CONFIDENTIAL 1 AC/JUL 2022/TAX267

UNIVERSITI TEKNOLOGI MARA

FINAL EXAMINATION

COURSE : TAXATION 1
COURSE CODE : TAX267
EXAMINATION : JULY 2022
TIME : 3 HOURS

INSTRUCTIONS TO CANDIDATES

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

2. Answer ALL questions in English.

3. Answer ALL questions in your ANSWER SHEET. Start each answer on a new page and
number each page.

4. Please submit your HANDWRITTEN answer in ONE (1) PDF file.

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

i) the Question Paper

ii) a four-page Appendix 1

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. i. Briefly explain any TWO (2) situations that fall under the offence of obstruction of
officers.
(2 marks)

ii. Explain FOUR (4) occurrences that lead the Director General of Inland Revenue
Board of Malaysia to raise an advance assessment.
(4 marks)

B. Alex Luo is a Taiwanese citizen who came to Malaysia for the purpose of managing an
operation of a branch company. His periods of stay in Malaysia from the year 2016 and
onwards are shown below:

YA Periods of stay in Malaysia Notes

2016 3 March – 30 July
1 September – 15 October
2017 1 October – 31 December
2018 1 January – 29 January
2 September – 29 November 1
2019 28 February – 31 July 2
2020 12 January – 29 April
2021 5 January – 24 May
14 August – 30 October 3

Notes:

1. From 30 November 2018 until 27 February 2019, he accompanied his mother to

Singapore for a medical treatment.

2. From 1 August 2019 until 11 January 2020, he went back to his country to visit his
brother who did a surgery.

3. From 31 October 2021 onwards, he left Malaysia permanently.

Required:

Determine the tax residence status of Alex Luo for the relevant years of assessment
until year of assessment 2021. Provide relevant sections and reasons to support your
answers.
(12 marks)
(Total: 18 marks)

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QUESTION 2

Rafiq, a 54-year-old Malaysian, is a sales executive of Bio Tan Sdn Bhd. He joined the
company on 1 January 2010. However, on 30 November 2021, he opted for early retirement
and received gratuity of RM60,000. The following were remunerations and benefits that he
received from his employment for the basis year 2021:

a. A monthly salary of RM8,600 before deducting 11% of EPF.

b. He received cash of RM3,000 with respect to excellent service award.

c. Travelling allowance of RM1,000 per month for official purpose.

d. Entertainment allowance of RM1,500 per month. Rafiq spent RM12,000 to entertain

clients.

e. He received a monthly meal allowance of RM500.

f. Life insurance premium of RM300 per month paid by the company in which his wife is
the beneficiary.

g. In July 2021, Rafiq was offered an option to buy 8,000 units of the company shares at
RM1.50 per unit. The market price of the shares at that time was RM3.50. In November
2021, he exercised the option to buy 5,000 units shares when the market price was
RM3.00.

h. During the year, Rafiq went for a vacation with his family to Sabah. Air fares and hotel
accommodation were RM5,000 and RM4,000 respectively. The company paid all the
vacation expenses.

i. The company paid RM450 for his annual corporate membership fees for a recreational
club.

j. The company paid his daughter medical expenses amounted RM1,500.

k. Since basis year 2020, the company provided a fully furnished house together with a
gardener to him. The monthly rental of the house was RM2,500 inclusive RM500 for the
value of the furniture. The gardener’s salary was RM1,500 per month. Additionally, the
company also paid his monthly utilities bills amounted to RM500. The utility bills were
registered under the name of the company.

l. In February 2021, a servant with a monthly salary of RM1,200 was hired by the
company.

m. On 1 March 2021, he was provided with a car. The cost of the car when it was acquired
on 1 January 2020 was RM150,000. The current market value of the car on the day it
was provided to him was RM105,000.

n. He withdrew RM50,000 from an unapproved fund in which 60% was contributed by the
company.

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o. During the year 2021, Rafiq incurred RM5,000 with respect to travelling expenses in
performing his duties.

Required:

Compute the statutory employment income for Rafiq for the year of assessment 2021.
(Total: 15 marks)

QUESTION 3

A. Non-allowable expenses should be added back in computing the adjusted business

income. Identify any THREE (3) categories of non-allowable expenses.
(3 marks)

B. Jasmine is the sole owner of Jasmine Electrical Appliances in Sungai Petani, Kedah.
The following is the Statement of Profit or Loss for the year ended 31 December 2021:

Notes RM RM
Sales 766,000
Less: Cost of sales 1 (280,000)
Gross Profit 486,000
Add: Other income 2 21,000
507,000
Less: Operating expenses
Bad debts 3 5,200
Donations and contributions 4 37,400
Entertainment 5 10,000
Fees 6 5,600
Miscellaneous 7 17,600
Remunerations 8 164,000
Rent expenses 9 36,000
Repair and maintenance 10 11,200 (287,000)
Net profit 220,000

Notes:

1. Cost of sales:

During the year, Jasmine has taken out a washing machine worth RM2,400 for her
personal use and the transaction has not been recorded. The market price of the
washing machine was RM2,700.

2. Other income comprises of:

RM
Bad debt recovered from a bankrupt debtor which was previously
allowed for tax deduction 2,600
Insurance claimed on stock damaged in an accident 5,200
Rent received 13,200

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3. Bad debts comprise:

RM
Debt from a customer who has died in a car accident 1,500
Loan to a friend which cannot be collected 3,000
General provision for doubtful debts 700

4. Donations and contributions comprise:

RM
Donation of cash to public libraries [s 34(6)(g)] 20,000
Donation of two units of television to Rumah Kebajikan Sungai Petani
(approved institution) 5,400
Business zakat 12,000

5. Entertainment comprises:
RM
Annual dinner for employees 4,200
Discount given to customers 1,900
Jasmine’s family gathering 3,900

6. Fees comprise:
RM
Accounting fees 840
Annual membership fees to Kedah Trade Association 2,410
Renewal of business license fees 1,270
Tuition fees for Jasmine’s daughter 1,080

7. Miscellaneous expenses comprise:

RM
Depreciation of non-current assets 9,800
Premium on fire insurance for the shop 7,800

8. Remunerations comprise:
RM
Salaries and bonuses paid to the owner 55,000
Salaries and bonuses paid to employees (including RM28,000 paid
to senior citizen who is 62 years old and hired on a full-time basis
since 1 January 2021) 92,000
Contribution to Employees Provident Fund (EPF) for the owner 6,050
Contribution to EPF for the employees 10,950

9. Rent expenses:

The rent is in respect of a rental payment of a shop-lot cum office totalling 1,500
square feets. Out of 1,500 square feets, 500 square feets are sublet to another
business.

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10. Repair and maintenance comprise:

RM
Cost of extending the store room 6,000
Motor vehicles expenses (2/5 of the total cost is for Jasmine’s
personal car) 4,400
Repair of broken business’s shop glass windows 800

11. The capital allowance claimed for the year of assessment 2021 was RM11,300.

Required:

Compute the statutory business income of Jasmine Electrical Appliances for the year of
assessment 2021. Indicate ‘Nil’ for any item that does not require any adjustment.
(17 marks)
(Total: 20 marks)

QUESTION 4

A. A resident individual in Malaysia would be entitled to claim child relief for the children
who are under their care. List THREE (3) definition of a child according to s 48(9) of the
Income Tax Act 1967.
(3 marks)

B. Ahmad and his wife Khadijah are both tax residents in Malaysia for the basis year 2021.
Ahmad has two sole proprietorship businesses located in Batu Maung and Batu Kawan.
His income from both businesses for the year ended 31 December 2021 were as follows:

Batu Maung Batu Kawan

RM RM
Adjusted Income/Loss (15,000) 190,000
Balancing charge 7,000
Current year capital allowances 4,000 30,000
Unabsorbed business loss brought forward
from year 2020 5,000

Ahmad’s other incomes for the year ended 31 December 2021 were as follows:

1. Dividend income of RM12,000 from MBC Sdn Bhd, a Malaysian resident company.

2. Ahmad has a rental income from his house in Shah Alam and a flat in Singapore
(remit) which have been rented out for several years. The following is the
information relating to his houses:

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Shah Alam Singapore

RM RM
Rental per month 1,800 1,000
Quit rent per annum 1,200 800
Fire insurance per annum 1,800 1,200
Repair and maintenance 1,600 600
Landscape expenses 800

Khadijah, is a kindergarten school teacher earning a gross yearly income of RM44,000.

She also received a royalty of RM17,000 for writing a novel.

Additional information:

1. During the year, Ahmad made a cash wakaf of RM5,000 to Majlis Agama Islam
Pulau Pinang and Khadijah donated food of RM2,000 for Iftar Jamaie to Rumah
Anak Yatim Sungai Ara (an approved institution).

2. On 18 April 2021, Ahmad adopted Aisyah, a 13 years old disabled child who is
registered with the Department of Social Welfare. The adoption was made legal in
accordance to the law. He paid RM2,800 and RM980 respectively for Aisyah
motorized wheelchair and new spectacles.

3. Ahmad and Khadijah were blessed with three (3) children as below:

Umar - 22 years old, studying in Universiti Sains Malaysia

Fatimah - 19 years old, studying in Kolej Matrikulasi Pulau Pinang

Abdullah - 16 years old, schooling at Sekolah Menengah Kebangsaan

Penang Free

4. A life policy was taken on Khadijah’s life for a premium of RM3,090 per annum
which was paid by Ahmad. He also paid a premium of RM2,200 for Aisyah’s
medical insurance policy and RM1,400 for Abdullah’s education insurance policy.

5. Khadijah incurred RM2,900 for her mother’s treatment and RM5,600 for her
father’s treatment who suffered serious disease respectively. Both treatments
were received at Penang Specialist Hospital and the payments were supported
with receipts.

6. Ahmad paid RM2,268 for yearly internet subscription registered under his name
and bought a laptop for his son’s use for RM3,500 on 6 July 2021.

7. In November 2021, Khadijah purchased a domestic tour package to Terengganu

for RM1,100. The purchase was made through a licensed travel agent registered
with the Commissioner of Tourism.

8. On 11 December 2021, Ahmad left Malaysia to perform Umrah. He spent RM150

for the departure levy.

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9. Ahmad and Khadijah paid zakat amounted RM6,600 and RM1,200 respectively.

Required:

Compute income tax payable for Ahmad and Khadijah for the year of assessment 2021.
Round off your answers to the nearest RM.
(22 marks)
(Total: 25 marks)

QUESTION 5

A. With effect from year of assessment 2001, the Finance (No. 2) Act 2000 increased the
qualifying expenditure for the motor vehicle to a maximum of RM100,000. Briefly explain
THREE (3) conditions that need to be fulfilled to qualify for the maximum amount,
RM100,000.
(3 marks)

B. a. Kaykaboo Sdn Bhd is engaged in the manufacturing of pillows for the domestic
and foreign market for several years. The company closes its account on 31
December annually.

Due to the expansion of its business, on 10 January 2020, the company purchased
a new building for RM1,100,000. Kaykaboo Sdn Bhd used 8/9 of the built-up area
as a factory and the balance is used as an office.

On 12 February 2020, Kaykaboo Sdn Bhd acquired a motor vehicle (which was
not licensed for commercial vehicle) under hire purchase for business purpose.
The cash price was RM147,600. The company traded its old non-commercial
vehicle for RM36,000 and agreed to pay a monthly installment of RM3,500 for 36
months commencing on 28 March 2020.

In June 2021, the company rented an adjacent building with a monthly rental of
RM4,000 per month to be used as a storage of goods for export. The company
incurred RM55,000 to renovate the building.

On 8 July 2021, the company purchased a computer costing RM3,200. The

computer was completely damaged by lightning and the company decided to
dispose the computer on 20 December 2021. The Inland Revenue Board of
Malaysia accepted the reason for the disposal.

Required:

Calculate the capital allowance, industrial building allowance, balancing charge or

balancing allowance (if any) for each asset of Kaykaboo Sdn Bhd for all relevant
years of assessment up to year of assessment 2021.
(13 marks)

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b. Cha’ah Plantation Sdn Bhd commenced an oil palm plantation company on 1

August 2018 and prepares its account to 31 July annually. The following costs
were incurred for the purpose of its business:

Date Cost RM
6 August 2018 Cost of land 1,000,000
16 November 2018 Clearing of land for plantation 400,000
26 January 2019 Construction of store 100,000
10 September 2019 Planting of oil palm trees 200,000

On 31 October 2020, the oil palm plantation was sold to QA Plantation Sdn Bhd
for RM2,300,000. QA Plantation Sdn Bhd makes up its account to 31 March
annually.

Required:

Calculate the agriculture allowances/(charges) for both companies for the relevant
years of assessments up to year of assessment 2021. Cha’ah Plantation Sdn Bhd
did not made an election to spread back the agriculture charges. Round off your
answers to the nearest RM.
(6 marks)
(Total: 22 marks)

END OF QUESTION PAPER

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