Case: Sarawak Properties Sdn Bhd V the Director General of Inland Revenue
CASE: SARAWAK PROPERTIES SDN BHD v THE DIRECTOR GENERAL OF INLAND REVENUE
ISSUE:
Whether the tax treatment of income accrued and the expenditures incurred in respect of the appellant’s property development activities regarding the two projects, namely the shop house project and the TAR Centre.
FACTS OF THE CASE:
• The appellant become the sole developer of the TAR Centre project after it had acquired Tamasa Holding’s share for a cash consideration of RM 572758.
• The development expenses and costs relating to the two projects such as shop house project and the TAR Centre, were capitalised in the development accounts of the appellant.
• The income of RM 35914865.48 come from the proceeds of sales of the shop houses under the shop house project which was completed or substantially completed in the year ending 1985.
• No income realised from the uncompleted TAR Centre at that time.
• An amount of RM 19521342.05 was expended on the shop house project where as an expenditure of R M 30229843.27 were incurred for the uncompleted TAR Centre in the year ending 1985.
• This income of RM 35914865.48 from the shop house project was recognised pursuant to the completed contract method of accountancy.
• The appellant was assessed to tax amounting to RM 5461730.88.
ARGUMENTS:
1. Sarawak Properties Sdn Bhd
• Consider deducting the expenditure of RM 30229843.27 from the income realised from the proceeds of sales of the shop houses.
• Treating the shop house project and the TAR Centre as an integrated whole.
• Expenses incurred should be allowed as deductible in accounting year without awaiting completion or substantial completion of projects.
2. Director General of Inland Revenue
The Commissioner agreed that the two projects of shop house projects and the TAR Centre are the separate projects.
• Refused to consider deducting the expenditure of RM 30229843.27 from
ISSUE:
Whether the tax treatment of income accrued and the expenditures incurred in respect of the appellant’s property development activities regarding the two projects, namely the shop house project and the TAR Centre.
FACTS OF THE CASE:
• The appellant become the sole developer of the TAR Centre project after it had acquired Tamasa Holding’s share for a cash consideration of RM 572758.
• The development expenses and costs relating to the two projects such as shop house project and the TAR Centre, were capitalised in the development accounts of the appellant.
• The income of RM 35914865.48 come from the proceeds of sales of the shop houses under the shop house project which was completed or substantially completed in the year ending 1985.
• No income realised from the uncompleted TAR Centre at that time.
• An amount of RM 19521342.05 was expended on the shop house project where as an expenditure of R M 30229843.27 were incurred for the uncompleted TAR Centre in the year ending 1985.
• This income of RM 35914865.48 from the shop house project was recognised pursuant to the completed contract method of accountancy.
• The appellant was assessed to tax amounting to RM 5461730.88.
ARGUMENTS:
1. Sarawak Properties Sdn Bhd
• Consider deducting the expenditure of RM 30229843.27 from the income realised from the proceeds of sales of the shop houses.
• Treating the shop house project and the TAR Centre as an integrated whole.
• Expenses incurred should be allowed as deductible in accounting year without awaiting completion or substantial completion of projects.
2. Director General of Inland Revenue
The Commissioner agreed that the two projects of shop house projects and the TAR Centre are the separate projects.
• Refused to consider deducting the expenditure of RM 30229843.27 from