Section 140(1) Not Applicable To Transfer Pricing

The MM Sdn Bhd case has the distinction of being the first transfer-pricing dispute to be litigated in Malaysia. The Special Commissioners of Income Tax ("SCIT") held that transfer pricing adjustments performed under Section 140(1) of the Income Tax Act 1967 ("ITA") are invalid.

We successfully represented MM Sdn Bhd before the SCIT and the High Court.

Validity of transfer pricing adjustment

The Inland Revenue Board ("IRB") performed the transfer pricing audit relying on the Transfer Pricing Guidelines 2003 ("TPG"). Upon intense cross-examination, the IRB's witness admitted that:

(a) the TPG has no legal effect;

(b) the TPG is not an instrument prescribed by statute.; and