financial ratio
Question 3 (a)
The three rules of deductibility that a taxpayer must satisfy before a claim for deduction is given for tax purposes are to satisfy the general deduction test under [S 33(1) of the Income Tax Act 1967]. Under the general deduction test the business expenses have to fulfil all the following conditions in order to secure a deduction from the gross income of a business source: 1) it is revenue expenditure wholly and exclusively incurred in the production of income [S 33(1) Income Tax Act 1967] and it is not prohibited from deduction under S39 of the Income Tax Act 1967, 2) it is a specific deduction under S 34, S 34A or S 34B of the Income Tax Act 1967 and 3) it is allowed for deduction under gazette order.
Question 3 (b)
An expense is deductible under the condition of the following, if i) it is revenue expenditure wholly and exclusively incurred in the production of income [S 33(1), Income Tax Act 1967] and it is not prohibited from deduction under S 39 of the Income Tax Act 1967, ii) it is a specific deduction under S 34, S 34A or S 34B of the Income Tax Act 1967, and iii) it is allowed for deduction under gazette order.
While an expense is not deductible under the condition of the following, when i) it is a capital expenditure (capital in nature), ii) it is not wholly and exclusively incurred in the production of income [it does not satisfied the general deduction test under S 33(1), Income Tax Act 1967], and iii) it is prohibited from deduction under S 39 of the Income Tax Act 1967.
i. Premium Rubber Estate Sdn Bhd could not claim the cost of replacing the first chimney as it is considered as a capital expenditure. It does not represent repair expense which is deductible expenditure under S 33(1)(c) of the Income Tax Act 1967 due to the new chimney replaced was an improvement for the company which is consider an enhancement of the asset value. According to the tax case Conn v Robins Brothers Ltd [1966] 43TC266, the court held that as a
The three rules of deductibility that a taxpayer must satisfy before a claim for deduction is given for tax purposes are to satisfy the general deduction test under [S 33(1) of the Income Tax Act 1967]. Under the general deduction test the business expenses have to fulfil all the following conditions in order to secure a deduction from the gross income of a business source: 1) it is revenue expenditure wholly and exclusively incurred in the production of income [S 33(1) Income Tax Act 1967] and it is not prohibited from deduction under S39 of the Income Tax Act 1967, 2) it is a specific deduction under S 34, S 34A or S 34B of the Income Tax Act 1967 and 3) it is allowed for deduction under gazette order.
Question 3 (b)
An expense is deductible under the condition of the following, if i) it is revenue expenditure wholly and exclusively incurred in the production of income [S 33(1), Income Tax Act 1967] and it is not prohibited from deduction under S 39 of the Income Tax Act 1967, ii) it is a specific deduction under S 34, S 34A or S 34B of the Income Tax Act 1967, and iii) it is allowed for deduction under gazette order.
While an expense is not deductible under the condition of the following, when i) it is a capital expenditure (capital in nature), ii) it is not wholly and exclusively incurred in the production of income [it does not satisfied the general deduction test under S 33(1), Income Tax Act 1967], and iii) it is prohibited from deduction under S 39 of the Income Tax Act 1967.
i. Premium Rubber Estate Sdn Bhd could not claim the cost of replacing the first chimney as it is considered as a capital expenditure. It does not represent repair expense which is deductible expenditure under S 33(1)(c) of the Income Tax Act 1967 due to the new chimney replaced was an improvement for the company which is consider an enhancement of the asset value. According to the tax case Conn v Robins Brothers Ltd [1966] 43TC266, the court held that as a