NEWS & RESOURCES
Prof. Dr Syed Muhammad Naquib Al-Attas vs. Ketua Hasil Dalam Negeri, Rayuan No. PKCP (R) 20/2011
Recent Tax Case (unreported)
 

Appeal Tribunal: Special Commissioners of Income Tax

Counsel for Apellant: Nik Saghir Mohd Noor

Counsel for Respondent: Senior Revenue Counsel & Revenue Counsel of the Inland Revenue Board Malaysia (IRB)

 

Brief Facts: 

Appellant appealed against assessment to income tax for year of assessment 2008 in respect of certain sum received by the Appellant as part of the Settlement Sum under a Deed of Settlement. The disputed sum was classified in the Deed of Settlement as compensation for “emotional pain, mental anguish and pain and suffering”. It was contended by IRB that notwithstanding such classification the said compensation sum was in fact a compensation for “loss of employment” as it was paid to the Appellant as an out-of-court settlement following a civil suit against his employer, namely, International Islamic University Malaysia, for failure of the University to renew his contract of employment and hence assessable under section 13(1)(e) of the Income Tax Act,1967. The Appellant was the Founder-Director of the International Islamic Thought and Civilization (ISTAC), an autonomous institute established by the University under special Rules. The suit by the Appellant against the University includes, amongst others, the revocation of the special Rules (resulting in the dissolution of his post) and the dissolution of his Academic Chair without any notice or prior consultation with the Appellant or the Board of Governors of ISTAC despite the fact that the Board had renewed the Appellant’s term of appointment.  

 

Decision:

After having considered the facts of the case and the failure of the counsel for the Respondent to challenge the Appellant’s testimony, the Special Commissioners ruled that the disputed sum was in fact compensation for emotional pain, mental anguish, etc. as described in the Deed of Settlement and not compensation for loss of employment as contended by the Respondent. Hence the disputed sum is exempted from tax under paragraph 14, Schedule 6, Income Tax Act 1967.