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Case Update: Federal Court upholds that local authorities cannot tax new holdings by way of amendments to a Valuation List

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30 July 2021

STATUTORY INTERPRETATION
Local Authority – Rates – Annual Rate – Valuation List – Whether Appellant has power to impose rates on holdings located within its area of local authority – Local Government Act 1976 (Act 171), section 144

Majlis Daerah Hulu Selangor v United Plantations Berhad
[2021] MLJU 1205, Federal Court
- see the grounds of judgment here

Facts Majlis Daerah Hulu Selangor (MDHS) (“Appellant”) is the local authority while United Plantations Berhad (“Respondent”) is the registered owner of holdings located in District Hulu Selangor, which carries an oil palm plantation business, UPB holdings. The Appellant had informed the Respondent that it was going to impose an annual value and annual rates on UPB holdings.  By Government of Selangor Gazette Notification dated 26.6.2008, the boundaries of the Hulu Selangor District Council were altered to include the UPB holdings with effect from 3.7.2008. The Appellant then issued the Respondent a Notice of Amendment of the Valuation List under section 144[1] of Act 171[2] informing the Respondent that it was amending the Valuation List and that with effect from 1.7.2018, the annual value of the UPB holdings shall be RM17,351,300.00 and annual rates imposed shall be RM173,513.00. The Respondent informed the Appellant of its objection to the Notice of Amendment stating that the Respondent never provided any services, facilities or amenities in relation to UPB holdings. However, the Appellant maintained its decision on the annual value of UPB holdings without explaining its reasons. On 12.7.2018, the Respondent paid the annual rate imposed under protest and appealed to the High Court. In the High Court, the Respondent alleged that the Appellant had no power to include the Respondent into the Valuation List vide Notice of Amendment. This was upheld by the High Court. The Respondent appealed to the Federal Court stating that the Respondent has no basis for complaint as the UPB holdings were valued using the Valuation List 1996. Hence, this appeal.

Issue Whether the Appellant has the power to impose rates on UPB holdings?

Held In dismissing the appeal, the Federal Court held that a new Valuation List must always be prepared to replace or supersede an existing Valuation List, whether amended, revised or in its original pristine form every five years. In this appeal, the Valuation List of 1996 has suffered from the gross inactivity on the part of the Appellant and has lapsed. The Appellant imposed the same Valuation List prepared for the year 1996 over and over again for twenty years. Therefore, it was held that the Notice of Extension dated 11.7.2016 seeking to extend the Valuation List for the year 1996 effectively until 2019 is clearly invalid. It was further held that the amendment conducted in 2016 to include UPB holdings is also invalid as UPB holdings is a new holding and does not fall within the definition of rateable holding and that the Appellant did not specify under which particular limb of sections 144(a) to (f) that the amendment was sought. Further, although State Authorities may redraw the boundaries of any local authority within its jurisdiction, local authorities cannot begin to impose rates on holdings which were outside their jurisdiction. The local authority is obliged to come out with a new Valuation List whenever there is a re-boundary exercise or at least to wait until the next new Valuation List before it may impose its rates on holdings which newly fall within its jurisdiction.

ZUL RAFIQUE & partners
{30 July 2021}
[1] Amendments to Valuation List
[2] The Local Government Act 1976

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