KUALA LUMPUR (Feb 4): Petrol station canopies and halide lights are recognised as “plant”, entitling them to be counted as capital allowances under the Income Tax Act 1967, the High Court has ruled.

In allowing PETRONAS Dagangan Bhd's (KL:PETDAG) appeal against the director general of the Inland Revenue Board (IRB), High Court judge Datuk Amarjeet Singh Serjit Singh ruled that these features in petrol stations were necessary because without them, the company would not have generated its income.

Amarjeet added that according to case laws, "plant" was not defined in the Act and must be given the "widest possible meaning". Also pertinent was the industry concerned and the specific circumstances of the taxpayer's business.

"Applying the principles by giving the word 'plant' in Schedule 3 of the ITA (Income Tax Act) the widest possible meaning and giving due consideration to the petrol filling station industry, this court holds that the canopy and halide lights considered as a whole constitutes 'plant' as it is something necessary without which [PETRONAS Dagangan] could not have generated its income," he said in his grounds of judgement dated Jan 19.

Among others, the judge noted that the special type of aluminium used for ceilings — Luxalon — is unique to petrol stations as it is non-flammable and reflects light. These were fixtures of the present day's petrol stations, he said.

"In this regard, I had considered the case-law which shows that although an item in question is a structure and part of a building, this fact does not disqualify the structure from being a 'plant' by means of which the petrol filling station's business is carried on.

"A 'plant' may play a passive role. Thus, in the instant case, the canopy and halide lights fitted [...], passive they may be in nature, [but they] are [the company's] apparatus or tool by means of which the petrol filling business activities are carried on a daily basis," he said.

The court's decision concerned three consolidated appeals by the company against the Special Commissioners of Income Tax's (SCIT) orders in 2018 and 2019.

The SCIT had upheld the IRB director general's earlier decision to refuse the company's claim for capital allowances on several items in petrol stations operated by PETRONAS Dagangan. Parties reached an agreement on all items in the list except for the canopy and halide lights, precipitating the court's determination.

The court also ruled that the respective tax assessments be amended and the excess tax paid, along with the penalties to be refunded.

The court had initially delivered its decision in November last year and the full grounds were released last month.

Lawyers Anand Raj, Foong Pui Chi, and Lim Shuwern of Messrs Shearn Delamore & Co appeared for PETRONAS Dangangan, and senior revenue counsel Ashrinna Ramzan Ali appeared for the IRB.