High Court Grants Judicial Review for TNB
The High Court in Petaling Jaya has granted a significant procedural victory to Tenaga Nasional Bhd (TNB), allowing its subsidiary, TNB Western Energy Bhd, to commence a judicial review against the Inland Revenue Board (IRB) over a substantial tax assessment. The tax bill in question amounts to RM291.6 million for the financial year that concluded in December 2018. As part of the court’s decision, TNB was also granted an interim stay on all further proceedings, which includes the enforcement of the assessment notice, until the matter can be fully heard and decided. The High Court has scheduled a case management for August 5 to provide further directions. This development is a crucial step for the national utility provider, as it now has the legal avenue to formally challenge the tax assessment.
Federal Court Ruling Creates Tax Precedent
This legal challenge follows closely on the heels of a separate, but highly significant, Federal Court ruling that has major implications for TNB’s tax liabilities. Earlier in the month, the Federal Court overturned previous decisions from both the High Court and Court of Appeal, siding with the Inland Revenue Board in a dispute over a different 2018 tax assessment. The ruling established a crucial precedent, clarifying that TNB, as a utility company, is only eligible for tax relief under Schedule 7B (Investment Allowance) of the Income Tax Act 1967, and not Schedule 7A (Reinvestment Allowance), which is intended for manufacturers. This decision reinstated a tax bill that was initially reduced to RM1.25 billion, and it is estimated that the ruling could lead to a total tax liability of up to RM5.05 billion for TNB for the years 2013 to 2018, with potential additional assessments for subsequent years.
Financial Impact and Strategic Response
In light of these legal developments, TNB is currently in the process of assessing the full financial impact of the Federal Court’s ruling. The company has acknowledged that the outcome may negatively affect its earnings and net assets for the 2025 financial year. However, TNB has reassured the market that the ruling is not expected to impact its core business operations. The company’s immediate strategy is to actively pursue claims under the Schedule 7B Investment Allowance, aligning its tax claims with the Federal Court’s recent precedent. The success in obtaining a judicial review for the RM291.6 million assessment demonstrates that TNB is committed to utilizing all available legal avenues to manage its tax liabilities and mitigate the financial fallout from these complex and costly disputes.
