DALAM MAHKAMAH RAYUAN MALAYSIA (BIDANG KUASA .5 DALAM MAHKAMAH RAYUAN MALAYSIA (BIDANG KUASA RAYUAN)

  • View
    243

  • Download
    0

Embed Size (px)

Text of DALAM MAHKAMAH RAYUAN MALAYSIA (BIDANG KUASA .5 DALAM MAHKAMAH RAYUAN MALAYSIA (BIDANG KUASA RAYUAN)

DALAM MAHKAMAH RAYUAN MALAYSIA 5 (BIDANG KUASA RAYUAN)

RAYUAN SIVIL NO. W-01-428 TAHUN 2010

ANTARA

10 KETUA PENGARAH HASIL DALAM NEGERI PERAYU

DAN 15 1. ALCATEL-LUCENT MALAYSIA SDN BHD (DAHULUNYA DIKENALI SEBAGAI ALCATEL NETWORK SYSTEMS (MALAYSIA) SDN BHD) RESPONDEN 2. ALCANET INTERNATIONAL ASIA PACIFIC RESPONDEN 20 PTE. LTD.

[Dalam Mahkamah Tinggi Malaya Di Kuala Lumpur 25 Dalam Wilayah Persekutuan, Malaysia

(Bahagian Rayuan dan Kuasa-Kuasa Khas) Permohonan bagi Semakan Kehakiman No.: R1-25-166-2008]

Antara 30

1. Alcatel-Lucent Malaysia Sdn Bhd (Dahulunya Dikenali Sebagai Alcatel Network Systems (Malaysia) Sdn Bhd) 35 Pemohon 2. Alcanet International Asia Pacific Pemohon Pte. Ltd.

Dan 40 Ketua Pengarah Hasil Dalam Negeri Responden

2

5 Coram:

A. Samah Nordin, JCA Azhar @ Izhar Hj Maah, JCA

Alizatul Khair bt. Osman Khairuddin, JCA 10

JUDGMENT

[1] The issue in this appeal is whether the decision of the 15

Director General of Inland Revenue (the appellant) in

treating the payments made by the 1st respondent to the 2nd

respondent, in consideration of certain services provided by

the latter, as royalty and thus subject to payment of

withholding tax under section 109 and/or section 109B of the 20

Income Tax Act 1967 (the ITA) is liable to be quashed by

way of judicial review on the grounds that he had acted in

excess of his powers under the ITA and/or without jurisdiction

and/or unreasonably in the circumstances of the case.

25

[2] The appellant did not object to the respondents

application in the High Court to challenge his decision by way

of judicial review instead of appealing to the Special

Commissioners of Income Tax against his decision in treating

the said payments as royalty. 30

3

5

[3] The facts are not in dispute. The 2nd respondent is a

non-resident. It operates a global network for voice, data

and video communication. By a Service Agreement dated

1.1.2003, the 2nd respondent agreed to allow the 1st

respondent to have connection to its data traffic and to 10

access the global services provided by the 2nd respondent

subject to payments at a fixed rate. Payments were made to

the 2nd respondent for services provided by the latter. But

the 1st respondent did not make any provision for withholding

tax under section 109 of the ITA. The 1st respondent was of 15

the view that section 109 was not applicable as the said

payments were for services performed from outside Malaysia

and that all the servers for the network were located outside

Malaysia.

20

[4] The appellant only discovered that no withholding tax

was paid by the 1st respondent in respect of the payments

made to the 2nd respondent, after it conducted a withholding

tax audit at the 1st respondents business premises. Pursuant

to the said auditing the appellant by letter dated 31.10.2007 25

informed the 1st respondent that it had omitted to pay

withholding tax in respect of payments made to a non-

resident for the years of assessment 2001 2005 totalling

RM4,891,747.00 and demanded that payment for that

4

amount be made, failing which no deduction would be 5

allowed under section 39(1)(f) and (j) of the ITA and that the

appellant would commence an action under section 106(1) of

the ITA to recover tax due and payable from the 1st

respondent. After several meetings and exchanges of

correspondence between the appellant and 10

PricewaterhouseCoopers (the 1st respondents tax agent) the

amount of withholding tax was reduced to RM1,781,274.00.

After further representation by the respondents tax agent,

the appellant by letter dated 14.4.2008 finally reduced the

amount of withholding tax to RM1,507,674.80. 15

[5] The appellant treated the payments made by the 1st

respondent to the 2nd respondent in consideration of services

rendered by the latter as royalty and subject to payment of

withholding tax under section 109 and/or section 109B of the 20

ITA. The payments for services which the appellant

considered as royalty and subject to withholding tax are

particularised in Appendix 1 of the appellants letter, which

we reproduce below for convenience:

25

5

Lampiran I 5

(i) Perbelanjaan SAP License and Maintenance Fees.

Bil

Tahun Kewangan Berakhir/ Tahun Taksiran

Belanja Yang Dituntut (RM)

Cukai Pegangan Yang Sepatutnya Dibayar (RM)

Kenaikan Cukai Pegangan (RM)

Catatan

1. 31.12.05/TT 2005 42,960 4,296.00 4,296.00 Seksyen 109, ACP 1967

2. 31.12.05/TT 2005 83,020 8,302.00 8,302.00 Seksyen 109, ACP 1967

Jumlah 125,980 12,598.00 12,598.00

(ii) Perbelanjaan Utilities Leased Communication 10

Facilities.

Bil

Tahun Kewangan Berakhir/ Tahun Taksiran

Belanja Yang Dituntut (RM)

Cukai Pegangan Yang Sepatutnya Dibayar (RM)

Kenaikan Cukai Pegangan (RM)

Catatan

4. 31.12.05/TT 2005 1,524,844 116,334.95 116,334.95 Seksyen 109 dan/atau 109B, ACP 1967

5. 31.12.05/TT 2004 1,426.444 108,827.72 108,827.72 Seksyen 109 dan/atau 109B, ACP 1967

6. 31.12.05/TT 2003 1,634,004 124,663.09 124,663.09 Seksyen 109 dan/atau 109B, ACP 1967

7. 31.12.05/TT 2002 1,721,736 131,356.43 131,35.43 Seksyen 109 dan/atau 109B, ACP 1967

8. 31.12.01/TT 2001 1.562,670 119,220.81 119,220.81 Seksyen 109 dan/atau 109B, ACP 1967

Jumlah 7,869,698 600,403.00 600,403.00

6

(iii) Bayaran Pelbagai kepada Pegawai Latihan, 5

Pekerja Luar Malaysia dan sebagainya.

Bil

Tahun Kewangan Berakhir/ Tahun Taksiran

Belanja Yang Dituntut (RM)

Cukai Pegangan Yang Sepatutnya Dibayar (RM)

Kenaikan Cukai Pegangan (RM)

Catatan

9. 20.04.05/TT 2005 44,596 1,459.60 4,459.60 Seksyen 109 ACP 1967

10. 20.04.05/TT 2005 14,446 1,444.60 1,444.60 Seksyen 109 ACP 1967

11. 07.04.05/TT 2005 236,949 23,694.90 23,694.90 Seksyen 109 ACP 1967

19. 22.12.05/TT 2005 1,000,497 100,049.70 100,049.70 Seksyen 109 ACP 1967

20. 29.11.05/TT 2005 111,876 11,187.60 11,187.60 Seksyen 109 ACP 1967

Jumlah 1,408,364 140,836,40 140,836.40

[6] Learned counsel for the appellant explained that the 10

amount of RM1,507,674.80 was arrived at as follows:-

(i) Perbelanjaan SAP License and Maintenance Fees

(a) Withholding tax - RM 12,598.00 15

(b) Increased - RM 12,598.00 Withholding tax Total RM 25,196.00 ========= 20

7

(ii) Perbelanjaan Utilities Leased Communication 5

Facilities.

(a) Withholding tax - RM 600,403.00

(b) Increased - RM 600,403.00 Withholding tax 10 Total RM1,200,806.00 ==========

(iii) Bayaran Pelbagai kepada Pegawai Latihan,

Pekerja Luar Malaysia dan sebagainya 15

(a) Withholding tax - RM 140,836.40

(b) Increased - RM 140,836.40 Withholding tax Total RM 281,672.80 20 ==========

Total amount: (i) + (ii) + (iii) = RM1,507,674.80.

The increased withholding tax was payable under either

section 109(2) or section 109B(2) of the ITA. 25

[7] The 1st respondent maintained its view that the above

said payments were not royalty and not subject to

withholding tax as they were payments made to a non-

resident for services wholly performed outside Malaysia. 30

8

Thus, by letter dated 11.4.2008, the 1st respondent sought 5

clarification from the appellant as to which withholding tax

provisions under the ITA apply to the specific payments as

listed in Appendix 1. The appellant in his reply letter dated

14.4.2008 did not however state which particular provisions

of the ITA apply to payments made by the 1st respondent but 10

insisted that the 1st respondent pay the withholding tax. The

1st respondent reluctantly paid the withholding tax under

protest and challenged the decision of the appellant by way of

judicial review.

15

[8] In its joint application with the 2nd respondent for

judicial view under Order 53 of the Rules of the High Court

1980 they sought the following reliefs

(a) an Order of Certiorari to quash the appellants 20

decision, contained in the appellants letter dated

14.4.2008 (the decision) that the payments made

by the 1st respondent to the 2nd respondent in the

years of assessment 2001 to 2005, for services

provided by the 2nd respondent to the 1st 25

respondent relating to the provision of a global

network for voice, data and video communication

referred to under the sub-heading Perbelanjaan

Utilities Leased Communication Facilities in the

9

appellants letter, are subject to withh

Related documents