TNB does not have to pay an additional tax of RM1.8 billion, the Court of Appeal upholds the High Court's decision
17/05/2024
TNB does not have to pay an additional tax of RM1.8 billion, the Court of Appeal upholds the High Court's decision
KUALA LUMPUR: A three-judge panel of the Court of Appeal on Thursday upheld the High Court's decision given two years ago, which rejected the Inland Revenue Board's (IRB) tax claim amounting to RM1.8 billion against Tenaga Nasional Bhd.
This follows the panel agreeing that TNB, as the electricity utility company is known, is in the business of generating energy, and that the requested amount consists of reinvestment allowance (RA) which should have been exempted.
The decision was reached unanimously by a panel of Court of Appeal judges headed by Datuk Seri Kamaludin Md Said, and including Datuk See Mee Chun and Datuk Hashim Hamzah.
See while delivering a unanimous decision, ruled that the High Court was correct in allowing the judicial review applied for by TNB, and the panel agreed that the expenditure incurred by the company from 2003 to the year of assessment 2018 was for energy generation, and thus the RA was applicable.
The court made no order as to costs.
TNB was represented by S Saravana Kumar and Amira Azhar from Rosli Dahlan Saravana Partnership, while senior revenue lawyers Ashrina Ramzan Ali and Surani Che Ismail represented the IRB director general.
Saravana Kumar, when contacted by The Edge , confirmed the appellate court's decision.
The case arose when, on 3 July 2020, the IRB informed TNB by letter that the RA they claimed for assessment year 2018 was not allowed, and then issued an additional assessment notice on 7 July 2020, to the amount of RM1,812,506,384.64.
Following that, TNB filed a judicial review in the same year regarding the imposition of RM1.812 billion as additional assessment to be paid by the national utility company.
The IRB argued in its appeal that TNB was not a manufacturing company, and thus was not eligible for certain tax incentives under Schedule 7A of the Income Tax Act that allowed it for RA.
"RA only applies to manufacturing companies that carry out manufacturing activities that transform raw materials into final products in factories, and capital expenditure incurred on factories, plants or machinery for eligible projects is eligible for RA," the IRB said in its submissions.
TNB, however, cited certain Commonwealth cases and Federal Court cases supporting its position that electricity generation is considered a manufacturing activity at the global level, in the form of its expenditure on transmission lines, substations and transponders.
