravana added, Na’imah applied for joint tax return as she and her husband submit a single tax return, and Subsection (2) stipulates that a wife need not in the basis year elect that the payment of the aggregated tax to the total income of the husband.
The counsel said that as could be seen in the additional tax imposed in August this year, some of the items imposed in the additional tax had already been accounted for when the husband paid the tax for additional assessment between 2017 and 2019.
Saravana Kumar added that his client and Daim had never had a problem with the IRB before this, and is considered one of the biggest taxpayers in Malaysia.
Daim has RM1.9 bil foreign assets
IRB senior revenue counsel Mohammad Hafidz Ahmad replied that the IRB and the court had adopted case law in not granting a stay citing the tax case against former prime minister Datuk Seri Najib Razak where the Federal Court affirmed the pay-now-talk-later policy when it comes to income tax.
Furthermore, Hafidz said the freezing order was made by the Malaysian Anti-Corruption Commission (MACC) and it does not cover his assets based overseas.
Hafidz added that according to Daim’s capital statement, Daim had declared his overseas assets amounting to RM1.9 billion in 2019.
“There is no evidence that they [Daim and Na’imah] do not have that money anymore. It is not a matter with the IRB over how they want to pay. They have the means and [must] find a way to get their money [and pay],” he added.
“The amount of RM300 million could be very high, but not in this case,” Hafidz said.
This led to judge Hashim replying that if the sum were to be brought back, it might be subject to MACC freezing.
However, Hafidz replied that Parliament had adopted legislation of pay-first-talk-later, and the IRB says there are no special circumstances in this case.
“Subject to the freeze order or not, it should be able to be brought back as there is at least RM1.9 billion outside Malaysia. The capital statement showed the purchase of some assets outside the country. What is the source of income? Based on the assumption the source of income is from Malaysia,” the senior revenue counsel added.
Saravana Kumar countered that some three assets in question were acquired in the 1990s, but, taxpayers are required to keep records for only seven years and not more.
This, he added, is stipulated under Section 82A of the ITA, where a taxpayer is required to keep records for seven years, as more than 30 years’ they are not required to keep.
“Furthermore, the IRB cannot tax the same income twice as was done in Na’imah’s case,” he said.
Following a short recess, the bench granted the ad-interim stay.