The principal activity of Shell Services Asia Sdn Bhd in Malaysia is to provide services to related companies within the Shell Group. For FY 2011 – 2016 the company was part of a contractual arrangement for the sharing of services and resources within the Shell Group as provided in a Cost Contribution Arrangement.
The tax authorities conducted a transfer pricing audit, and based on the findings, issued a tax assessment, where the Cost Contribution Arrangement had instead been characterised as an intra-group services arrangement. As a result the taxable income was adjusted upwards by imposing a markup on the total costs of the services provided for fiscal years 2012, 2014, 2015 and 2016. Consequently, the company had to pay the additional taxes in the amount of: RM 3,474,978.44; RM 2,559,754.38; RM 7,096,984.69; RM 2,537,458.50; RM 15,669,176.01.
The company did not agree with the proposal and an appeal for leave was filed with the High Court related to statutory powers/legal jurisdiction of the authorities.
The appeal was dismissed.
The judgement by the High Court only relates to proceedings and no views is expressed regarding the tax assessment.
“this judgement concerns solely DGIR’s decision on s 140A ITA which do not fall within the 3 Catagories. There may be decisions of DGIR under the ITA which fall within any one or more of the 3 Catagories and in such cases, leave of court should therefore be granted pursuant to O 53 r 3(1) RC for a judicial review of those decisions.”
Malaysia vs Shell_High_Court BA-25-68--08-2019