RM15.7mil refund for Petronas after tax appeal victory

The overcharge arose from the disallowance of expenses linked to Petronas’s overseas country-office operations for that year.

The disputed expenses were for Petronas’s overseas offices in Sudan and Vietnam. (Reuters pic)

PUTRAJAYA:

 The Court of Appeal today instructed the director-general of Inland Revenue (DGIR) to refund RM15.672 million to Petronas within six months for overcharged taxes in the 2010 assessment year.

The overcharge arose from the disallowance of expenses linked to Petronas’s overseas country-office operations for that year.

The Court of Appeal’s three-member bench, comprising Justices P Ravinthran, Wong Kian Kheong and Nadzarin Wok Nordin, made the decision after allowing the appeal brought by the national oil and gas company.

The disputed expenses were for Petronas’s overseas offices in Sudan and Vietnam. The High Court had ruled that these country-office expenditures were not deductible under Section 15(1) of the Petroleum (Income Tax) Act 1967 (PITA).

In delivering the Court of Appeal’s decision, Wong said the High Court and the Special Commissioners of Income Tax (SCIT) had erred in ruling that Petronas was not entitled to deduct its office-related expenses under PITA.

Wong noted that the 2010 tax return had been filed within the stipulated time and the company had duly paid all taxes due to the DGIR within the required time periods.

He said the court disagreed with the DGIR’s argument that Petronas had been negligent in submitting its 2010 tax return, adding that even if there had been negligence, both the High Court and SCIT erred in law by failing to determine whether such negligence caused any tax loss.

He also stated that both the High Court and SCIT should have recognised that the country-office expenses were incurred outside of Malaysia.

“In view of the reasons stated, particularly the errors of law committed by both the SCIT and High Court, the DGIR was barred under Section 39(1) of PITA from issuing Form JA (the additional assessment), and we set it aside,” he said.

Wong said the DGIR must refund RM11,392,044 and RM4,280,556 to Petronas within six months.

“With the agreement of both parties, no order as to costs is made for this appeal, or for proceedings in the High Court and before SCIT,” he added.

In today’s proceedings, lawyers S Saravanan Kumar and Nur Amira Ahmad Azhar represented Petronas, while senior revenue counsel Ashrina Ramzan Ali and revenue counsel Nik Amyrah Syarinie Dusuki appeared for the DGIR. - FMT