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MOF has no power under Sections 127 and 135 of the Income Tax Act 1967 to set aside a Notice of Assessment

The High Court recently in Berjaya Times Square Sdn Bhd v Menteri Kewangan Malaysia (WA-25-47-02/2021) discussed the power of the Minister of Finance (“MOF”) under Section 127(3A) and Section 135 of the Income Tax Act 1967 (“ITA”) and the application of the same.

The salient facts of Berjaya (supra) are as follows:
a) Pursuant to a tax audit, the Inland Revenue Board of Malaysia (“IRB”) issued notices of assessment dated 9.1.2020.
b) Taxpayer responded by filing a judicial review application to challenge the said notices of assessment but subsequently withdrew the judicial review application.
c) On 2.2.2021, the Taxpayer sent a letter to MOF requesting the MOF to exercise his power under Section 127(3A) and Section 135 of the ITA to set aside or exempt the unlawful notices of assessment.
d) Notably, the Taxpayer in the said letter requested the MOF to respond within 7 days from the date of the letter (i.e. 9.2.2021). Failing which, the Taxpayer assumes MOF is not considering its request for a direction and/or tax exemption and reserves all legal rights.
e) The MOF did not respond to the said letter by 9.2.2021.
f) Two days later (i.e. 11.2.2021), the Taxpayer proceeded to file a judicial review application to challenge the MOF’s ‘refusal to act’ and sought to set aside the unlawful notices of assessment issued by the IRB.

In dismissing the Taxpayer’s leave application, the High Court held that, amongst others:
a) There was no inordinate delay as the MOF was only given 7 days to respond.[1] The time frame does not evince a clear determination on part of MOF not to comply with the request. Thus, there is no clear evidence of ‘refusal to act’.[2]
b) The MOF has no power to do what the Taxpayer requested under Section 127(3A) and Section 135 of the ITA because:
(i) Section 127(3A) of the ITA is an empowering provision conferring power to the MOF to exempt a person from ‘any provision’ of the ITA. To invoke such provision, there must be a liability to income tax first and then only the question of tax exemption arises.[3] Thus, Section 127(3A) of the ITA cannot be used to exempt a taxpayer from tax liability that is purported illegally and/or unlawfully levied. Unlawful and/or illegal tax is the jurisdiction of the Special Commissioners of Income Tax (“SCIT”).
(ii) Section 135 of the ITA is housed in Chapter 1 under Part X which solely concerns administration and thus the directions are administrative and general in nature and not giving specific direction to the IRB to set aside a notice of assessment.
c) An order which is framed in the nature of mandamus cannot in law be granted because mandamus does not lie to perform a discretionary power and only lies where the applicant has a legal right to compel performance of a duty provided in the statute.[4]


This case is probably the first case where the High Court discussed and scrutinised the power of MOF under Section 127(3A) and Section 135 of the ITA.

In an upshot, Section 135 of the ITA does not envisage the MOF giving directions to the Director General of the IRB to set aside a notice of assessment. Power to set aside the notice of assessment is expressly within the SCIT’s jurisdiction by virtue of the provisions of the ITA, and; Section 127(3A) of the ITA does not envisage granting exemption in respect of illegal and/or unlawful tax.

Further, this case also demonstrated what could be construed as ‘inordinate delay’. A unilateral timeframe of 7 days, in Berjaya (supra), don’t tantamount to an inordinate delay.

This article is intended to be informative and not intended to be nor should be relied upon as a substitute for legal or any other professional advice.

About the Author
Desmond Liew Zhi Hong
Halim Hong & Quek

[1] See R v Central Professional Committee for Opticians [1949] 2 All ER 519.
[2] See Re Bukti Sembawang Rubber Co Ltd  v Sembawang Estates Ltd [1961] 1 MLJ 269.
[3] See Lower Perak Co-operative Housing Society Berhad v Ketua Pengarah Hasil Dalam Negeri [1994] 3 CLJ 541.
[4] See Menteri Besar Negeri Pahang Darul Makmur v Seruan Gemilang Makmur Sdn Bhd [2010] 5 CLJ 123 and Mohd Karim Abas & Ors v Ketua Pengarah Jabatan Hal Ehwal Kesatuan Sekerja [2013] 1 LNS 280.

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