If your company has ever considered filing a tax relief application with LHDN, this case is an important reminder that procedural requirements matter just as much as the merits of your claim. The High Court recently ruled on a straightforward but critical question: can a company apply for tax relief under Section 131 of the Income Tax Act 1967 if it still has outstanding taxes unpaid?

𝐁𝐚𝐜𝐤𝐠𝐫𝐨𝐮𝐧𝐝 𝐨𝐟 𝐭𝐡𝐞 𝐜𝐚𝐬𝐞:

Profound Reliance Sdn Bhd filed a relief application under Section 131 of the Income Tax Act 1967 (ITA 1967) for the year of assessment 2011. Section 131 allows a taxpayer to apply for relief where tax has been incorrectly assessed or where there are grounds to reduce the tax payable. The Special Commissioners of Income Tax (SCIT) dismissed the application, ruling that LHDN was justified in rejecting it because the company had failed to fulfil one of the pre-requirements under Section 131(1) of the ITA 1967, namely that there must be no outstanding tax payable before a relief application can be made.

𝐏𝐨𝐬𝐢𝐭𝐢𝐨𝐧 𝐨𝐟 𝐭𝐡𝐞 𝐭𝐚𝐱𝐩𝐚𝐲𝐞𝐫:

The company argued that the requirement of having no outstanding tax payable was never raised or argued before the SCIT, and that the SCIT had dismissed the application on its own motion without giving the parties an opportunity to be heard on that point. The company further contended that there is no strict requirement for all taxes to be fully settled before a relief application can be made, and that imposing such a condition would lead to an unjust outcome for taxpayers seeking legitimate relief.

𝐏𝐨𝐬𝐢𝐭𝐢𝐨𝐧 𝐨𝐟 𝐋𝐇𝐃𝐍:

LHDN maintained that the company had failed to satisfy the pre-requirement under Section 131 ITA 1967, which clearly requires that no outstanding tax be payable before a relief application can be entertained. As the company had not complied with this condition, LHDN was legally entitled to reject the relief application, and the SCIT was correct in upholding that rejection.

𝐃𝐞𝐜𝐢𝐬𝐢𝐨𝐧 𝐨𝐟 𝐭𝐡𝐞 𝐂𝐨𝐮𝐫𝐭:

On 3 July 2025, the High Court dismissed the company's appeal, holding that the SCIT had correctly applied the law and had not misdirected itself on either the facts or the legal requirements. The Court found no error in LHDN's interpretation of Section 131 and held that the company's alternative interpretation could not be sustained. As the SCIT's findings were well grounded in law, the High Court declined to interfere with its decision. The company retains the right to appeal to the Court of Appeal within 30 days from the date of the decision.

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