This case concerned a dispute between the Ketua Pengarah Hasil Dalam Negeri (“KPHN”) and Tenaga Nasional Berhad (“TNB”) over TNB’s entitlement to claim Reinvestment Allowance (“RA”) under Schedule 7A of the Income Tax Act 1967. TNB, whose principal business involves the generation, transmission and distribution of electricity, had claimed RA under Schedule 7A from the year of assessment (YA) 2003 to YA 2017 in respect of capital expenditure incurred on its electricity-related assets. Following an internal audit, KPHN rejected TNB’s RA claim for YA 2018 and issued a notice of additional assessment amounting to approximately RM1.81 billion. KPHN took the position that electricity generation does not constitute “manufacturing” within the meaning of Schedule 7A and that TNB, as a utility company, should instead fall under Schedule 7B, which provides investment allowance incentives for the service sector.
