High Court confirms Collector of Stamp Duties not bound by JPPH valuation
The High Court in Lagenda Mersing Sdn Bhd v Pemungut Duti Setem (Civil Suit No. AA-24NCvC-23-01/2024) held that the Collector of Stamp Duties (“Collector”) is not bound by the valuation furnished by the Valuation and Property Services Department (Jabatan Penilaian dan Perkhidmatan Harta (“JPPH”)) in determining the “market value” of the property under Item 32(a) First Schedule of the Stamp Act 1949 (“Stamp Act”). Further, “market value” should be assessed through a holistic evaluation of all relevant evidence, including appropriate comparables.
This article provides an overview of the High Court’s decision.
Snapshot
Lagenda Mersing Sdn Bhd (“Taxpayer) acquired a few parcels of land (“Land”) from a subsidiary of a public listed company. The Taxpayers procured three independent valuation reports, which placed the market value of the Land between RM28 million and RM31 million.
The Economic Planning Unit of the Prime Minister’s Department subsequently approved the acquisition of the Land for approximately RM29 million. The Taxpayer submitted Form 14A to the Collector, who issued a notice of assessment based on JPPH’s valuation of RM40,350,000, resulting in ad valorem stamp duty of RM1,598,000. The Taxpayer paid the stamp duty under protest and filed a notice of objection. Although the Collector agreed with the objection, a revised notice was issued imposing the same duty. The Taxpayer then appealed to the High Court.
Judgment
The High Court ruled in favour of the Taxpayer.
Collector’s obligation
The High Court stated that the Collector is not required to automatically adopt the JPPH valuation in determining the “market value” for ad valorem stamp duty under Item 32(a) of the First Schedule to the Stamp Act (“Item 32(a)”). Item 32(a) provides that stamp duty on an instrument of transfer is calculated using the purchase price or the value of the property, whichever is higher.
The court also explained that section 3A(4) of the Stamp Act, which sets out the Collector’s powers in ascertaining the market value of a property, does not require the Collector to rely solely on the JPPH valuation or treat it as final or decisive. Instead, the Collector must consider all relevant evidence, including the taxpayer’s representations, such as the agreed purchase price set out in the Sale and Purchase Agreement (“SPA”) and any private valuation reports, as well as other relevant market factors when determining the property’s market value under Item 32(a).
Judicial interpretation of market value
The term “market value” is not defined in the Stamp Act and must therefore be determined through judicial interpretation. The High Court held that “market value” must be assessed by a holistic evaluation of all relevant evidence, “with reference to the hypothetical willing buyer and willing seller at the material date of transfer”. These factors must be considered together to ascertain the true open market value, rather than relying rigidly on the JPPH valuation or accepting the SPA price at face value.
Reliability of JPPH valuation reports
In assessing the JPPH’s valuation report, the High Court accepted the Taxpayer’s contentions that it did not adequately account for the following material factors affecting the valuation of the Land:
- Part of the Land was designated for cemetery use, which limited its commercial potential;
- The COVID-19 pandemic depressed property values and market liquidity at the material time;
- The comparables relied upon by JPPH were not sufficiently analogous to the Land;
- There are several methodological flaws in the valuation report (e.g. comparables selected were from transactions prior to the COVID-19 pandemic).
Comment
This is a landmark decision in which the High Court confirmed that, in determining the market value of a property under Item 32(a), the Collector is not bound to adopt the valuation furnished by JPPH.
In doing so, the court provided authoritative judicial interpretation of the term “market value” for the purposes of ad valorem stamp duty, requiring reference to a hypothetical willing buyer and seller at the material date of transfer.
Our Partner Desmond Liew represented the Taxpayer in its successful appeal against the notice of assessment before the High Court.
Further information
This article was prepared with the assistance of Pupil Chin Zeyang.
