CONFIDENTIAL 1 AC/JUNE 2017/TAX467

SUGGESTED SOLUTION

Question 1

A. Two circumstances where income tax liability arises:

i. the transaction must be income in nature and such income is accrued in or derived from
Malaysia 
ii.the transaction must be income in nature and it is received in Malaysia from outside
Malaysia 
2 x 1.5 = 3 marks
B. Two types of assessments:

i. Original assessment 
An assessment made in accordance to the particulars or his agent in the relevant return.

ii. Additional assessment 

Additional assessment is raised when the taxpayer had omitted certain income while
making the return or when tax had been refunded to the taxpayer by an error of fact or law
or when there is additional income which has not been taken into account when making
the return

Or any other relevant answer  4 x 1 marks = 4 marks

C.
Resident Sectio
YA status   n  
201 Resident  7(1)(a)  Stayed in M’sia for at least 182 days
2
201 Resident  7(1)(b)  Stayed in M’sia less than 182 days √ and
3 linked√ to 2012 with at least 182 consecutive
days √

201 Resident  7(1)(a)  Stayed in M’sia for at least 182 days

4
201 Resident  7(1)(d)  Resident in 3 immediate preceding years √
5 (2012,2013,2014) and
also resident in following year (2016)
201 Resident  7(1)(c)  Stayed at least 90 days in Malaysia √ and
6 resident in three out of four immediate
preceding years (2013,2014,2015) √

16 x ½ = 8 marks
D. 2 disadvantages of being a resident individual:
i. Income tax is charged at a flat rate of 28%√
ii. Not entitled to enjoy individual tax relief√
2  x 1 = 2 marks

(Total 17 marks)
 CONFIDENTIAL 2 AC/JUNE 2017/TAX467

QUESTION 2

A. Statutory employment income of Bella for the year of assessment 2016

Section 13(1)(a) RM RM
Salary 198,567
EPF 45,000 - (198,567 x 19%) 7,273
=45,000 – 37,727
Discount on company’s goods 5,000
Less: Exempted
(1,000) 4,000
Personal computer – gift 3,000
Reimbursement – maid’s wages 9,000
221,840
Section 13(1)(b)
Traditional medical benefit – exempted Nil
Driver 600 x 7 = 4,200 4,200
Car 15,000 x ½ year 7,500
Furniture 3,360
236,900
Section 13(1)(c)
Hotel accommodation
3% of Section 13(1)(a)
3% x 236,900 x 1/12 months 592
House
Defined Value
RM1,500 x 11 months = RM16,500  16,500
or
30% x RM236,900 = RM71,070
WIL
253,992
Section 13(1)(e)
Compensation 50,000
Less: Exempted (30,000)
(3 years x RM10,000) 20,000
Statutory employment income 273,392

√ 24x ½ marks = 12 marks

B. An exemption is available in the case of a non-resident individual who exercises

employment in Malaysia for not more than 60 days in a year (or for not more than 60
days over a two-year period).√ Rachel exercised her employment in Malaysia for a
period of 55 days, excluding the 10 days period when she was not exercising her
employment√. As this was not more than 60 days during 2016 √, she is eligible for the
exemption on her income from employment exercised in Malaysia. √

√ 4 x ½ marks = 2 marks
CONFIDENTIAL 3 AC/JUNE 2017/TAX467

(Total 14 marks)

QUESTION 3
Computation of statutory income from business for the Y/A 2016
RM
Net Profit 117,000
Add Withdrawal 9,000 √
Less Rental income (26,000) √
Interest (14,000) √
Add Disallowed Expenses
Salary/Bonus/EPF (owner ) 65,000 √
Salary/Bonus - employees NIL √
EPF – Normal Employees 5,600 √√
EPF – Disable Employees NIL √
Rental – Business NIL √
- owner 2,500 √
Rep & Main. – Security System 3,000 √
- Removable partition 2,000 √
- Maintenance van NIL √
- Owner’s car 1,000 √
Depreciation 8,000 √
Ent. Exp – Diaries without bus logo 3,000 √
- Entertaining customers and staff NIL √
- Annual Dinner NIL √
Donation – Rumah Org Tua 1,000 √
- Approved Institution Bangladesh 2,000 √
- Perlis Muslim League 3,000 √
- MDAB 4,000 √
Renovation of office building 5,000 √
Insurance – Owner’s life 2,000 √
- Business motor vehicle NIL √
Bad Debts - Trade Debts NIL √
- Loan to ex-employee 2,000 √
- Increase in Specific Provision NIL √
- Increase in General Provision 1,500 √
Appeal on Income Tax 1,000 √
Current year’s tax 7,000 √
Road Tax NIL √
Less Double Deduction
Salary & Bonus (Handicapped Employee) 16,000 √
Export Promotion Expenses 1,000 √
Adjusted Income 187,600
Add Balancing Charges 5,000 √
Less Capital Allowances 7,000 √
Statutory Business Income 185,600

√ 36 x ½ = 18 Marks
(Total: 18 marks)
 CONFIDENTIAL 4 AC/JUNE 2017/TAX467

QUESTION 4

A.
Computation of income tax payable for En Ahmad Saroni and Puan Yahana under
separate assesement for YA 2016
Ahmad Saroni Yahana
Section 4 a RM RM
Business income BIZ 1(RM) BIZ 2(RM)
Gross income
less Deductibe expenses
Adjusted income NIL 40,000√
add Balancing charge 900 -
900 40,000
less Capital allowances 900√ 3,500√
Statutory income NIL 36,500 36,500√
Capital allowance c/f 500√
UNABSORBED LOSS B/F 2,500√
34,000
Section 4 b
Employment Income 110,000√ 58,000√

Section 4 c: Dividend and Interest income

Renong Bhd Exempted√ NIL
Alumni Sdn Bhd (Pioneer S) Exempted√ NIL
Amanah Saham Wawasan Exempted√ NIL
Interest Exempted√ NIL -

Section 4 d: Rental and Royalty income

TMNHATI TMN KILAU
PERMAI EMAS
Rental 12,000√ 18,000√
Air Cond. NQ√
QR&A (800)√ (1,000)√
Repairs (2,000)√ (1,500)√
Adjusted Rental Income 9,200 15,500 24,700
AGGREGATE INCOME √ 168,700 58,000
CURRENT YEAR BUSINESS LOSS 10,000√
DONATIONS to APPROVED INSTITUTIONS
Cash (restricted to 7% of aggregate income) 1,000√

TOTAL INCOME √ 157,700 58,000

Less RELIEF
Self 9,000√ 9,000√
Parents Medical Expenses 2,379√
Serious Disease 500√ 384√
 CONFIDENTIAL 5 AC/JUNE 2017/TAX467

Computer 3,000√
Books 1,000√ 923√
Child-Yasmin NQ√
Kamil 6,000√
Dahlia 6,000√
EPF/Life Insurance 6,000√ 4,979√
Medical/Education 3,000√ 1,738√
Medical Expenses-Children NQ√
TAXABLE INCOME 120,821 40,976
COMPUTATION OF TAX
On the first 100,000 35,000 11,900 900
On the next 20,821 @ 24% √ 5,976 @10%√ 4,997 598
TAX CHARGED 16,897 1,498
LessZakat 4,000√
TAX
PAYABLE/(REFUNDABLE) 12,897 1,498

42 x ½ = 21 Marks

B. The following income is excluded form in determining a child’s total income:

i. A scholarship or a similar grant√√
ii. Income settled on a child by the parents but where settlement is disregarded√√
iii. A payment by child’s employer which represents returns of a premium paid for articles or
apprenticeship√√
(√ 6 x 1 marks = 6 marks)

(Total: 27 marks)

QUESTION 5

A. i Plant and machinery was used for the purposes of business immediately before disuse√.
ii. If during a period of disuse the plant and machinery is constantly maintained in readiness
to be brought back into use√
iii. The period of disuse is temporary√
(√ 3 x 1 marks = 3 marks)

B. Capital allowances for the years of assessment (YA) 2016 and 2017

RM RM
Steel door Moulding machine
Cost 500,000√
YA2016√ IA 20% 100,000
 CONFIDENTIAL 6 AC/JUNE 2017/TAX467

AA 14% 70,000 (170,000) √√

RE 330,000
YA2017 AA (70,000) √
260,000
Factory building
Cost 12,000,000
Less: Non- IB (20%) (2,400,000)
QE 9,600,000√
YA2016√ IA 10% 960,000
AA 3% 288,000 (1,248,000) √√
RE 8,352,000
YA2017 AA (288,000) √
8,064,000
Motor car (HP)
Cost RM145,000 (restricted QE of RM100,000) 100,000√

YA2016√ Deposit paid 50,000√

Instalments (8,000 – 500) x 4 months) 30,000√√
Total 80,000
IA 20% 16,000
AA 20% 16,000 (32,000) √√
RE 48,000
YA2017 RM 7,500 X 8 months = 60,000 20,000√√
Restricted to RM100k – RM80,000)
IA 20% 4,000
AA 20% 4,000 (8,000) √√
Previous year instalments:
AA (RM80,000 x 20%) (16,000) √
RE 44,000

(√22 x ½ = 11 marks)

C.Partnership – Divisible income for the year of assessment (YA) 2016

RM RM
Provisional adjusted loss (40,000)
Less: Interest on capital contribution
Faisal: 10% x 360,000 = 36,000 x 10/12 (30,000)√ √
Keyrul: 10% x 240,000 = 24,000 x 10/12 (20,000)√ √ (50,000)
Divisible Loss (90,000)

Partners – Chargeable income for YA 2016

RM RM
Faisal Keyrul
Interest on capital contribution 30,000√ 20,000√
Divisible loss (45,000) √ (45,000) √
Adjusted loss (15,000) (25,000)
CONFIDENTIAL 7 AC/JUNE 2017/TAX467

Capital allowance c/f √ 6,000√ 6,000√

Statutory income Nil Nil
Interest income Nil 13,000√
Aggregate income Nil 13,000
Less: Current year loss (13,000) √√
Less: Donation Nil√ Nil√
Total income Nil√ Nil√

Unabsorbed business losses c/f 15,000√ 12,000√

(√ 20 x ½ marks = 10 marks)

(Total: 24 marks)

END OF SOLUTION