LHDN Ordered To Refund RM286 Million To Penang Company In Taxes

It was also ordered to pay RM20,000 in costs.
In a landmark decision made by the Court of Appeal yesterday (May 27), the Inland Revenue Board (LHDN) was ordered to pay a staggering RM286 million in taxes to a company in Penang.

Aside from the gigantic amount, the agency was also instructed to pay RM20,000 in costs to Keysight Technologies.

- Advertisements -

LHDN found to have taxed Penang company incorrectly

According to the unanimous decision made by the three-member bench, the Court of Appeal found that the High Court and Special Commissioners of Income Tax (SCIT) had erred in upholding the tax assessment issued by LHDN, reported FMT.

- Advertisements -
Lhdn office
Photo via Kosmo

Based on the facts of the case, Keysight Technologies was taxed RM286 million on its RM821.6 million sale which was made by selling technical knowledge to Agilent Technologies International.

While LHDN contended that the sale had generated a form of income, Keysight Technologies dissented, arguing that selling intellectual property (IP) rights are a  capital receipt and not income.

- Advertisements -

The Court of Appeal also agreed with the company’s argument, with Justice Collin Lawrence Sequerah saying that the proceeds made from the IP sale weren’t income and therefore not taxable.

Keysight technologies
Photo via Delaine Tam

The court also found that LHDN’s assessment had gone beyond the five-year limitation period under the Income Tax Act 1967, where it failed to meet the 2013 deadline and only issued the tax in 2017.

LHDN’s claim that Keysight Technologies was negligent was also rejected, where the bench noted that the company “had made full and frank disclosure of the receipt in the tax returns and sought professional advice in preparing its tax returns.”

‘Significant legal victory’

Following the court’s decision, Wong & Partners, the firm which represented Keysight Technologies, called it a ‘significant legal victory’.

The CoA has affirmed the application of the “Badges of Trade” test in Malaysia on capital versus income issue, and limit the IRB’s ability to confine the applicability of the test to real property cases, ensuring a consistent and fair approach across all types of transactions.

Lhdn logo
Photo via Malay Mail

“The ruling also adds to a line of existing case law that limits the IRB’s ability to use the ‘negligence’ excuse to lift the time bar, which provides greater certainty and safeguards for businesses operating in Malaysia,” it said as quoted by NST.


- Advertisements -

Weirdkaya | malaysian' daily dose of social media stories
For more stories like this, follow WeirdKaya on Facebook and Instagram!

We are hiring writers!
We are hiring writers!