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SOLUTION 1
(20 marks)
3 TAX SEPTEMBER 2017
SOLUTION 2(a)
En Segar
Computation of chargeable gain
Disposal price RM RM
Acquisition price RM RM
(10 marks)
4 TAX SEPTEMBER 2017
SOLUTION 2(b)
Note 1 RM
Statutory contribution
Contribution to Universiti Malaya 19,040
Co-op Development Trust Fund 16,800
Statutory reserve fund 39,200
75,040
5 TAX SEPTEMBER 2017
Note 2
Member's fund as at 1 Jan 2014 [Para 12 Schedule 6] RM
Paid up share capital 1,200,000
Share premium account 50,000
Statutory reserve fund 122,000
Reserves from revaluation of assets (excluded) 0
Balance of profit and loss appropriation account b/f 185,000
Member's funds as the first day of the BP 1,557,000
(10 marks)
SOLUTION 3(a)
The issue is whether the sum paid is capital or revenue in nature and if revenue in nature
whether it is deductible for the purposes of the Income Tax Act 1967 (as amended).
The payment would have been capital and therefore not allowable for the purposes of the
Income Tax Act 1967 (as amended) if it is connected with the closing down of the business.
However in this case, the retrenchment was undertaken as part of an attempt cut costs and to
remain in business.
It is therefore an expense wholly and exclusively incurred in the production of gross income
and the company is entitled to the deduction under section 33(1) of the Income Tax Act 1967
(as amended).
There is sufficient support for this line of thinking in the decision of Ampat Tin Dredging Ltd v
DGIR and IRC v Patrick Thompson Ltd.
(5 marks)
SOLUTION 3(b)
It is a loss that arose out of the defalcation of the director. In other words, amount is an
embezzlement of funds by an officer of the company who has some control over the operations
and administration of the business.
This is therefore not an expense wholly and exclusively incurred in the production of gross
income within the meaning of section 33. It should be disallowed in arriving at the adjusted
income of the company.
There is support for this treatment in the case of Curtis v J&G Oldfield Ltd.
(5 marks)
6 TAX SEPTEMBER 2017
SOLUTION 4
A.
Computation of income tax payable for Encik Badrul and Puan Sofia under
separate assesement for YA 2016
Taman Taman
Section 4d: Rental income Cahaya Desa
Rental 24,000 36,000
7 TAX SEPTEMBER 2017
Air Cond. NQ
QR&A (1,600) (2,000)
Repairs (4,000) (3,000)
Adjusted Rental Income 18,400 31,000 49,400
AGGREGATE INCOME 336,400 168,420
CURRENT YEAR BUSINESS LOSS (20,000)
DONATIONS to APPROVED INSTITUTIONS
Cash (restricted to 7% of aggregate income) (2,000)
Benefits in kind - books (NIL)
TOTAL INCOME 314,400 168,420
Less RELIEF
Self 9,000 9,000
Employers provident fund
(EPF)/life insurance 6,000 6,000
Books
Internet subscription 2500
Parents Medical Expenses 2,379
Full Medical Check up 500 384
Computer
Books 2,200
Child-Yusmira NQ
Ariel 8,000
Delima 2,000
Medical/Education 3,000 1,738
Medical Expenses-Children NQ
TAXABLE INCOME 281,321 148,798
COMPUTATION OF TAX 281,321
On the first 250,000 31,321 47,900 11,900
31,321
On the next 47,900 @24.5% 7,673.64 48,798@24%
TAX CHARGED 55,573.64 23,611.52
LessZakat 40,000
TAX
PAYABLE/(REFUNDABLE) 15,573.64 23,611.52
(14 marks)
B.
a. A taxable person means any person who is registered under sec 2 GST Act 2014.
Persons include an individual, sole-proprietor, partnership, company, trustee, society, trade
union, club and association.
(1 mark)
8 TAX SEPTEMBER 2017
(5 marks)
SOLUTION 5
A.
A. Deceased Executor
R / D [6/12] R [6/12]
RM RM
Adjusted income 160,000
(+) balancing charge 2,000
(-) capital allowance (18,000)
Statutory income 144,000 72,000 72,000
Dividend (exempt) Nil -
Interest - 10,000
Royalty (exempt) Nil
Adjusted rental income 8,000 12,000
Aggregate income 80,000 94,000
less:
Approved donation (restricted to 7% of AI) (5,600)-
Annuity payable -(20,400)
Total income 74,400 73,600
less: self relief/special relief (9,000)(9,000)
child relief (2,000 x 2) (4,000)-
Chargeable income 61,400 64,600
Tax charge scale rate
on the 1st RM50,000 2,400 2,400
On the next RM11,400 x16% 1,824 2,336
/14,600 x 16%
4,736
Income tax payable 4,224 4,736
(10 marks)
9 TAX SEPTEMBER 2017
Supply of materials
Technical advice
The RM270,000 payment is not subject to withholding tax because the services
rendered outside Malaysia. (video conference)
ii. Tax implications: A penalty of 10% will be imposed on the payer if the
company failed to pay the amount of withholding tax to the tax authorities within
1 month after crediting or paying the interest amount to the non-resident.
Since TP Sdn Bhd paid the WHT on 28 August 2016; the following will be the
debt due by TP Sdn Bhd.
SOLUTION 6
A.
Investment Tax Allowance
2016 2017
RM RM
QCE:
Factory bulding 2,220,000 -
Plant and machinery 260,000 1,600,000
Total QCE 2,480,000 1,600,000
ITA @ 60%x QCE 1,488,000 960,000
(8 marks)
11 TAX SEPTEMBER 2017
ii. Decision:
Investment incentives Chargeable Exempt Income
Income account
RM RM
Pioneer status 498,000 1,042,000
Investment Tax Allowances 378,000 1,162,000
Kelly Castle Sdn Bhd should apply for Investment Tax Allowances since the amount of
chargeable income is lower while the amount of exempt income account is higher
compared to Pioneer Status Incentives.
(2 marks)