Question 1 - Briefly discuss the general characteristics of income.

1st Part 2nd Part

1  Income must be money or convertible into

money
- Tennant vs Smith
In order to determine whether a particular amount
received by taxpayer is income, capital or receipt,

2
Employee was given rent-free accommodation
He cannot sublet to others which could not earn benefit
Since it cannot be turn into money, therefore it is not an
income
 Activities raise income (adventure in the
nature of trade)
- Provision of services (or gift)

3
 Periodicity, recurrence and regularity. - Income from personal exertion (services,
– Receipts from income producing activities is a periodicity employment).
and recurrence and regular
- Income from property (dividends, interest, rent)
- FCT vs Dixon

4
Taxpayer left his job to join army forces, while former - Income from a business.
employer top up his pay on regular basis. It was ordinary
income due to payment was regular and periodical. It arose  Receipts:
out of circumstances relating to employment, he depended on - Disposal of Fixed assets are capital receipts
receiving those payments as regular income
- Disposal of circulating assets (current assets) are
 A decisive characteristic - Needs to be a connection revenue
(nexus) between the receipt and an income earning
 Compensation:
activity
- FCT vs Harris - Substantial restriction on trader’s activity are capital
Ex-gratia received by retired manager to offset the effect receipts
of inflation on his pension
Harris is not expecting the payment, therefore not - Payments in lieu of trading receipts are revenue
depending on it, as such the payment is not income in nature receipts
 1
Question 2
Would the following constitute assessable income? Give brief reasons for your
answers.
a) Wages from part time employment as a bar attendant.

2 b) Director's fees paid by a company.

c) A lottery prize of RM10,000.

Profession – involves the idea of an occupation requiring manual skill (sculpture

3 painting), intellectual skills (surgeon, architects, lawyers)

4
Employment – involves the appointment to an office is usually maintained for some
time until resignation.
1 (a) Wages from part time employment as a bar attendant.

2
Assessed under employment income as there exist master-servant
relationship. A nexus exists between the wages and the income producing
activities (bar attending).

2 (b) Director's fees paid by a company.

Working as director is an income producing activity and the director’s fees
are the results of the activity.
(c ) A lottery prize of RM10,000. – Pure luck – not taxable

(d) A voluntary payment of RM5,000 to a solicitor by a generous client.

The solicitor had already been paid by the client for work done.
(i) If there is no personal relationship between the solicitor and client, then
most likely the solicitor would be expecting such payment, therefore it is
likely taxable;
(ii) If there is a personal relationship between the solicitor and client and the
payment was unsolicited, the fact that the work done has already been paid
strongly suggest that the payment was not made for the services provided, and
it could be a personal gift, therefore not taxable.
1 2
2 (e) Proceeds of an insurance pay out on a policy in respect of
the theft of household goods.
Not taxable – the items insured are not trade related (assumed

2
to be personal items) – private/domestic items.

(f) Weekly compensation payments to a self-employed person

out of a personal disability insurance fund.

FCT vs Dixon – substitution principle

Ordinary income - payments are periodic and compensate for loss
of business income due to the injury.
1 2 Question 3

2 Mr. Park, a Korean (South) citizen and a resident in Malaysia received an interest
income of RM5,000 from a Korean company in January 2022 and it was credited to
his bank account in Korea.

3 An interest income of RM5,000 from a Korean company credited to his bank account
in Korea.

Not liable to tax because it is derived from Korea and not remitted to Malaysia
 Adrian (non-resident) 10,000 20,000 Remitted

2 Success Ltd (Non-resident) 35,000 45,000 Remitted

3
Foreign-sourced income of Adrian and Success Ltd are exempted under Para
28, Sch 6.
Alex (resident) 30,000 10,000 Remitted

Foreign-sourced income of Alex is exempted under P.U.(A)

Additional 234/2022.
Question Slowmo Sdn Bhd (Resident manufacturing 60,000 5,000 Remitted in February 2022
company)

Foreign-sourced income of Slowmo is taxable at 3% of gross income.

Simon (resident) 45,000 10,000 Not remitted

The foreign source of Simon is not taxable as the income of

RM10,000 has not been remitted therefore not received in Malaysia.
Little West Insurance Bhd 850,000 150,000 Remitted

For Little West Insurance Bhd, the company is in insurance

business, therefore is subject to tax under world scope basis. In
this case both Malaysian source and the foreign source is
chargeable to tax.