On 19.5.2016, in the case of IQSB v Ketua Pengarah Hasil Dalam Negeri, the High Court held that telecommunication towers are "plant". Accordingly, the taxpayer was entitled to claim capital allowance on the capital expenditure incurred on the towers. Our tax lawyers successfully represented the taxpayer.


Whether the Special Commissioners (SC) committed an error of law in ruling that telecommunication towers are not "plant".


The taxpayer is in the business of providing telecommunication towers to telecommunication service providers who will then affix their antennas to the towers. The taxpayer owns 193 telecommunication towers which are installed on rented land.

The taxpayer's business income is from the licensing of the telecommunication towers. No staff, desk or office equipment was placed at the towers. No correspondence directed to the taxpayer is posted to the towers. The taxpayer's workers carry out maintenance works like painting and grass-cutting at the towers. All business activities of the taxpayer are carried out from its office.

Our Arguments

We submitted that:

  1. SC had failed to consider relevant evidence

    The SC failed to take into account the taxpayer witness' oral evidence, which was not challenged during cross-examination in the course of the hearing before the SC. The SC also failed to consider the totality of the documentary evidence tendered in court, including the construction proposal, consultancy report and works, rental agreements and technical proposal.

    An examination of all evidence tendered, including documentary and oral, in their totality would reveal the taxpayer's business nature and the functions of the towers. They were also sufficient to establish the expenditure incurred for the construction and ownership of the towers.
  2. SC only applied the "premises test" and failed to apply all relevant tests

    SC did not take a holistic and comprehensive approach as propounded by the Court of Appeal in Ketua Pengarah Hasil Dalam Negeri v Tropiland Sdn Bhd (2013) MSTC 30-054. The selective application of the premises test led to the erroneous conclusion that the towers are premises.

    SC should have applied the "functional test", "business test" and "apparatus test" in coming to their conclusion. The fundamental question should have been "whether the item concerned is utilised for the purposes of the trade or business as "plant" or as a "building" looking at the intention of the taxpayer in relation to the use and location of the asset.
  3. SC failed to consider that assets which are premises can also be "plant"

    Even if the towers are setting as the Inland Revenue Board contended, they could still be "plant" since they are the only apparatus and tool used to carry on business. As the towers are used to collect fees from the service operators, considering their functions in the trade of the taxpayer, the towers are the means through which the taxpayer generates profits. Without the purpose-built towers, the taxpayer does not have any business tool to carry out its business nor would it have any income.
  4. Speculative reliance on authorities

    SC's reliance on the cases of Resort Poresia Bhd and MSDC Sdn Bhd in applying the premises test was sorely erroneous. During the preparation of case stated, no grounds of decision were provided by the Court of Appeal for its judgments in those cases.

Our Comments

This landmark decision is similar to another recent case in which we successfully argued that telecommunication towers are "plant".

In claiming capital allowance, two questions need to be addressed:

  1. First, whether the towers are an apparatus, i.e. does the taxpayer carry on its business with the purpose-built telecommunication towers?
  2. Second, whether the taxpayer carries on its business in the telecommunication towers, i.e. whether the towers are the taxpayer's place of business.

As we highlighted in Tropiland Sdn Bhd (supra), one must consider the totality of facts and evidence in respect of the functions of an asset in the business. If the asset is the apparatus used in the course of business, and from which the taxpayer generates income, then it should ordinarily qualify as a plant.

Businesses must ensure that these aspects are properly documented. Due to proper documentation, the taxpayer in this appeal was able to establish that:

  1. The towers are used in the permanent employment of business and not for any other purposes;
  2. Without the towers, the business of licensing the towers to the telecommunication service providers cannot take place;
  3. The towers are the apparatus with which the business is carried out;
  4. The towers were manufactured and installed according to the technical proposals provided by the telecommunication service providers. The technical proposals include site details, equipment descriptions, infrastructure dimensions, antennas, frequency of operation, power supply and civil mechanical and electrical requirements;
  5. The structure of the towers is specifically designed and manufactured for the purpose of business. Likewise, the materials used are able to withstand strong wind and harsh weather; and
  6. The towers are designed at a certain height to help enhance telecommunication connectivity and coverage of the equipment installed. Their function is not merely to hold antennas.

If you are claiming capital allowance on similar assets or intending to do so, it is necessary to ensure that the factors highlighted above are properly documented. We are glad to prepare the required documentation or review your existing documentation including your business operation procedures for this purpose.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.