Kayil Investment Sdn Bhd (‘Kauil’’s principal activity is holding of investments. Kayils income statement for the financial year ended 31 December 2019 1s as follows: Gross income: “Rental (Note 1) Interest (exempt) Dividend (exempt) Distribution of income from unit trust Management services fees "Gains from realization of nvestment Expenses. Audit fees | Salaries and allowance Secretarial fees Professional fees (Note 2) Printing and stationery Travelling expenses Net profit before tax ‘Quit rent and assessment (fented out property) 3) ‘The capital allowances for the sources of income for the year of assessment 2019 is RM20,000. Common expenses and capital allowances will be apportioned based on gross income from each source. Note 1: Kayil provides maintenance and support services comprehensively and actively to its tenant for the derivation of rental income.1. Note 2: Professional fees _ RM. Accounting fee: 3,600 Legal fee for purchase of property _3,000 6,600, Note 3: Repair and maintenance ___ RM Repair of office equipment 2,500 Maintenance of rented out property _5.500 i 8,000) Required: a Determine whether Kayil is an investment holding company under Section 60F of the ITA. Justify your answer as necessary. (5 marks) b. Calculate the amount of permitted expenses which is determined in accordance with the prescribed formula under Section 60F (1) of the ITA. — (6 marks) Assume that Kayil is now an investment holding company listed on Bursa Malaysia and subject to income tax provision under Section 60FA of the ITA Calculate the chargeable income for Kayll for the year of assessment 2019, (12 marks)EBA 4063 -SPECIALISED TAXATION. eS SS EE... ‘SEMESTER 1 SESSION 2020/2021 a. Determine whether Kayil is an investment holding company under Section 60F of the ITA. Justify your answer as necessary. V Yes. Its principal activity is the holding of investments. (5 marks) Also, more than 80% of its gross income other than gross income from a source V consisting of a business of holding of an investment (whether exempt or not) is derived from the holding of those investments, as follows: Rental Interest (exempt) Dividend (exempt) Distribution of income from unit trust Management services fees 60,000 Business of holding of investment 126,000 150,000 30,000 12,000 Business of holding of investment 378,000 (126,000 + 150,000 + 30,090)'378,000 x 100 = 81%/ b. Calculate the amount of permitted expenses which is determined in accordance with the prescribed formula under Section 60F (1) of the ITA. (8 marks) Audit fees 15,000 Salaries and allowance 48,000 Secretarial fees 2,400 Accounting fees 3,600 Repair of office equipment 2,500 Printing and stationery 1,000 A _ 72,500 K/ Chargeable gross income: aes Rent 60,000 “Distribution of income from unit trust 30,000 B 90,000 Interest (exempt) 126,000 Dividend (exempt) 150,000 Gains from realization of investment 40,000 Cc “406,000+ “06 000V/ Fraction of permitted expenses = lower of 4,018 V, 25% x 72,500 x 90,000/406,00 5% x 90,000 = 4,500 > 4,018 @) c. Assume that Kayil is now an investment holding company listed on Bursa Malaysia and subject to income tax provision under Section 60FA of the ITA. Caloulate the chargeable income for Kayil for the year of assessment 2019. (12 marks) re D ‘Sharon Cheuk Page 7©) ) Kayil: Computation of chargeable income for YA2019. RM RM 8.4(a}: Rental income” Rental 60,000” Less: Quit rent and assessment (rented out property) : 5,000, : 55007 Less: Allocation of common expenses 60/378 x 79,000 12,500" Adjusted income 36,964 Less: Capital allowances 60/378 x 20,000 : 3175 7 33,785 s.A{alc Interest income V Interest income exempt /, * Less: Allocation of common expenses 126/378 x 79,000 disregarded Less: Capital allowances 126/378 x 20,000 disregarded Nil s.4(a): Diidend (exempx) Vs Dividend income : exempt \/ (Cy Less: Allocation of common expenses 150/378 x79,000 disregarded Y Less: Capital allowances 150/378 x 20,000 disregarded Nil (a): Disvibuion ofincome from unit rust /_ Distribution of income from unit trust 30,0007) Less: Allocation of common expenses 30/378 x 79,000 - 6270 /, Less: Capital allowances 30/378 x 20,000 . 1,587 / 22,143 s.Ala): Management service fees V/_ Management service fees 12,0007, Less: Allocation of common expenses 12/378 x 79,000 - 2,508,/, Less: Capital allowances 12/378 x 20,000 : 635, / 8,857 Total chargeable income © 64,785 Common expenses Total expenses 89,500 Less: Quit rent & assessment for rented out property : 5,000 Less: Maintenance of rented out property : 5,500 ay ary = 1a mak X05 ot