Multi-Purpose Credit Sdn Bhd v Ketua Pengarah Hasil Dalam Negeri

Appellant(s): Multi-Purpose Credit Sdn Bhd

Respondent(s): Ketua Pengarah Lembaga Hasil Dalam Negeri

• YA Datuk S. Nantha Balan A/L E.S. Moorthy
• YA Datuk Azimah binti Omar
• YA Dato' Ahmad Kamal Bin Md. Shahid

• The appellant, a credit services provider, incurred substantial loan debts in a prior Year of Assessment (YA (X)) to fund its primary business operations.
• Crucially, the appellant did not claim any tax deduction for these loan amounts in YA (X), resulting in the entire loan sum being fully taxed as part of its adjusted income.
• In a subsequent Year of Assessment (YA (Y)), the creditors waived these loan debts, leading the respondent to assess the waived amount as taxable income for YA (Y).

• Whether the High Court and Special Commissioner of Income Tax (SCIT) erred in finding Section 30(4) of the Income Tax Act 1967 (ITA) irrelevant and inapplicable to the case of waived debts where no prior deduction was claimed.
• Whether the *lex generalis* provisions (Sections 4 and 22 ITA) should apply to the waiver of debt, or if the *lex specialis* (Section 30(4) ITA) governs such situations.
• Whether the respondent was entitled to impose a second tax collection on the waived debt in YA (Y), given that the loan sum had already been fully taxed in YA (X).

• The Court of Appeal allowed the appeal, holding that Section 30(4) ITA is the *lex specialis* governing debt waivers and remains relevant even when no deduction was claimed in the prior YA.
• The Court ruled that if a debt was not deducted (and thus taxed) in YA (X), then its waiver in YA (Y) should not be treated as taxable income, preventing redundant taxation.
• The Court found that the categorisation of the loan as capital expenditure (CAPEX) or operating expenditure (OPEX) was not material to the tax treatment in YA (Y), as the decisive factor was whether the loan sum had already been taxed in YA (X).