"Federal Court Is Vested With Jurisdiction To Hear Stamp Duty Appeals" by Halim Hong & Quek.

Federal Court is Vested with Jurisdiction to Hear Stamp Duty Appeals

BY DESMOND LIEW

Federal Court in Pemungut Duti Setem v Lee Koy Eng & Another Appeal [2022] 6 MLRA 209 had dismissed the Taxpayer’s motion in setting aside the leave granted by the Federal Court for the reason of lack of jurisdiction and held that, amongst others, Federal Court is vested with jurisdiction to hear stamp duty appeals.

The brief facts of the case are as follows:

1. The deceased died intestate leaving lands to the widow and children. The children then executed a deed renouncing their entitlements to the lands for the widow’s benefits.
2. The High Court issued a vesting order to vest the lands to the widow and consequently the administrators executed Forms 14A in favour of the widow.
3. The Collector, in turn, imposed an ad valorem stamp duty under item 66(c) in the First Schedule to the Stamp Act 1949 (“Stamp Act”) as the Forms 14A were in relation to “renunciation by way of gift’.
4. The Taxpayer challenged the Collector’s decision and both the High Court and Court of Appeal ruled in favour of the Taxpayer and affirmed that renunciation of entitlement to the estate of a person who died intestate only attract nominal stamp duty.
5. Dissatisfied, the Collector appealed to the Federal Court, amongst others, challenge the jurisdiction of the Federal Court in hearing the stamp duty appeal.

The Federal Court in dismissing the Taxpayer’s motion reasoned that the Federal Court is vested with jurisdiction to hear stamp duty appeal as the High Court heard the stamp duty appeal in its original jurisdiction and not appellate jurisdiction.

Although, the word ‘appeal’ was used loosely in Section 39 of the Stamp Act, the High Court is actually hearing the stamp duty appeal in its original jurisdiction and not appellate jurisdiction as Section 39 of the Stamp Act did not invoke the appellate jurisdiction of the High Court. In other words, the High Court is not asked to invoke its appellate powers. Further, the High Court’s sole function is to answer the questions posted in the Case stated prepared by the Collector. Unlike the Case Stated issued by the Special Commissioners of Income Tax where the High Court has the power to remit the case back to the SCIT to rehear the whole case including the evidence, the High Court in the stamp duty appeal does not have such power. The High Court is only empowered to make orders and the vary the sums ordered by the Collector. In doing so, the High Court is exercising its original jurisdiction and does not sit in appeal. 

Commentary

This is a landmark case which addressed the jurisdictional issue of Federal Court in hearing stamp duty appeal. Before this landmark case, one may construe first round of ‘appeal’ by way of notice of objection filed to the Collector is the ‘first-round of appeal’ and thus the right of appeal exhausted at the level of Court of Appeal.

This case made it very clear that there is a difference between the Case Stated issued by the SCIT and the Collector where the former is an appeal proper (as SCIT prepared the same after a full trial was conducted) and the latter is a product of statute (where the High Court only need to answer the questions posted in its original jurisdiction).

Taxpayers are advised to revisit their stamp duty appeal as the right of appeal only exhausted at the level of Federal Court and not the Court of Appeal. 

Desmond Liew Zhi Hong

Partner, Tax
Halim Hong & Quek
desmond.liew@hhq.com.my