Tutorial 11 Q4

(a) An investment dealing company & an unlisted investment holding company

Investment Dealing Unlisted Investment

Company Holding Company
Definition - A company which - A company
is actively whose activities
involved in buying consist wholly of
and selling making of
investments & investments and
making profit whose income is
from dealing derived there
activities. from S60F
-
Section - 4 (a) business - 4 (C) dividends,
interest
4 (d) rent
4 (e) annuity
4 (f) other income
Deduction Test - Wholly & - Each source W
exclusively &E
incurred (100% - At aggregate
deductible) income level
deduct franction
of permitted
expenses
Basis of - Financial year - Financial year
assessment
Unabsorbed Losses - Utilization yes - No utilization
- Carry forward against other
yes sources
- No carry forward
to future year =
permanent loss
Capital Allowance - Yes - No
Gain on sale of - Gain for sales of - Capital gain at
investment shares is revenue company level
profit taxable
 (b) A listed Investment holding company and an Unlisted investment holding company
Listed Investment Holding Company
1 - The interest and rent are each
treated as a business income under
S4(a) of the ITA 1967
2 - Capital allowance can be given. It
will be allocated to each business
based on the proportion of gross
income from each business over the
total gross income from all the
businesses
- However, the excess capital
allowance (i.e. unabsorbed capital
allowance) in a YA is not allowed to
be carried forward, and thus is a
permanent loss.
3 - Expenses such as the directors
fees, salaries of staff, accounting,
audit and secretarial fees, rent,
postage and stationery etc. would
NOT be regarded as permitted
expenses. However, such expenses
can be fully allowed in arriving at
the adjusted business income
- If there is more than one business,
such expenses (common expenses)
would be allocated to each business
based on the proportion of gross
income from each business over the
total gross income from all the
businesses
- Meanwhile, if there is no gross
income, the deduction of expenses
shall be disregarded. Likewise, any
excess of deduction of expenses
(i.e. unabsorbed business loss)
against gross income from the
business source shall be
disregarded too.
Unlisted Investment Holding
Company
- The interest and rent are each
treated as non-business income
under S4(c) and S4 (d)
respectively
- Capital allowance will not be
granted to set-off against the
investment income
- However, industrial building
allowance can be set-off against
the adjusted rental income
provided it is an industrial
building for manufacturing
business.
- Expenses such as the directors
fees, salaries of staff,
accounting, audit and
secretarial fees, rent, postage
and stationery etc. would be
regarded as permitted
expenses.
- A fraction based on the formula:
A x B / 4C OR 5% of B;
whichever is the lower would
be given in arriving at the total
income.
 (c) An unlisted investment holding company and resident unit trust
Unlisted Investment Holding Company
1 The interest and rent are each treated as non-business income under S4(c) and S4 (d)
respectively
2 - Capital allowance will not be
granted to set-off against the
investment income
- However, industrial building
allowance can be set-off against the
adjusted rental income provided it is
an industrial building for
manufacturing business.
3 - Expenses such as the directors fees, - Expenses such as managers
salaries of staff, accounting, audit
and secretarial fees, rent, postage
and stationery etc. would be
regarded as permitted expenses.
- A fraction based on the formula:
A x B / 4C OR 5% of B; whichever is
the lower would be given in arriving - A fraction based on the formula:
at the total income.
4 All interest income are taxable
Resident Unit Trust
-10% special capital allowance for
rental income
remuneration, maintenance of register
of unit holders, share registration
expenses and secretarial, audit and
accounting, telephone charges,
printing and stationary and postage
would be regarded as permitted
expenses.
A x B / 4C OR 10% of A; whichever is
the higher would be given in arriving
at the total income.
- Long list of exemption for interest
income
- Expenditure incurred on the alteration
of an existing building for the purpose
of installing that machinery or plant
and other expenditure incurred
incidentally to the installation thereof
provided that such expenditure does
not exceed 75% of the aggregate of
itself and any other qualifying capital
expenditure.
- Expenditure incurred on preparing or
levelling land in order to prepare a site
for the installation of the machinery or
plant provided that such expenditure
does not exceed 10% of the aggregate
of itself and any other qualifying
capital expenditure.
- The special deduction will be in the
form of an allowance equal to 10% of
the qualifying capital expenditure
made against the adjusted income
from the source relating to the
derivation of rental from the letting of
real property. Any unabsorbed
allowances will not be allowed to be
carried forward to subsequent years of
assessment.