The Federal Court in the recent case of Tenaga Nasional Berhad v. Majlis Daerah Segamat [2022] 2 CLJ 497 decided that it was unlawful for a local authority to impose rates using the improved value method of assessment under the Local Government Act 1976 (“LGA”) on electrical structures and machineries located in certain holdings.
A local authority, Majlis Daerah Segamat (“MDS”) had imposed rates on Tenaga Nasional Berhad’s (“TNB”) holdings located within MDS’ area of jurisdiction, including four main intake substations (Pencawang Masuk Utama) (“PMUs”), which were assessed using the improved value method. In doing so, MDS considered, amongst others, electrical structures and machineries that were located in the PMUs.
TNB appealed against the imposition of rates to the High Court and the sole question before the High Court was whether the assessment of the improved value of the PMUs by MDS was in accordance with the LGA, on the basis that the assessment considered the value of electrical structures and machineries installed in the PMUs. The High Court answered in favour of MDS and dismissed TNB’s appeal, finding that the electrical structures and machinery were a main component of the holdings. TNB thereafter appealed to the Federal Court pursuant to Section 145(5) of the LGA.
At the Federal Court, TNB submitted, amongst others, that pursuant to the definition of “improved value” under the LGA, only “holdings” are rateable, and the electrical structures and machineries are not “holdings” as they are neither “land” nor “building”.
The Federal Court allowed TNB’s appeal and held that MDS’ decision regarding the assessment of the improved value of the PMUs was unlawful, and remitted the matter to the High Court for assessment of the improved value to be imposed. In doing so, the Federal Court made the following findings:
David Mathew from Messrs Steven Thiru & Sudhar Partnership appeared as Co-Counsel for TNB at the Federal Court, with Priscilla Faith Lim assisting.