UNIVERSITI TUNKU ABDUL RAHMAN

ACADEMIC YEAR 2020/2021

JANUARY 2021 TRIMESTER

FINAL ASSESSMENT

MARKING SCHEME

UBAT3013 BUSINESS TAXATION

FRIDAY, 7 MAY 2021 TIME: 9.00 AM – 12.30 PM (3.5 HOURS)

BACHELOR OF BUSINESS ADMINISTRATION (HONOURS)

BACHELOR OF BUSINESS ADMINISTRATION (HONOURS) BANKING AND
FINANCE
BACHELOR OF FINANCE (HONOURS)

Instructions to Candidates:

This paper consists of TWO (2) questions. Answer ALL questions.

Question 1: [Total: 50 marks]

Question 2: [Total: 50 marks]

Marks will be awarded for all relevant workings.

___________________________________________________________________________
This marking scheme consists of 2 suggested answers on 6 printed pages.
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UBAT3013 BUSINESS TAXATION
Question 1 (a)
Hibiscus Gloves Sdn. Bhd.
Income Tax Computation for Year Assessment 2020
(+) (-)
Note RM'000 RM'000
Profit before taxation 519 √
Sales (not yet included) (T) 1 165 √
Cost of sales: Compensation (T) 2 Nil √
Foreign exchange: Realised gain on trade debtors (T) Nil √
3
Realised loss on trading stock (D) Nil √
Other income: Interest income from overdue debtors (AS) 12 √
Interest income from Maybank (AS) 4 √
Dividend income (AS) 4 39 √
Rental income (AS) 36 √
Discount receive from trade creditors (T) Nil √
Wages: Non-resident (without deduction withholding tax) (ND) 18 √
Fines (ND) 3 √
Disabled staff (DD) 5 132.4 √
EPF (ND) (RM126k x 2 x 1%) 2.52 √
Provision of pension scheme (ND) 330 √
Entertainment: CNY Dinner (100% D) Nil √
Maintenance of childcare centre (DD) 12 √
Entertainment allowance (50% ND) 60 √
6
Advertisement via online (D) Nil √
Suppliers (50% ND) 22.5 √
Manager leave passage oversea (ND) 6.6 √
Freight and insurance (D) 7 Nil √
Depreciation (ND) 572 √
Bad and doubtful debts: Written off (D) Nil √
8
General provisions (ND) 434 √
Legal and professional fees: Tax filing fees (RM16.5 – RM10k) (ND) 6.5 √
9
Secretarial fees (ND) 9 √
Repair and maintenance: Extended administrative office (ND) 190 √
Repair roof with better quality (ND) 25 √
10
Maintenance machinery (D) Nil √
Revamp lavatory (assist disabled staff) (D) Nil √
Miscellaneous: Printing annual report (ND) 21 √
11
Consultancy fees (D) Nil √
Donations: In-kind to Hospital Putrajaya (D) (S34(6)(h)) Nil √
12
Cash to approved institution (ND) 150 √
2,534.12 (235.4)
Adjusted business income 2,298.72
(-) Capital allowance 13 (950.72) √
Section 4 (a) Statutory business income 1,348
This marking scheme consists of 2 suggested answer on 6 printed pages.
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UBAT3013 BUSINESS TAXATION
Hibiscus Gloves Sdn. Bhd.
Income Tax Computation for Year Assessment 2020
(+) (-)
Note RM'000 RM'000
(+) S 4 (c) Interest and dividend income: 4
Interest income from debtors late payment (T) 12 √
Interest income from Maybank (T) 4 √
Dividend (exempted) Nil √

(+) S 4 (d) Rental income: 4

Rental (T) 36 √
Aggregate Income 1,400
(-) Donations: Cash to approved donation (restricted to 10% of AI) 12 (140) √
Chargeable Income 1,260

Income tax payable:

First RM600,000 x 17% 102
√
Balance RM660,000 x 24% 158.4
260.4
1m for each √ (42 marks)

(b) Note 10:

• Extended administrative office is a capital expenditure, which are non- deductible
expenses. √
• Replacement of damaged roof for a better-quality roof is non-deductible as it is a
capital expenditure, which constitute an improvement and not repairs. √
• Maintenance for machinery is deductible as it is revenue expenditure wholly and
exclusively incurred in the production of gross income and it is not prohibited from
deduction under Section 39(1)(l) of the Income Tax Act 1967. √
• Revamp lavatory necessary to assist the disable employee in the course of exercising
his/ her employment is specifically deductible under Section 34(6)(e) of Income
Tax Act 1967. √

Note 11:
• Printing cost of company’s annual report is non-deductible as they cannot be
regarded as integral part of the income-earning process of the company. √
• Consultancy fees paid would be deductible since it was incurred in the production of
income. √

Note 12:
• Donation in kind to Hospital Putrajaya is deducted under Section 34(6)(h) at a gross
income level and no limitation amount. √
• Cash donation to approved institution is deducted under Section 44 (6) at aggregate
income level and restricted of 10% aggregate income. √
1m for each √ (8 marks)
[Total: 50 Marks]

This marking scheme consists of 2 suggested answer on 6 printed pages.

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UBAT3013 BUSINESS TAXATION

Question 2 (a)

(1) Machinery:
RM
Cost of machine (M) 37,000 √
Cost of site preparation (S) 13,000 √
Aggregate income (A) 50,000 √

Since the cost of site preparation (S) has exceeded 10% of aggregate cost (A) but not exceeded
75% of aggregate cost (A), [(10% of A: RM5,000) < S: RM13,000 < (75% x A: RM37,500)],
√ cost of machine (M), RM37,000 is treated as QPE √ and no tax relief for cost of site
preparation (S). √

RM (CA) RM
YA 2017 (1 Sept 2016 – 31 Aug 2017)
QPE 37,000 √
(-) Initial allowance (20% x RM37k) 7,400 √
(-) Annual allowance 14% x RM37k) 5,180 √ (12,580)
Residual Expenditure as at 31 Aug 2017 24,420

YA 2018 (1 Sept 2017 – 31 Aug 2018)

(-) Annual allowance (14% x RM37k) 5,180 (5,180) √
Residual Expenditure as at 31 Aug 2018 19,240

YA 2019 (1 Sept 2018 – 31 Aug 2019)

Disposal 18,000 √
Balancing charge 17,760* √
17,760

* Since the asset has been owned for a period of less than 2 years (1 March 2017 – 30
November 2018), √ the capital allowances claimed of RM17,760 shall be withdrawn in the
form of a balancing charge, irrespective of any disposal value. √

This marking scheme consists of 2 suggested answer on 6 printed pages.

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UBAT3013 BUSINESS TAXATION

(2) Car:
RM RM RM
(CA)

YA 2016 (1 Sept 2015 – 31 Aug 2016)

Deposit 9,000 √
Instalment
7,125 √√
(RM180k–RM9k = RM171k/72m = RM2,375 x 3m)
QPE 16,125 16,125
(-) Initial allowance (20% x RM16,125) 3,225 √
(-) Annual allowance (20% x RM16,125) 3,225 √ (6,450)
Residual Expenditure as at 31 Aug 2016 9,675

YA 2017 (1 Sept 2016 – 31 Aug 2017)

Instalment (RM2,375 x 12m) 28,500 √ 28,500
38,175 44,625
(-) Initial allowance (20% x RM28,500) 5,700 √
(-) Annual allowance (20% x RM44,625) 8,925 √√ (14,625)
Residual Expenditure as at 31 Aug 2017 23,550

YA 2018 (1 Sept 2017 – 31 Aug 2018)

Instalment (RM2,375 x 12m but restricted to) 5,375 √ 5,375
28,925 50,000*
(-) Initial allowance (20% x RM5,375) 1,075 √
(-) Annual allowance (20% x RM50,000) 10,000 √√ (11,075)
Residual Expenditure as at 31 Aug 2018 17,850

YA 2019 (1 Sept 2018 – 31 Aug 2019)

(-) Annual allowance (20% x RM50,000) 10,000 √ (10,000)
Residual Expenditure as at 31 Aug 2019 7,850

YA 2020 (1 Sept 2019 – 31 Aug 2020)

Disposal (RM50k/RM180k x RM90k) 25,000 √√
Balancing charge 17,150 √
42,150

* Qualifying plant expenditure is restricted to RM50,000 for car of branch manager. √

Notes: The marks will be given if the amount claimed is in the correct year of assessment. If
the amount claimed calculate correctly but in the wrong year of assessment, no marks will be
given.
1m for each √ (32 marks)

This marking scheme consists of 2 suggested answer on 6 printed pages.

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UBAT3013 BUSINESS TAXATION

(b)
• Intention or motive of taxpayer √: Derek, Prem and Afif purchased the used laptops
to be sold at local market. Thus, they are profit seeking motive in this case. √
• Subject matter of transaction √: The 400 units of used laptops were not used,
enjoyed or produced income for Derek, Prem and Afif during their possession. Not
to be kept as a long-term investment. √
• Frequency of transaction √: Even though there was no past disposal history but
there was a frequency of transactions. √
• Method of disposal √: The sales were organized and done using social networking
site online advertising. It shows that Derek, Prem and Afif disposed the products
actively. √
• Period of ownership √: The used laptops were held for only a short period. There
is no intention of holding the used laptops for any longer, they need to sell them. √
• Financing arrangements √: Prem and Afif used own saving and borrowed some of
money from their family, meanwhile Derek used the money from compensation for
loss of employment. √
• Circumstances leading to the sales √: Derek, Prem and Afif disposed the used
laptops of their free will. √
• Formation of organization √: Even though, Derek, Prem and Afif did not form any
organization but they are carrying on the business through a partnership as Section
2 of the Act defines partnership as mean association of any kind between members
who agreed to share their rights, powers, labor, skill or profit and loss for the
purpose of carrying on a business. √

Even though the purchases of used laptops take place in China, this activity is only to
support the principal activity of selling in Malaysia. It is likely that a trade is carried on.√
Thus, the income of Derek, Prem and Afif will be derived from Malaysia and will be
viewed as an adventure in nature of trade and subject to Malaysian income tax, being
business income derived from Malaysia. √
1m for each √ (18 marks)
[Total: 50 Marks]

This marking scheme consists of 2 suggested answer on 6 printed pages.