TNB should be considered utility company, apex court rules

Free Malaysia Today

4 days ago

In 2022, the Kuala Lumpur High Court allowed TNB's judicial review application to set aside LHDN's RM1.8 billion tax assessment for the year 2018, ruling that the amount was considered a reinvestment allowance.
PETALING JAYA : The Federal Court today overturned a Court of Appeal ruling that found national utility company Tenaga Nasional Bhd to be in the business of manufacturing electricity, in a case considered the largest corporate tax dispute in the country's history.
The court said TNB should actually have been considered a utility company under Schedule 7B of the Income Tax Act 1967 (ITA), The Edge reported.
As a utility company, TNB's application for a reinvestment allowance in seeking tax relief under Schedule 7A of the ITA was wrong, a five-member bench, led by Court of Appeal president Abang Iskandar Abang Hashim said.
The judges said TNB's application should have been done under Section 7B that specifically relates to utilities entities where it could apply for investment allowance.
Justice Rhodzariah Bujang said even if TNB was manufacturing electricity, electricity was considered a form of utility.
Rhodzariah said Schedule 7B of the ITA provides investment allowance incentives specifically for companies involved in the service sector, including transportation, communication, utilities, and other sub-sectors.
The said schedule was introduced to encourage investments in infrastructure and services that were essential for public welfare and economic development, she said.
However, she said TNB could not be blamed for filing its claim for reinvestment allowance under Schedule 7A on grounds that it manufactured electricity.
'It does not mean that the Inland Revenue Board (LHDN) has no option but to accede to it.
'That is the same for any other applicant of a statutory claim, for it is the approving authority which must decide whether an approval be granted for such a claim, and of course, if not, the aggrieved party has the legal right in an appropriate factual and legal circumstance to question that decision in court,' she said.
In 2022, the High Court allowed TNB's judicial review application to set aside the LHDN's RM1.8 billion tax assessment for the year 2018.
High Court judge Noorin Badaruddin agreed that the amount was considered a reinvestment allowance.
The dispute arose when LHDN disallowed TNB's claim under Schedule 7A of the ITA on the basis that the generation, distribution and transmission of electricity was not manufacturing of electricity, and arguing that it was only a service provider.
In 2024, the Court of Appeal upheld the High Court's ruling.
TNB has already paid the said sum.