High Court upholds tax deductions for S’wak logging company’s community leader allowances

KUCHING (Dec 3): The High Court here has dismissed an appeal by the Inland Revenue Board (IRB) against a logging company, thereby upholding a decision by the Special Commissioners of Income Tax (SCIT) which allowed the firm to claim tax deductions for monthly allowances paid to community leaders.

The allowances were given to the Tuai Rumah and Penghulu from neighbouring longhouses to assist with discussions, negotiations and the resolution of issues arising from logging activities.

These issues included environmental damage, pollution, crop losses and disputes over roadblocks.

The IRB had earlier treated the payments as private expenses and subsequently disallowed the deductions, and it then raised an additional tax assessment with a penalty under Section 113(2) of the Income Tax Act 1967.

The company appealed the assessment to the SCIT, which ruled in its favour after a detailed hearing, and this led to the IRB bringing the matter before the High Court.

In dismissing the appeal, the High Court effectively affirmed that the payments constituted allowable business expenses incurred in the ordinary course of logging operations.

The company was represented by K.C. Wong and Wong Jo Yiin of Messrs K.C. Wong & Advocates, assisted by tax consultant Lam Kam Wing.