CONFIDENTIAL 1 AC/JUL 2021/TAX467

UNIVERSITI TEKNOLOGI MARA

FINAL ASSESSMENT

COURSE : TAXATION 1
COURSE CODE : TAX467
EXAMINATION : JULY 2021
TIME : 3 HOURS

INSTRUCTIONS TO CANDIDATES

1. This question paper consists of five (5) questions.

2. Answer ALL questions in the Answer Booklet. Start each answer on a new page.

3. Please check to make sure that this examination pack consists of :

i) the Question Paper

ii) a four-page Appendix 1

4. Answer ALL questions in English.

DO NOT TURN THIS PAGE UNTIL YOU ARE TOLD TO DO SO

This examination paper consists of 9 printed pages
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QUESTION 1

A. Adeeb Jameel is an entrepreneur involved in producing local preserved products to be

marketed in Sabah and Sarawak. He submitted his tax return on the 1 April 2021 for
income tax payable YA 2020. On 31 May 2021, Inland Revenue Board (IRB) issued
an additional assessment on Adeeb Jameel’s income tax payable on the basis that he
failed to declare sales made on goods export to Korea amounting RM100,000. Section
99(1) of the Income Tax 1967 provides that a taxpayer who is dissatisfied with an
assessment made on him is entitled to appeal to the Special Commissioner of Income
Tax (SCIT).

Required:

i. If Adeeb Jameel decides to make an appeal against the additional assessment,

identify the prescribed form and the due date for the submission of the form.
(2 marks)

ii. Identify FOUR (4) situations that allows an individual taxpayer to make an
appeal.
(4 marks)

B. Professor Kim Tae Hyung, a Korean, was employed by Swinburne University (Sarawak
Campus) as the Adjunct Professor of Korean Language and Literature. Upon his
appointment, he arrived in Malaysia on 1 January 2014. His period of stay during his
employment were as follows:

Period of stays: Notes:

1 January – 31 July 2014 He was in Malaysia.

16 November 2015 – 10 July 2016 From 24 December 2015 to 4 January
2016, he went back to Korea to
celebrate Christmas holidays with his
family in Korea.
1 January – 10 January 2017 He was on vacation with his family in
Bali, Indonesia.

11 January – 25 April 2017 He was in Malaysia.

From 26 April 2017 to 11 January
2019, he went back to Korea to take
care of his uncle who was suffering
from pancreatic cancer.
12 January – 5 July 2019 He was in Malaysia.
15 February – 11 May 2020 He was in Malaysia.
From 12 May 2020 onwards, he left
Malaysia permanently when his
contract with Swinburne University
expires.

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Required:

i. Determine the resident status of Professor Kim Tae Hyung, for the years of
assessment 2014 until 2020. Support your answer with reasons.
(12 marks)
(Total: 18 marks)

QUESTION 2

Puan Shazleen, (46 years old), was the Human Resource Manager at Puncak Jaya Berhad
(PJB) since 1 January 2015. On 31 December 2020, her employment was terminated as part
of the company’s internal reorganization plan due to pandemic situation. Upon her termination,
she received gratuity and compensation for loss of employment amounting RM50,000 and
RM184,000 respectively.

The details of Puan Shazleen’s remuneration and benefits for the year ended 31 December
2020 are shown below:

a. Net salary of RM10,680 per month, after deduction of EPF of 11%.

b. Travelling allowance for carrying official duties amounted to RM500 per month.

c. Entertainment allowance of RM1,000 per month of which she made a claim of

RM15,000 in respect of entertainment expenses spent on her clients.

d. Bonus of RM67,500 for the year ended 31 December 2019 but was only received in
May 2020.

e. A new Mercedes Benz costing RM250,000. No fuel was provided.

f. Mobile phone costing RM2,500 for official use.

g. She was admitted at a private hospital for surgery after being involved in an accident.
The company paid her medical bills of RM30,000.

h. She was provided with a fully furnished house in Puchong since January 2015. The
company paid rental of RM4,000 per month (excluding the cost of furniture of
RM1,000). She paid RM2,800 for repair and maintenance expenses of the house in
August 2020.

i. In February 2020, Puan Shazleen went on a vacation to Osaka in Japan with her family
and incurred the following expenses:
Air tickets - The company paid RM8,000 for the whole family.
Food - Food bills paid by Puan Shazleen amounted to RM2,500 and it
was reimbursed by the company.
Hotel bills - The full amount of RM6,000 was paid by the company.

j. She was also provided with a leave passage to Pulau Tioman costing RM1,800.

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k. In November 2020, Puan Shazleen withdrew a sum of RM55,000 from an unapproved

fund. The amount represents contribution made by the company inclusive interest
earned of RM5,000.

l. On 15 February 2020, she exercised the option to purchase 5,000 units of the
company’s shares where the market value was RM7.00 per unit upon exercised. The
value of the option price when the shares was offered to her was RM5.00 per unit and
the market value at the point the option granted was RM8.00 per unit.

m. The company paid for her annual corporate membership fees at Regal Golf and
Country Club of RM5,000.

Required:

Calculate the statutory employment income of Puan Shazleen for the year of assessment
2020.
(15 marks)
(Total: 15 marks)

QUESTION 3

Kaseh runs a flower shop Kaseh D’Lela Flowers since 2017. The following is the Statement
for Profit or Loss accounts for the year ended 31 December 2020.

Kaseh D’Lela Flowers

Statement for Profit or Loss for the year ended 31 December 2020
RM RM
Sales 640,000
Cost of sales (169,000)
Gross profit 471,000

Add: Other income

Interest received from a fixed deposit in Affin Bank 10,800
Insurance compensation received 1 35,000
Gain on disposal of machinery 12,000

Less: Operating expenses 528,800

Remuneration 2 107,468
Finance charge 3 17,400
Bad debts 4 16,400
Entertainment expenses 5 13,400
Repairs and maintenance 6 15,200
Fees 7 14,540
Donation 8 5,200
Other expenses 9 4,500
Depreciation 44,000
(238,108)
Profit before tax 290,692

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Additional information:

1. The business received RM15,000 for compensation from an insurance company for
goods destroyed during a recent fire incident in the business premise. The remaining
balance of RM20,000 is the insurance recovery on the damaged of the chiller to store
the fresh flower.

2. Remuneration consists of:

Salary Bonus EPF

(RM) (RM) (RM)
Kaseh 42,000 8,000 5,920
Samsiah and Haziq (normal employees) 23,600 4,200 2,700
Saiful (disabled employee) 16,800 2,400 1,848
TOTAL 82,400 14,600 10,468

3. Finance charge was in respect of short-term loan taken to finance the business
operations amounting RM11,000 and installation of kitchen cabinets for Kaseh’s house
of RM6,400.

4. Bad debts consist of:

RM
Trade debts written off 8,600
Loan made to an ex-employee 2,400
General provision for doubtful debts 5,400

5. Entertainment expenses consist of:

RM
Hampers contribution to Rumah Kebajikan Sinar Emas 2,800
(homecare for elderly)
Leave passage for Kaseh and her family to Kota Kinabalu 5,600
Cash contribution to Masjid As- Syakirin 1,000
Discount vouchers to customers 400
Lunch provided to suppliers 3,600

6. Repair and maintenance consist of:

RM
Repairs of flower arrangements display shelves 3,200
Rewiring the business premise electrical system 5,000
Installation of new CCTV in the business premise 4,200
Repainting Kaseh’s car 2,800

7. Fees consist of:

RM
Business zakat 3,800
Kaseh’s income tax 3,700
Legal fees on tax appeal 2,500
Accounting and audit fees 4,540

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8. Donations consist of:

RM
Cash donation to Harapan Orphanage 2,000
(approved organization)
Tabung Perlindungan Tumbuhan-tumbuhan Liar 2,000
(a charity for preservation of wildflowers)
Subscription fees to trade association 1,200

9. Other expenses consist of:

RM
Medical insurance for Kaseh’s son 2,000
Utilities bills 2,500

10. The current year capital allowance and balancing charge are RM3,600 and RM6,800
respectively.

Required:

a. Assuming for year of assessment 2020, Kaseh made cash donations of RM135,000 to
a public library in Kuching, Sarawak. Explain briefly the tax treatments of cash
contribution to public library under Section 34(6)(g) and Section 44(8).
(3 marks)

b. Commencing with profit before tax, calculate the statutory business income of Kaseh
D’Lela Flowers for YA 2020.

Note: You should indicate ‘nil’ for any item referred to in the question of which no
adjusting entry needs to be made in the computation.
(17 marks)
(Total: 20 marks)

QUESTION 4

Anwar and his wife Aminah are both tax residents in Malaysia for the basis year 2020. The
details of their incomes and expenditures for the year of assessment 2020 are as follow:

Anwar

1. Business Income:
Construction Restaurant
business business
RM RM
Adjusted income/ (loss) (89,000) 320,000
Balancing charge 60,000 -
Balancing allowance - 15,000
Capital allowance 28,000 78,000
Unabsorbed loss b/f (25,000)

2. Dividend income received from Amanah Saham Bumiputra amounted to RM28,200,

while interest income of RM5,400 received from a fixed deposit in Maybank.

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3. A monthly rental income received of RM3,000 for a house in Subang Jaya. The tenant
paid two months advance rental in January 2020 amounting to RM6,000. The house
was rented out from 1 January 2020 and incurred the following expenses:

RM
Quit rent per annum 1,200
Fire insurance per month 200
Repairs of the floor tiles 2,200
Installation of kitchen cabinets 5,600

Aminah

1. Aminah works as an editor with a local publishing company. Her annual gross
employment income received for the year 2020 was RM72,000 and her EPF
contribution is 11% of her salary.

2. She has a fixed deposit in Ambank Bhd and received interest income of RM2,500.

3. She received royalty for her translation work requested by the Ministry of Higher
Education amounting RM30,000. She is also a writer of a best-seller novel of which
received a royalty of RM42,000.

4. She was invited to give a talk on “The challenges of young writer” in a symposium held
by one of the private universities and received an honorarium of RM5,000.

Additional information:

i. Anwar and Aminah paid for the following expenses:

Anwar Aminah
RM RM
Parent medical expenses 5,800 1,800
Wheelchair for Shahrizan 3,800
Medical examination 800
Monthly internet subscription 150
Purchase of books and magazines 1,200 800
Monthly deposit for Shahril’s SSPN 200
Monthly life insurance premium for:
Anwar 280
Aminah 200 250
Medical insurance for:
Shahril 150
Bashirah 120
Donations to approved organizations:
- Cash donation to Rumah Kebajikan Warga 10,000
Emas Klang
- Donation of medical supplies to Rumah 5,000
Kebajikan Yayasan Ummah Seri Setia

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ii. They are blessed with five children as below:

Shafiq - 23 years old, pursuing his degree in Child Education at Open University,
Malaysia
Afiqah - 22 years old, married and studying in Curtin University, Sarawak.
Bashirah - 20 years old, a medical student at Universiti Kebangsaan Malaysia,
Bangi
Shahril - 17 years old, studying A levels in Sunway College Kuala Lumpur
Shahrizan - 16 years old and disabled, studying at Lodge International School for
Special Needs Students, Kuala Lumpur

iii. Anwar and Aminah paid zakat of RM7,000 and RM4,200 respectively for the basis year
2020.

Required:

a. Describe three (3) qualifying criteria for joint assessment under Section 45(2) of the
Income Tax Act 1947.
(3 marks)

b. Calculate the income tax payable/tax refund of Anwar and Aminah for the year for
assessment 2020. Aminah did not elect for joint assessment.
(22 marks)
(Total: 25 marks)

QUESTION 5

A. BellFarm Sdn Bhd is involved in farming organic vegetables in Shah Alam, Selangor
since 2010. On 30 September 2020, BellFarm Sdn Bhd was sold to Organic Vege Sdn
Bhd for RM20 million. BellFarm Sdn Bhd and Organic Vega Sdn Bhd’s accounting year
ends on 31 December.

Briefly explain the eligibility to claim agriculture allowance on the seller (BellFarm Sdn
Bhd) and the buyer (Organic Vege Sdn Bhd) for the year of assessment 2020.
(3 marks)

B. Salleh Enterprise was incorporated on 1 April 2015 and closes its accounts on 31
December every year. The following assets were acquired by the business:

i. Honda Civic
On 1 February 2018, a new Honda (not for commercial use) was bought on
hire purchase. The cash price of the car was RM125,000 and a deposit of
RM25,000 was paid on 1 February 2018. Installment payment is RM2,800 per
month for 40 months commencing from 1 February 2018. On 1 February 2020,
the motor vehicle was sold for RM50,000.

ii. Machine
Salleh Enterprise brought in a used machinery from Indonesia into Malaysia on
1 January 2020. The machine was used solely for business purpose when it
was in Indonesia. The market value and net book value on the date of transfer
were RM20,000 and RM25,000, respectively.

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Required:

Calculate the amount of capital allowance, balancing charge, and balancing allowance
(if any) for Salleh Enterprise for all relevant years of assessment until year of
assessment 2020.
(10 marks)

C. Impak Maksima Sdn Bhd is a manufacturing company in Kuala Lumpur. As part of the
business expansion, a factory was built on a piece of land in Cheras. The building was
completed in August 2020 and brought into use in November 2020. The company
closes its accounts annually on 31 December.

The following were the cost incurred in the construction of the factory:

Date Expenditure incurred RM

1 Jan 2019 Cost of land 250,000
2 Feb 2019 Architect’s fees 9,500
3 Feb 2019 Legal fees-agreement with contractor 15,000
4 Apr 2019 Cost of laying foundations for electric cables 20,000
8 May 2019 The cost of preparing plan for approval of the 5,500
local authority
1 Sept 2019 Labour, materials, management, and supervision 185,000
5 May 2020 Installation of fixtures and fittings 3,200

The company occupies 75% of the building for factory, 12% for administrative use and
the remaining areas for storage of materials.

A special machine was later installed in the factory in June 2020. The following is the
capital expenditure incurred:
RM
Cost of machinery installed 95,000
Cost of preparing a site to install the machine 205,000

ln July 2020, the company purchased a house and use it as living accommodation for
the administrative workers. The house, which cost RM250,000 includes RM155,000
being the cost of land.

Impak Maksima Sdn Bhd has also built a canteen for its staff at the cost of RM55,000
and was completed on 1 December 2020. The canteen was only put into use in
February 2021.

Required:

Calculate the industrial building allowance for the year of assessment 2020 for Impak
Maksima Sdn Bhd.
(9 marks)
(Total: 22 marks)

END OF QUESTION PAPER

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