Procedural History

1. On 13 September 2023, the KLHC granted leave for the Taxpayers to commence judicial review[1].
2. In May 2024, the Court of Appeal (“COA”) struck out the DGIR’s appeal against the KLHC’s decision to grant leave[2].
3. In September 2024, the FC struck out the DGIR’s application for leave to appeal against the COA’s decision to strike out.
4. In November 2024, the FC rejected the DGIR’s application for clarification on whether the Wiramuda decision applies prospectively or retrospectively. The FC held that the issue should have been raised during the hearing of the Wiramuda case itself, and that the FC is now functus officio with no authority to make further orders on the matter.

 

Parties’ Arguments During the Substantive Judicial Review Hearing

DGIR’s Position

The DGIR opposed the judicial review applications, contending, amongst others, that:

1. The Wiramuda decision should be applied prospectively to avoid administrative disruption and a floodgate of claims for refund. The DGIR relied in particular on the FC’s decision in Obata-Ambak Holdings Sdn Bhd v Prema Bonanza Sdn Bhd and other appeals [2024] 5 MLJ 897 (“the Obata Ambak Decision”).
2. The Taxpayers’ claims were time-barred under Section 111 of the ITA.
3. The DGIR’s failure to respond did not amount to a “decision” amenable to judicial review

 

Taxpayers’ Arguments

The Taxpayers contended that:

1. The DGIR is bound by the Wiramuda decision, which applies retrospectively in the absence of an express order to the contrary. The DGIR had every opportunity to seek a declaration of prospectivity at the hearing of Wiramuda but failed to do so. The FC is now functus officio.
2. The Obata Ambak Decision is distinguishable. There, exceptional hardship and potential unjust enrichment of house buyers were present. Here, the Taxpayers are merely seeking restitution for taxes paid under an invalid provision. If Wiramuda were applied prospectively, it is the DGIR—not the Taxpayers—that would be unjustly enriched.
3. Section 111 of the ITA is inapplicable. This is not a case of overpayment under valid law, but a constitutional claim for restitution of tax collected under an unlawful statute.

 

High Court Decision

On 29 July 2025, the KLHC ruled in favour of the Taxpayers, holding that:

1. The Wiramuda Decision Applies Retrospectively

The FC made no direction for prospective application. Therefore, the general rule of retrospective application of constitutional rulings applies. The High Court cannot impose a prospective limitation where the FC has not done so.

2. The DGIR is Bound by the FC’s Ruling

As reaffirmed in Arumugam Pillai v Government of Malaysia [1980] 2 MLJ 283, once the apex court has ruled on a tax issue, the DGIR must apply it uniformly. Failure to do so is subject to judicial review.

3. Section 111 of the ITA Does Not Apply

The High Court agreed this was not a case of excess payment under a valid assessment, but a constitutional claim for restitution of tax collected under an unlawful provision.

4. DGIR Silence Is Not a Shield

The DGIR’s inaction was held to be a reviewable decision:

“The DGIR’s inaction on the matter created an impasse that should not have been. It was a conscious decision on the part of the DGIR not to respond … The intentional decision to remain silent was unwarranted.”

(Emphasis added)

5. Refund with Interest Ordered

The Court directed that refunds be paid with interest at 5%, calculated from the date of filing of the judicial review applications.

Broad grounds by the KLHC have been issued and can be viewed here.

 

Conclusion

This decision confirms:

1. The retrospective application of constitutional rulings in the absence of specific directions of prospective application.
2. The taxpayer’s constitutional right to restitution of taxes paid pursuant to unlawful legislation.
3. The DGIR’s obligation to comply with apex court decisions.
4. That inaction or silence cannot be used to evade that duty.

It is noteworthy that on 4 June 2024, the Shah Alam High Court (“SAHC”) ruled against the taxpayer in a similar case[3].

The DGIR has filed appeals against the KLHC’s decisions in Lush Development and Tanda Bestari. Both matters are expected to be heard by the COA in due course, as with the matter decided by the SAHC.

The Taxpayers were successfully represented by Consultant Dato’ Nitin Nadkarni, Partner Chris Toh Pei Roo and Associate Soon Jia Ying from Lee Hishammuddin Allen & Gledhill’s Tax, Trade & Customs Practice.

If you have any queries regarding tax assessments raised by the DGIR please contact Partner Chris Toh Pei Roo (tpr@lh-ag.com) or Associate Soon Jia Ying (jys@lh-ag.com).

 

REFERENCES

[1] The High Court’s grounds of judgments can be viewed here and here.

[2] Our LHAG Alert dated 24 May 2024 on the COA’s decisions can be viewed here: https://lh-ag.com/wp-content/uploads/2024/05/LHAG-Insights-20240524.pdf

[3] https://www.hasil.gov.my/media/ob0lycxt/20250604-revenews-centralfield-sdn-bhd.pdf