In a filing with Bursa Malaysia on Monday, the company said wholly owned subsidiary Saujana Triangle Sdn Bhd (STSB) -- the developer of its flagship Damansara Perdana project in Petaling Jaya -- had been served with notices for an additional income tax of RM55.7mil and a 45% penalty of RM25.07mil.
The tax bill of RM80.77mil is in relation to years of assessment 2009-2011 and 2013.
M K Land said the IRB decided to impose the additional income tax and penalty for three reasons.
One, it considered the gains from the disposal of land held under Investment Properties in year of assessment 2009 as revenue in nature, instead of capital in nature.
The IRB has also disregarded the five-year time barred period to raise the said assessments in respect of the land disposal.
Finally, the IRB has disallowed certain development costs on the basis that these were only provisions and the amounts had yet to be paid. Thus it does not treat them to be incurred for the purpose of Section 33 (1) of the Income Tax Act, 1967 (as expenses that qualify for tax deduction).
M K Land said STSB disagreed with the assessments raised by the IRB and would therefore appeal.
Based on the advice from both its tax consultants and lawyers, STSB felt the land sales of the Investment Properties were capital transactions that were liable to real property gains tax (RPGT) in year 2009 (tax-exempt year).
(From April 2007 until the RPGT was reinstated on Jan 1, 2010, all gains from property transactions were exempted from the tax.)
In addition, STSB is of the view that the notices of assessment raised are statute barred and erroneous in law.
Further, according to STSB, the accrual of development costs has been allowed according to accounting standards and IRB’s public ruling on property development.
M K Land said it would make further announcement if there was any material update.