Shipping company wins tax appeal
KUCHING: The Special Commissioners of Income Tax (SCIT) in Putrajaya has unanimously ruled to allow the appeal of a local shipping company against the Inland Revenue Board’s (IRB) assessment and waived the penalty imposed.
A press statement yesterday said the decision would benefit members of the Sarawak and Sabah Shipowners Association.
The company, whose principal activity is transporting cargo by sea, was audited by the IRB for the years of assessment 2005 to 2009.
For transporting cargo, the company uses its steel cargo vessel registered as a seagoing Malaysian ship under the Merchant Shipping Ordinance 1952.
Its statutory income derived from the transportation of cargo by sea using the steel cargo vessel was exempted from income tax from years of assessment 1996 to 2007.
However, after the tax audit, the IRB tax audit officer found that the statutory income for the years of assessment 2006 and 2007 for the transportation of cargo by sea should not be tax exempt with the reason that the steel cargo vessel is a flat-bottomed vessel that looks like a barge.
As such the IRB decided the vessel was not a ship within the definition of a Malaysian ship under Section 54A(6) of the Income Tax Act 1967.
Consequently, the IRB issued Notices of Assessment for 2006 and 2007 to assess statutory income and required the company to pay over RM73,000 inclusive of the 45 per cent penalty imposed under Section 113(2) of the same Act.
Being aggrieved by the IRB’s interpretation of the relevant provision of the law and the assessments made, the shipping company filed an appeal through its tax accountant to the SCIT.
During the trial of the case on March 3, the company was represented by tax consultant Lam Kam Wing, while the IRB was represented by two legal officers from Kuala Lumpur.
After going through and examining the lengthy detailed submissions by both parties, the SCIT decided to allow the appeal and waive the penalty imposed.