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CASES: Ketua Pengarah Hasil Dalam Negeri v Penang Realty Sdn Bhd ISSUE: Whether the gains arising from the compensation for compulsory acquisition of land were subject to income tax? Decision and contrast: 1 The main issue of contention was whether or not the gains arising from the compensation for compulsory acquisition of the taxpayer’s land were subject to income tax under the law. The contention of the taxpayer was based on the decision of the Court of Appeal in Ketua Pengarah Hasil Dalam Negeri v Penang Realty Sdn Bhd [2006] 2 CLJ 835 which held that the compulsory acquisition of land could not constitute a sale. Taking the position that profits derived from the compensation paid to the tax payer on account of compulsory acquisition of the land was not profit that arises from taxpayer’s business. 2 The general law and the law on income tax, requires that a sale must be consensual. It must be based on one’s own free will. Thus, since gains derived from compensation paid to the taxpayer were on the account of compulsory acquisition, it was not profit arising out of the taxpayer’s business activity. 3 The taxpayer submitted, the Revenue’s decision which based on the Decision Impact Statement (“DIS”) was clearly without any legal authority. The DIS was defective and the Revenue in issuing and relying on the DIS had acted ultra vires. It also attracted a constitutional issue under Article 96 of the Federal Constitution which provides that “no tax or rate shall be levied by or for the purposes of the Federation except by or under the authority of federal law”. The DIS had no legal effect and cannot override the decisions of the superior courts..
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  • Fall '16
  • Madam noormala
  • Taxation in the United Kingdom

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