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Business income - Coggle Diagram

- - - - Comprehensively
        
        Facilities and the exterior parts of the property
        
        For the real property
      - Actively
        
        Provides the services themselves
        
        Hire another person or firm to provide the service
        
        If the maintenance and support service is let out, then the letting is a business source even though it is between related parties as IRB would be adjusting the payment accordingly
        
        There is a special treatment for letting a building to an approved multimedia super corridor status company. It shall be treated as business source. To determine whether it is from business source:
        
        Has to be a new building that provides a world class physical and information infrastructure as determined by the MDC Sdn Bhd
        
        Must not have been occupied by any company
        
        Does include building for the purpose of living accommodation
  - - - When the property is rented out for the first time
    - - The date the property is made available for letting, when the property is available to be occupied by tenants and steps to let out the property have been taken such as advertising or appointing a real property agent
    - - The commencement date of each need to be ascertained
  - - - Follow majority
  - - - Assessment and quit rent
        
        Annual assessment paid to the local authority and quit rent paid to the land office
      - Interest on loan
        
        To finance the asset that is rented out
      - Fire insurance premium
      - Expenses on rent collection
        
        Rent collection fee and legal expenses incurred to enforce rent collection
      - Expense on rent renewal
        
        To renew tenancy or to change tenant
      - Expense on repair
        
        Ordinary repair to maintain the asset in its existing state
    - - It is not allowed as deduction under 4d and 4a
      - This is because this expense is incurred to create a source of income and not incurred in the production of gross income
      - Example
        
        Cost to obtain the first tenant such as advertising cost, legal cost to prepare rental agreement, stamp duty and commission for real property agent
    - - These expenses are not allowable in calculating the adjusted income from the letting out of the real property
      - However, if the period for which the real property is not let out after it has been let out, and it is clear that the real property is ready to be let out, then expenses are allowable
      - If the period is temporary, then the expenses are allowable provided that
        
        It is maintained in good condition and is ready to be let out
        
        Due to this reasons
        
        Repair or renovation of the building
        
        Absence of tenants for a period of two years after termination
        
        Legal injunction or official sanction
        
        Other circumstances beyond the control of person who lets out the real property
    - - They are not deductible and have to be adjusted proportionately
    - - Interest expense allowable against the business source has to be restricted
      - The interest expense on a loan to finance the real property thta is to be let out is deductible under rental income
  - - - Where advance rental income is taxed in the year of assessment, any expense incurred after that year of assessment, which is in relation to the advance rental income, would be allowable in the basis period the expense was incurred
      - The tax treatment is different from rental income as a rental source under 4d in above section
      - If refund of the advance payment to the tenant is made, claim for a tax deduction on the amount refunded under ITA can be made in the basis period the refund occurs
- - - - Advance which is subject to refund
    - - Advance where the person receiving it has unconditional right to it
      - Advance receive in respect of services to be rendered or the use or enjoyment of any property to be dealt with, notwithstanding that no debt is owing
  - - - Insurance recoveries
      - Compensation received for breach of contract
      - Discounts and commissions
    - - Where such sums are in respect of the kind of outgoings and expenses deductible in ascertaining the adjusted income of that person from that source, or
      - Under a contract of indemnity/ insurance, and
      - Compensation for loss of income from that source
    - - Insurance proceeds from a professional indemnity insurance are taxable irrespective as to whether a professional running a business chooses to claim the insurance premiums as tax deductions
  - - - Insurance
      - Agreement of payment from staff concerned
      - Legal action
- - - - The day when the retailer opens its outlet or shop for business
      - The date where the first sale was made is irrelevant
    - - The date when the raw material is received and a manufacturer is in the position to commence manufacturing
      - The date when machinery is purchased before the receipt of raw material is irrelevant
    - - The date of which the business operation was acquired
    - - The date when the hotel is opened to the public
- - - - Overdue trade debts
      - Extended credit period, such as easy payment scheme
      - Client account
      - Fixed deposits necessarily placed as trade security
      - Loans to employees
- - - - Income
        
        The intention was to sell the goods after developing it
      - Capital
        
        Asset which are purchased for investment and subsequently sold and the gain would not be taxable
      - Change of intention
        
        The the income would be chargeable under ITA
        
        The court took the difference between the market value and the selling price of the asset at the time when the change of intention took place
    - - Income
        
        There is a repetition of buying and selling
    - - The court would determine the nature of the company's operation together with the capacity of the company
      - Example
        
        It was presumed that a company is always formed with intention of carrying on a business
    - - Income
        
        When a person borrows more than they could normally afford to purchase an item/article
    - - Income
        
        Include modification, processing ,packaging, renovating
    - - Capital
        
        The time between acquisition and disposal of asset
      - Income
        
        Resale is quick
    - - Income
        
        A forced sale
    - - Income
        
        Advertisement, setting up an office, employment of staff
    - - Indicates a trading activity
      - However, a trader may purchase items similar to the stock for investment purpose, so the gains would not be taxable
    - - 3 reasons for purchasing an article
        
        Own use or the use of his family or friend
        
        For investment, not only to yield income but also for aesthetic pleasure
        
        Resale at a profit
- - - - Maintenance and support services should be comprehensively and actively provided
  - - - Evidence of exploitation of business asset
        
        The exploitation does not necessarily mean exploitation by the taxpayer themself at all material times. The taxpayer can temporarily cause it to be exploited by another person
      - Intention of the taxpayer
        
        During the lease, the asset must remain and treated as commercial asset
- - - - Where part of it is retained and the vendor is still able to make profit from the asset for example, know how, then the receipt of the know how was held to be revenue in nature
      - Compensation received for cancellation of agency contract that was incidental to the normal course of business, even though that contract might be modified, altered or discharged from time to time
      - Compensation received (in addition to the repairs cost) for a partly damaged asset, as that amount was for loss of use of an asset instead of disposal of an asset
      - Compensation received for late delivery of an asset where the damages received is for loss of profit
      - Compensation received for cancellation of trading contract that is in the ordinary course of business
  - - - Sale of fixed assets
      - Sterilisation of a capital asset (or loss of a source of income)
      - Restrictive covenant or for the imposition of substantial restriction on the activities of a trader is capital receipts
      - Sale or destruction of profit-making apparatus
    - - Fireclay left unworked, as it as made for sterialisation of a capital asset
      - Disclosure of secret processes where no part of it was retained
      - Compensation received for any loss resulting from the alteration of an agreement that relates to the framework of the business
      - Consideration received under restrictive covenant, for example, an actor undertakes not to act in, produce or direct any film for any other person for an agreed period of time
      - Compensation received for termination of an unexpired agreement, as it was for the loss of the company's only major asset that affected the structure of the organisation
      - Consideration received for cancellation of future rights under the agreement (which are not ordinary commercial contract made in the course of business) that relate to the whole structure of the person's profit-making apparatus