KUALA LUMPUR (March 21): DRB-Hicom Bhd (KL:DRBHCOM) has been spared from a potential RM246.25 million tax bill after the Inland Revenue Board (IRB) ruled in favour of the automotive-to-banking conglomerate’s appeal, reversing its decision to classify the gain from the disposal of its long-held stake in Alam Flora Sdn Bhd as income.

In a filing with the exchange on Friday, DRB-Hicom said its wholly owned unit, Hicom Holdings Bhd (HHB), received a notification from the IRB confirming the full discharge of the RM246.25 million tax amount.

This came after HHB appealed against the notice of additional assessment, received on Aug 30, 2024, with additional supporting documents.

“The IRB, upon due consideration, has allowed the appeal and decided that the gain from the disposal of a subsidiary is not subject to tax under Section 4(a) of the Income Tax Act 1967 for the year of assessment 2020,” DRB-Hicom said.

Section 4(a) pertains to special classes of income on which tax is chargeable.

Last year, IRB hit DRB-Hicom with a RM246.25 tax bill after it decided to treat the disposal gain from its long-term 97.37% interest in Alam Flora as income.

The investment had been held by HHB for 24 years.

According to DRB-Hicom’s 2019 annual report, the sale was completed for RM869 million in cash, paid by Malakoff Corp Bhd’s (KL:MALAKOF) subsidiary, Tunas Pancar Sdn Bhd.

The deal resulted in a disposal gain of RM514.67 million for DRB-Hicom.

The deal was a related-party transaction, as DRB-Hicom’s 55.92% shareholder Tan Sri Syed Mokhtar Al-Bukhary also holds a deemed interest of 38.45% in Malakoff.

As of the midday break on Friday, DRB-Hicom’s shares were half a sen or 0.8% lower at 66 sen, giving it a market capitalisation of RM1.28 billion. The stock is down 40.63% this year.

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