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Chapter 1- part II - Coggle Diagram

- - - - Specific provision would allow for deduction
      - General deduction would not allow for deduction
- - - - The owner of the property provides maintenance to the property that is being rented out
        
        The maintenance must be a number of services, not just one
        
        If just security services, not considered comprehensively
        
        This is considered as active instead of passive source
        
        Maintenance and support service must be comprehensively provided
        
        Doing generally all necessary things for the maintenance and management of real property
        
        Doing generally all necessary things for the maintenance and management of exterior part of the real property
        
        Related party is not an issue, the issue here is if the transaction is not at arm's length
        
        If not at arm's length then the DG may adjust the rental payment accordingly
        
        Letting of a property to an approved MSC status company
        
        There will be special treatment
        
        The maintenance provided need not be comprehensively and actively
        
        If approved, it is considered as business income
        
        However, to be assessed as a business income, the building let out:
        
        New building that provides world class physical and information infrastructure as determined by the MDC Sdn Bhd
        
        Must not have been occupied by any company
        
        Does not include building for the purpose of living accommodation
        
        Not to be occupied by staff but for the company
      - There must be evidence of exploitation of business asset
        
        The exploitation is not necessarily by the taxpayer himself at all material times. He may temporarily cause it to be exploited by another person
      - The intention of the taxpayer must be that during the period of lease the asset leased must remain and be treated as commercial asset
    - - Pure renting of property, that is passive source, is not tantamount to carrying on a trade or business
      - If no maintenance and support service is provided comprehensively and actively by the owner of the property
        
        If let say the owner rents out the apartment where the tenant can use the facilities provided by the management of the apartment, then it is said that the services are being provided passively, it is merely the extension of the owner's rights as a proprietor
      - Maintenance and support service is provided but are passively derived from the ownership of the real property
  - - - Date when available for renting irrespective of whether the tenant is in
        
        Considered available when steps have been taken such as advertising or appointing real property agent to facilitate the letting, so in this case the advertisement cost is deductible
    - - Date of first time being rented, so tenant must be in, then only allowable for deductions
    - - Pre-commencement expenses which are capital in nature are not deductible as they are incurred to produce a source of income, not in the production of gross income, so not tax deductible under both 4(a) and 4(d)
      - If let say the property has been rented out for a while, and then after the previous tenant has moved out, the property is vacant now, but the expenses incurred during this time are still allowable
  - - - No relief for adjusted loss
  - - - Become permanent loss
    - - First become adjusted loss, if not used, CA can be carried forward to offset against adjusted income, treat like other business income
  - - - Very limited and strict
    - - More flexible so long there is business element
- - - - If the debtors pay late, and even though it is the debtor from the normal course of trade, it is treated as gross income under 4(c)
  - - - Interest income derived in the normal course of trade
        
        Examples are bank and moneylender
    - - Beside from moneylender and back, all interest income is classified under 4(c)
  - - - Even though not yet received, should be included within the gross business income because we assess that it on a receivable basis
    - - Taxable when received but we go back to the year when supposed to be receivable and adjust that year
  - - - Even though has not yet received/ not obtainable on demand, the interest income shall be included under 4(c) because we assess it using receivable basis
    - - If they are entitled for interest income and they can get them on demand, then it is treated received by him
  - - - They form part of the stock in trade, or
      - They are receivable by licensed moneylender
    - - Debenture
      - Mortgage
      - Other source to which it relates
    - - Overdue trade debts
      - Client account
      - Fixed deposits necessarily placed as trade security
      - Loans to employees
      - Shot term deposits in money market
  - - - The director must own at least 20% ordinary share capital of the company
      - It must be internal funds
        
        If the loan is obtained from the bank and then later is given to the director as loan, then it is not deemed to receive interest income from the director, as the company actually pays the interest expenses to the bank
    - - If total interest payable by director exceed the deemed received interest, then the deemed interest is disregarded
      - If the total payable by director is less than the deemed interest received, then the chargeable part shall be the deemed interest
- - - - Such gains and profit can be regarded as business within the ambit of ITA 1967
      - The charging section is not restricted to only lawful business
      - A long as trade in nature, it is taxable even if illegal
- - - - Basis period for YA shall be 1 Jan to 31 Dec, irrespective of the accounting year of his business
  - - - Is required under any law of the place of incorporation to make up its accounts ending on a specified day, or
      - Being a company within a group of companies, makes up its accounts ending on the same day as that of all other companies in that group
    - - The carrying on of the business
      - Wholly in the making of an investment
      - The carrying on of the business and wholly in the making of an investment
      - Making of investments prior to the commencement of a business or after the cessation of a business
- - - - The exception is that items related to asset still can get deductions for interest income
      - However, the asset must be used for business purpose
  - - - However, for interest expense related to dividend source, if the dividend income is tax exempt or single tier dividend, then the interest expense which relate to the dividend source will be given no deduction
    - - If the money is in the bank and not being used, then it shall be allowable
    - - If total amount of investment and loans is the same or exceeds the amount of money borrowed, the whole amount of interest is not allowable against the business income
        
        This is because the whole amount is being used for non-business purpose that is for investment purpose
      - If the amount of investment and loans is less than the amount of money borrowed, then only a portion interest is disallowed against business income
        
        The portion disallowed is the one used for non-business purpose, that is investment purpose.
    - - RM100,000 for companies
      - RM6000 for individuals and others
    - - This will be applied when the money charged to business accounts does not exceed RM500,000
    - - The total cost of investments and loans exceeds RM500,000
      - There is no investments and loans at the end of the financial year because the investments and loans have been sold, transferred or repaid
- - - - It is what an owner makes profit with, by parting with it and letting it change ownership
      - Fixed capital is what the owner uses to make profit by keeping in possession
    - - If the basis is not acceptable by IRB, then adjustment must be made to bring the value of stock in trade to be in line with the requirements set out in section 35(3)
        
        For physical tangible items
        
        Can choose either market value or cost
        
        Under normal circumstances, market value
        
        Cost will include total cost of acquiring an item and bringing it to its condition and location
        
        Cost of keeping the stock in its conditions are excluded
        
        For immovable properties, stocks, shares, marketable securities
        
        The lower of cost or market value
      - Valuation of stock on cessation of a business
        
        If sold to another person who will use the stock in business of his, then the selling price is the value of stock at cessation date
        
        The selling price cannot be too far away from the market value
        
        Instead, the selling price must be just and reasonable (cannot be too high or too low)
        
        If not sold, then the value of the stock shall be the market value
        
        If the stock is sold together with another assets, then need to be apportioned on a just and reasonable basis
    - - Where the stock is transferred to the fixed assets, then the market value would subject to income tax
      - If the business has two modes of earnings, then there is no such thing as withdrawal of stock
    - - It is considered as deemed disposal under RGPT
        
        The market value at the time of transfer shall be the disposal value
        
        There is a balancing adjustment: allowance or charge
        
        RPGT computation: The difference between the selling price and the disposal value to arrive at any chargeable gain
      - The value of land shall be the cost of stock in trade
      - Any asset acquired for investment, and later if there is any disposal or sale, the receipt is capital in nature
        
        However, the person can change the intention of acquisition from intention for investment to intention for trading
      - If not subject to either RPGT and Sch 3, then there is no chargeable gain or balancing charge/ allowance or anything
    - - Allowance of stock obsolescence is just an estimate and therefore not allowable for tax deduction
      - An actual stock write-off which is realised is allowable for tax deductions
      - Diminution in the value of shares to reflect MV to a person dealing in shares is allowable
      - The value of stock in trade for immovable properties or shares is allowed to be valued at the lower of cost or market value