Stamp duty is a form of tax payable on certain instruments as listed in the Stamp Act 1949. Depending on the nature of the document, the stamp duty payable may range from nil to ad valorem which depends on the value of the transaction. For sale of real property, the stamp duty payable is under Paragraph 32(a) of the Stamp Act 1949 (“the Act”).
The said paragraph provides that “(o)n sale of any property (except stock, shares, marketable securities and accounts receivables or book debts of the kind mentioned in paragraph (c): For every RM100 or fractional part of RM100 of the amount of the money value of the consideration or the market value of the property, whichever is the greater— (i) RM1.00 on the first RM100,000; (ii) RM2.00 on any amount in excess of RM100,000 but not exceeding RM500,000; (iii) RM3.00 on any amount in excess of RM500,000.”
In the case of Parkwood Palms Sdn Bhd v Pemungut Duti Setem (2021) MSTC ¶30-460, the issue surrounding the determination of what amounts to “market value” under the aforementioned paragraph. The Collector of Stamp Duty (“Collector”) valued the land at a price of RM107 million whereas the taxpayer valued the land at RM61 million. The High Court found in favour of the taxpayer in finding that in arriving at its decision, the Collector had failed to take into account relevant consideration.
Facts: The taxpayer had purchased a piece of land for a consideration of RM57 million and executed a Memorandum of Transfer. When the taxpayer submitted the Memorandum of Transfer, a valuation was conducted upon the land whereby the value of the land was valued at RM107 million which resulted in a stamp duty payable of RM 4.25 million. The taxpayer had submitted its own valuation reports which stated that the value of the land were RM61.4 million and RM61 million each.
Aggrieved, the taxpayer submitted a Notice of objection under Section 38A of the Act and the matter was referred to the High Court for trial.
In coming to the decision and finding for the Plaintiff, the High Court had taken heed of the below:
- Market value
The definition of market value was not defined in the Act hence reference is made to the cases of Collector Of Stamp Duties v Ng Fah In & Ors [1981] 1 MLJ 288 and Hoe Guan Investment v Collector of Land Revenue, Batu Pahat [1978] 2 MLJ 115 which provided that:
“It is common ground that in determining the market value, nowhere defined in the Ordinance, the courts should be guided by the principles that apply under the Land Acquisition Act — namely, market value is the price which a willing seller not obliged to sell, might reasonably expect from a willing purchaser with whom he was bargaining for sale and purchase of the land (Nanyang Manufacturing Co v CLR Johore [1954] MLJ 69) and this amount can best be determined by looking at recent sales of comparable lands in the vicinity.”
Similarly, the paragraph 1(1A) of the First Schedule to the Land Acquisition Act 1960 provides that “prices paid for the recent sales of lands with similar characteristics” and “to the last transaction on the scheduled land within two years from the date” are relevant considerations.
The Defendant had failed to comply with principles of land acquisition in that during cross-examination, the Defendant’s witness had admitted that 4 of the 6 comparables considered by the Defendant were transacted more than 2 years from the date the Plaintiff acquired the land. Furthermore, the 2 of the comparables were located within the Central Business District whereas the Plaintiff’s land was located within the fringe of the area.
Counsel for the Plaintiff further contended that the Defendant had failed to consider that the land was within close proximity to a funeral parlour, crematorium and cemetery which had led to unfavourable surrounding and poor market condition. The Federal Court in Collector Of Stamp Duties v Ng Fah In & Ors had already held that the existence of a cemetery is “an understandable aversion” and “may have a depressive effect on the value of lands in the vicinity”. The Plaintiff’s witnesses also considered the poor market condition in the year 2018 was contributory to the low market value of the land.
The Plaintiff’s valuation reports all took into account the negative adjustment owing to the existence of the cemetery whereas the Defendant had failed to consider the same. The Defendant’s witness also did not consider the oversupply had affected the value of the land. On this ground, the High Court had considered that the Defendant’s valuation was flawed as being inconsistent with trite principles of the law.
The High Court noted that the officer who produced the report stating that the value of the land to be RM107 million was a crucial witness but the Defendant’s witness was instead had no involvement in the valuation reports.
The Defendant’s explanation was that the then preparer of the report had retired and could not be present to testify. The Defendant’s witness instead merely reiterated the statements prepared and due to the lack of familiarity with the subject matter and was informed of the reply reports prepared by the Plaintiff’s valuers on the morning of the trial.
Based on the above, the High Court did not find the Defendant’s witness to be a credible one.
Conclusion
The High Court was of the view that the Plaintiff’s witness which valued the land at RM61.4 million to be the most accurate value and rejected the Defendant’s valuation of RM107 million. As seen above, although the law presumes in the favour of the Defendant as held in the case of Majlis Perbandaran Subang Jaya v The Alice Smith Schools Association [2011] 2 MLJ 442, they are by no means free to disregard trite principles established in case law.
As such, hearsay evidence is clearly inadmissible and that relevant considerations such as oversupply and existence of unfavourable circumstances ought to be taken into account in determining the market price of the land transaction.
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