Friday 29 Mar 2024
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This article first appeared in The Edge Financial Daily on February 22, 2018

KUALA LUMPUR: Eden Inc Bhd, which is controlled by Tan Sri Abdul Rahim Mohd, has been slapped with a wind-up petition by the government for allegedly owing the Inland Revenue Board (IRB) about RM3.2 million.

This is the second wind-up petition served to public listed companies by IRB in less than six months. In October last year, IRB slapped a winding-up petition on construction firm Lebtech Bhd's unit, Lebtech Construction Sdn Bhd, for over RM1 million in unpaid taxes.

On Eden, the petition was presented to the High Court on Feb 6, and was served to Eden on Feb 13.

Consequently, Eden is to be wound up by the court pursuant to Section 466(1)(e) of the Companies Act 2016, and that the cost of the petition will be paid out from the company's assets.

The income tax debt stated under the petition was mainly resulted from the advance rental income for the period of 10 years between 2013 and 2023 amounting to RM9.8 million received and recognised by Eden as a deferred income in the financial year ended Dec 31, 2013.

In a filing with Bursa Malaysia yesterday, Eden said the petition came as a surprise because the company had been actively negotiating the payment terms with IRB, and had been making progressive payments to settle the alleged tax debt.

To date, it has made about RM1.2 million in payment to IRB to this end.

When contacted, IRB declined to comment on the matter.

"Unfortunately, a mutual agreement on the terms of the repayment could not be achieved. The repayment required was coincidentally due at a time when the company was faced with challenging operational conditions as the power plants [which are the main income generator for the Eden group of companies] were not fully operational," Eden explained.

Eden said its power plants and transmission lines were affected by unprecedented floods in December 2014, hence requiring extensive repairs which in turn require a redistribution of its resources to ensure full recommissioning of the power plants.

"The company expects that one of its power plants, namely its Kenerong plant, will be fully operational by March 2018, and will result in an additional monthly net inflow to the group of an estimated RM0.5 million," it added.

However, Eden said the amount of the tax debt under the petition had been fully provided for, hence there will not be any financial impact from the proceedings. Operationally, the cash available for working capital of the group will be reduced by the settlement sum to be paid under the petition, it added.

Furthermore, Eden believes that it can settle the amount claimed by the government before the next mention date, which is on May 8.

To support this, it has identified the source of repayment which, among others, is the proposed compulsory acquisition of the East Coast Rail Link in the Gebeng Industrial Area, Kuantan.

Besides that, it said the company had been in continuous negotiations with IRB on the repayment plan based on the sources of funds identified, and thus will continue the periodic repayment to IRB pending finalisation of the revised repayment plan.

"The company expects to achieve a positive reply from IRB within the next three weeks, well before the mention date of May 8, 2018," it added.

Abdul Rahim, who has extensive experience in various government ministries, held about 29.42% stake in Eden as at March 31, 2017.

Meanwhile, his spouse Puan Sri Fadzilah Md Ariff holds a 27.86% stake.

Eden has been part of a series of companies listed on Bursa visited by the tax authorities over the past year.

Last December, IRB slapped Aeon Credit Service (M) Bhd with a RM96.82 million bill for additional income taxes with penalties for the years of assessment of 2010 to 2016.

S P Setia Bhd's unit was also slapped with a back tax bill of RM75.38 million in November, but the company said it had grounds to contest the notice.

IRB slapped Cocoaland Holdings Bhd with RM5.89 million in additional taxes and penalties. In September last year, EcoFirst Consolidated Bhd said it was sued by IRB over some RM35.47 million in additional taxes and penalties the latter was claiming for.

In May, IRB sought RM80.77 million in additional taxes and penalties from MK Land Holdings Bhd's wholly-owned subsidiary Saujana Triangle Sdn Bhd, while Magnum Bhd and its wholly-owned subsidiary Magnum Holdings Sdn Bhd were served with notices of assessment for additional taxes and penalties totalling RM476.5 million.

In that same month, Country Heights Holdings Bhd announced that its executive chairman and major shareholder Tan Sri Lee Kim Yew had his fixed deposits of some RM126 million placed in a foreign-owned bank seized by IRB in relation to RM22.5 million worth of tax liabilities incurred by Country Height's wholly-owned unit Country Heights Sdn Bhd.

The tax liabilities were accrued from the years of assessment of 1997 and 1998.

In April, IRB slapped Tenaga Nasional Bhd with an extra RM2.07 billion tax bill for the 2013-2014 tax years. IRB also went after a subsidiary of Mega First Corp Bhd for RM22.8 million.

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