KUALA LUMPUR – The high court here today allowed Tenaga Nasional Berhad’s (TNB) judicial review application to set aside the Inland Revenue Board’s (IRB) RM1.8 billion tax assessment for the year 2018.
Judge Datuk Noorin Badaruddin in her ruling agreed that the said amount (RM 1.8 billion) was considered reinvestment allowance (RA).
TNB’s counsel S. Saravana Kumar, who confirmed the matter, said the dispute arose when the IRB disallowed TNB’s RA claim under Schedule 7A of the Income Tax Act 1967 (ITA) on the basis that TNB’s generation, distribution and transmission of electricity is not a manufacturing of electricity, and argued that TNB was only a service provider.
“The judge in disagreeing with the IRB’s argument held that TNB is in the business of manufacturing electrical energy and that the generation of electricity is a manufacturing activity.
“The judge observed that because it was the transformation in issue that turns the electrical energy into a form that can be used by the customers, this transformation must be considered to be part of the manufacture and production of electricity.
“The court also commented that the electricity was not precluded as a manufacturing activity both under Schedule 7A of the ITA and also in the Gazette Order issued by the finance minister.
“The court went on further to rule that the IRB’s internal interpretation as contained in its Guidelines and Public Rulings are not binding on taxpayers,” said the counsel.
Saravana said today’s decision was considered a landmark decision as it may have a favourable impact on the other ongoing tax appeals lodged by TNB.
“It is understood that this is in relation to its RA for the earlier years of assessment 2003 to 2007 and 2009 to 2017 which amounts to RM5.8 billion in additional taxes and refund,” he said.
TNB was also represented by counsel Nur Amira Ahmad Azhar while IRB was represented by IRB’s deputy solicitor Hazlina Hussain.
On July 21, 2020, TNB filed a judicial review application among others to quash the IRB’s decision dated July 13, 2020. In essence, the respondent disallowed the applicant’s RA claim in the sum of RM1,812,506,384.64.
The company also sought a declaration that it is entitled to claim the RA under Schedule 7A of the Income Tax Act 1967.
TNB also claimed the RA for the year of assessment 2018 in its tax return, only to be informed on July 3, 2020, through an IRB letter that the RA claim for the year of assessment 2018 was disallowed.
“On July 13, 2020, the IRB issued the notice of additional assessment for additional tax amounting RM1,812,506,384.64,” TNB said in its application. – Bernama, February 8, 2022
