IRB appeals against kidney foundation’s tax-exempt status legal bid

 

The Inland Revenue Board (IRB) has gone to the Court of Appeal over the National Kidney Foundation’s (NKF) legal challenge to regain its tax-exempt status.

The tax authority’s appeal seeks to quash a lower court’s ruling to grant leave to NKF to proceed with the judicial review.

On Aug 26, the Shah Alam High Court granted leave to NKF to commence with the judicial review against IRB’s decision to revoke the foundation’s tax-exempt status.

Under the law for judicial review, the granting of leave paves the way for the High Court to later hear oral submissions from opposing parties over the merits of the legal action.

According to a copy of the Notice of Appeal sighted by Malaysiakini, IRB’s director-general filed the notice on Sept 6 over dissatisfaction with the decision of High Court judge Shahnaz Sulaiman.

Among the document’s stated recipients are the deputy registrar of the Court of Appeal at the Palace of Justice at Putrajaya, the registrar of the Shah Alam High Court, and law firm Rosli Dahlan Saravana Partnership - the legal representatives of NKF.

According to a copy of an order dated Nov 11, the High Court had also allowed IRB’s application to stay the tax-exempt status legal proceedings pending disposal of the appeal at the Court of Appeal.

When contacted by Malaysiakini, a counsel from Rosli Dahlan Saravana Partnership confirmed the IRB’s appeal as well as the stay of judicial review proceedings.

The IRB’s appeal is fixed for case management before the Court of Appeal on Jan 17 next year.

In granting leave, Shahnaz ruled that NKF’s legal action was not frivolous and that the judicial review is the appropriate forum to determine whether its tax exemption status - under Section 44(6) of the Income Tax Act 1967 (ITA) - can be revoked by the IRB.

Tax exemption status

In 1970, IRB granted NKF tax exemption status under Section 44(6)(a) of the ITA.

However, after a tax audit in 2019, the IRB was alleged to have decided to revoke the tax exemption status and raise tax assessments to NKF in July 2020.

NKF had filed the legal challenge on Sept 17 of the same year, naming IRB as the respondent.

According to a copy of the judicial review application, the foundation seeks a court order to quash IRB’s decision in the form of a letter dated June 17, 2020, that allegedly withdrew its tax-exempt status.

The applicant claimed the decision was illegal, void, unlawful and/or in excess of authority, irrational and/or unreasonable, among others.

NKF seeks a court declaration “that the respondent is not entitled in law to impose arbitrary and unilateral conditions on a charitable organisation such as the applicant when such conditions are not contained in the approval letter and/or communicated to the applicant”.

According to a copy of an affidavit in support of the judicial review affirmed by the foundation’s chairperson Dr Zaki Morad Mohamad Zaher, the applicant contended that the IRB failed to appreciate ITA provisions that the income of an approved charitable organisation, received for charity purposes is exempted from tax, provided that the establishment is not operated primarily for profit.

The ITA provisions in question are Sections 44(6) read together with Paragraph 13 of Schedule 6 of the act.

NKF contended that IRB failed to take into account the established legal precedent of superior courts that approved charitable organisations are entitled to tax exemption as the principle of vested rights applies. - Mkini