PUTRAJAYA (Dec 2): Listed construction firm Muhibbah Engineering (M) Bhd on Thursday (Dec 1) succeeded in obtaining leave in its judicial review to challenge the tax assessments imposed by the Inland Revenue Board (IRB).

This follows a three-member Federal Court bench, led by Chief Judge of Sabah and Sarawak Tan Sri Abang Iskandar Abang Hashim, dismissing the appeal by the IRB to challenge the leave granted to the company and also a stay of proceedings against the payment of disputed tax assessments that was granted by the Court of Appeal.

The bench, which included judges Datuk Zabariah Mohd Yusof and Datuk Harmindar Singh Dhaliwal, also directed the IRB to pay costs of RM50,000 to Muhibbah Engineering.

The IRB is said to have disallowed certain construction expenses incurred between 2015 and 2016, to the tune of more than RM190 million that Muhibbah Engineering had accrued on the premise that the expenses had not been disbursed. This in turn has affected the amount of losses available for Muhibbah Engineering to be surrendered to its related party — Muhibbah Marine Engineering Sdn Bhd.

Muhibbah Engineering’s counsel Datuk DP Naban, who appeared with S Saravana Kumar and Dharshini Sharma from the law firm Rosli Dahlan Saravana Partnership, argued that the existence of the Special Commissioners of Income Tax (SCIT) does not bar a taxpayer from seeking judicial review of taxes ordered to be paid by the IRB.

In the court papers sighted by The Edge, the IRB argued that the issue of domestic remedy must be canvassed at the leave stage since the existence of a domestic remedy would be a ground for refusing leave for judicial review.

The IRB through senior deputy solicitor Dr Hazlina Husain also argued that no stay can operate against any tax imposed by the IRB in light of Sections 103, 103B and 106(3) of the Income Tax Act 1967.

The company’s lawyers further argued that judicial review is the appropriate avenue to challenge tax assessments which were erroneously and arbitrarily raised by the IRB.

Naban also argued that the granting of a stay order should be granted to the taxpayer in order to preserve the integrity of the appeal. He further added that the Income Tax Act 1967 does not bar the courts from granting a stay order.

The decision on Thursday was confirmed by Saravana.

With the decision, the High Court will hear Muhibbah Engineering's judicial review application at a later date.