Syarikat Ibraco-Peremba was a property development company in Malaysia. The company had entered into a series of elaborate transactions to avoid paying income tax on the profits made from the sale of a developed land.
Profits arising from the companies sale of developed land would be treated as business income and subject to income tax.
The company first incorporated a subsidiary and then, after selling the lands to the subsidiary, entered into a contract with it to develop the lands. Upon completion of the project, the company sold its shares in the subsidiary to a related company and the subsidiary company subsequently sold the developed lands to third parties. The subsidiary and related companies were then closed.
The Court of Appeal held that the taxpayer had made the arrangement for the primary purpose of minimizing tax. Although Section 140 did not explicitly state that the tax administration has the power to disregard a series of transactions, as opposed to a single transaction, each individual step or transaction in an arrangement could be looked at as a whole.Malaysia-vs-Corp-2016