The principal activity of Shell Services Asia Sdn Bhd in Malaysia is to provide services to related companies within the Shell Group. For FY 2011 – 2016 the company was part of a contractual arrangement for the sharing of services and resources within the Shell Group as provided in a Cost Contribution Arrangement. The tax authorities conducted a transfer pricing audit, and based on the findings, issued a tax assessment, where the Cost Contribution Arrangement had instead been characterised as an intra-group services arrangement. As a result the taxable income was adjusted upwards by imposing a markup on the total costs of the services provided for fiscal years 2012, 2014, 2015 and 2016. Consequently, the company had to pay the additional taxes in the amount of: RM 3,474,978.44; RM 2,559,754.38; RM 7,096,984.69; RM 2,537,458.50; RM 15,669,176.01. The company did not agree with the proposal and an appeal for leave was filed with the High Court related to statutory powers/legal jurisdiction of the authorities. Courts decision The appeal was dismissed. The judgement by the High Court only relates to proceedings and no views is expressed regarding the tax assessment. Excerpt “this judgement concerns solely DGIR’s decision on s 140A ITA which do not fall within the 3 Catagories. There may be decisions of DGIR under the ITA which fall within any one or more of the 3 Catagories and in such cases, leave of court should therefore be granted pursuant to O 53 r 3(1) RC for a judicial review of those decisions.” ...

In FY 2005 Shell Timur Sdn Bhd in Malaysia had sold its economic rights in trademarks to a group company, Shell Brands International AG. The sum (RM257,200,000.00) had not been included in the taxable income, but had – according to Shell – been treated as a capital receipt which is not taxable. The tax authorities conducted a transfer pricing audit beginning in June 2015 and which was finalized in 2018. Following the audit an assessment was issued where the gain had been added to the taxable income of Shell Timur Sdn Bhd. According to the tax authorities they were allowed to issue the assessment after the statutory 5-year time-bar in cases of fraud, wilful default or negligence of a taxpayer. An application for leave was filed by Shell. Courts decision The Court dismissed the application. Excerpt “I am, by the doctrine of stare decisis, bound by these pronouncements of the Court of Appeal and Federal Court. Hence, it is crystal clear that in matters concerning the raising of assessments of tax under section 91(1) or 91(3) of the ITA, challenges by the tax payer are best left to be dealt by the SCIT, unless of course if there are any exceptional circumstances. (27) In this case, I do not find exceptional circumstance that would warrant leave to be granted for judicial review. Which would then make this application an abuse of process. Wherefore, the I dismissed the application for leave.” ...

Gazprom Chemical Fiber had previously sold goods directly to the final buyers, but now an intermediate trading hub had been established – the Trading House – through which sales and purchases were now passed. Following an audit, the tax authorities concluded that the cost of purchasing goods, as well as sales revenues following the establishment of the Trading hub, had been affected by non-arm’s length prices resulting in an understatement of taxable income. The court of first instance found the tax authorities arguments to be legitimate.The court of appeal overturned the decision of the court of first instance and ruled in favor of the taxpayer.The Supreme Court found the appellate court’s decision to be justified. According to the Supreme Court the tax authorities had gone beyond it’s statutory powers. There were no “multiple deviation” from market prices. A12-39246-2016 ...