TOPIC 1 PARTNERSHIP

MALAYSIA TAXATION II enables the students to deal with the
preparation for partnership taxation, Industrial Building Allowance, Company Taxation, Real
Property Gain Tax and Tax Planning. This course is part of the Core Subject for Diploma of
Accountancy students in Polytechnics.

Our aim in writing this module is to help students become skilled preparers and informed
consumers of taxation information and also to help the Majority of Polytechnic Students who are
from Low Income to Middle Income family background. As lecturers, we have mixed feelings when
we asked them to purchase reference books in the market, which for us may be Cheap, but for
some of them could be quite expensive.
This Module is an innovation idea for experienced the Learning and Teaching Process because:

 The Notes were prepared by a Group of experienced Lecturers; some of whom have been
teaching the course for more than 14 years. The strength and weaknesses of the students
have been identified based on this experience and also performance of previous students
in examinations.

 The notes are cheap if compared with reference books in the market.
 The Notes were prepared based on the needs of the Polytechnic Syllabus, and fully follow

the guidelines from the Ministry Of Higher Education unlike the current reference books
in the market. This, our students are not required to buy further reference books.
 The notes are complete with varied examples and solutions. The content of the note is
written in simple English language.
We hope that this book will benefit all students and help them to achieve excellent
results.

Lecturers of Commerce Department PMK
JUN2020

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COURSE COURSE OUTLINE
CREDIT HOUR
CLASS MALAYSIAN TAXATION 2
3
SYNOPSIS DAT
Malaysian Taxation 2 is an extension of Malaysian Taxation 1 which provides
knowledge to students through understanding the fundamental concepts
and principles of the Malaysian Taxation System and the relevance of taxation
to individuals, partnerships, companies and business decision making.

COURSE LEARNING COURSE LEARNING OUTCOMES (CLO)
OUTCOMES (CLO)
Upon completion of this course the students should be able to :
ASSESSMENTS 1. Justify precisely total income and tax payable and capital allowance in

appropriate procedures. C6
2. Conduct the tax liability for chargeable person using appropriate

procedures. (P4)
3. Present the major tax incentives available to chargeable person related

to the current issues and explain on minimizing or deferring tax
liabilities for individuals and companies. (A2)

ASSESSMENT DPA5033 CHAPTER TICK IF DONE

TEST 2(20%) 2,3 / 4,5

QUIZ 2(15%) 1/6

TUTORIAL EXERCISE 1(5%) 5

CASE 1(10%) 1,2,3,4,5,6

STUDY/TRIP/SEMINAR

TOTAL 50%

FINAL EXAMINATION 50%

REFERENCES
Alan Yeo Miow Cheng (2011). BusinessTaxation. 26thEdition. YSB Management Sdn. Bhd
Choong Kwai Fatt (2011). Malaysian Taxation Principle and Practice. 7 thEdition.
Faridah Ahmad (2008). Fundamentals of Malaysia Taxation. Third Edition. Pearson (M) Sdn. Bhd.
Jeyapallan Kasipillai (2009). A Comprehensive Guide to Malaysian Taxation-Under Self Assessment.

4thEdition. McGraw-Hill Education.

Real Property Gains Tax Act 1976.
Income Tax Act 1967.
Budget commentary and tax information, MIA, MICPA, CTIM.
Ketetapan Umum LHDN Laporan Belanjawan Tahunan Maklumat Cukai, MATA MasterTaxGuide
www.hasil.gov.my

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SUMMARY (45 LECTURE : 30 TUTORIAL)

1.0 PARTNERSHIP TAXATION - CLO 1 & CLO 2 ( 09 : 03 )

Introduction to the partnership and existence of a partnership. Computation the provisional
adjusted income, divisible income, adjusted income and statutory income. Prepare the
computation of aggregate income and total income. Allocation of capital allowance among
the partners

2.0 INDUSTRIAL BUILDING ALLOWANCE & OTHERS - CLO 1 & CLO 2 ( 09 : 03 )

Definition of industrial building. Qualifying expenditure and eligibility for capital allowance. Date when
the expenditure is incurred. Disposal of an industrial building. Temporary disuse and notional
allowances. Introduction to agriculture and forest allowance.

3.0 COMPANY TAXATION - CLO 1 & CLO 2 ( 09 : 03 )

Meaning of management and control of company. Calculation of adjusted and statutory income.
Calculation of chargeable income of business. Approved donation and computation of tax liability

4.0 REAL PROPERTY GAIN TAX - CLO 1 & CLO 2 ( 06 : 02 )

Administrative of RPGT, chargeability of RPGT. Determination the date of acquisition and disposal.
Chargeable gain. Circumstances where disposal price equals acquisition price

5.0 INVESTMENT INCENTIVES - CLO 1 , CLO 2 & CLO 3 (06 : 02)

Incentives under promotion of an Investment Act 1986 and incentives under Income Tax Act 1967

6.0 TAX PLANNING - CLO 1 , CLO 2 & CLO 3 (06 : 02)

Tax planning and avoidance. Employment versus Self- employment. Remuneration packages. corporate
structure and dividend flows, business operations and restructuring of activities

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TABLE OF CONTENT

Chapter PARTNERSHIP TAXATION Page

1 1

2 INDUSTRIAL BUILDING ALLOWANCE 18

3 COMPANY TAXATION 46

4 REAL PROPERTY GAIN TAX 66

5 INVESTMENT INCENTIVES 80

6 TAX PLAINING 100

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CHAPTER 1: PARTNERSHIP TAXATION

At the end of this chapter, you should be able to:

1.1 Define Partnership Under ITA 1967
1.2 Understand The Calculation Of Provisional Adjusted Income
1.3 Understand The Assessment Of Partners
1.4 Understand The Changes In Partnership

1.0 INTRODUCTION

A partnership is not a person in law, it is not a separate and assessable entity for tax
purposes (Rose v FC of T). A partnership is, however, required to lodge a return. The
partnership return determines what is the net partnership income or partnership loss. Each
partner must then include in his personal return his individual share of these amounts and
pays tax accordingly.

1.1DEFINE PARTNERSHIP UNDER ITA 1967
A partnership is defined in Section 2 of the Income Tax Act (ITA) as “an association of any kind
(including joint ventures, syndicates and cases where a party to the association is itself a
partnership) between parties who have agreed to combine any of their rights, powers,
property, labour or skill for the purpose of carrying on a business and sharing the profits there
from but it excludes a Hindu joint family although such a family may be a partner in a
partnership.”

According to the Malaysian Partnership Act 1961, a partnership is defined as a relationship
that subsists between persons carrying on business in common with a view of profit. A
partnership is not a person within the meaning of sec 2 of the ITA. Consequently, no
assessment can raised for income tax purposes on the partnership. Instead each individual
partner is assessed on his or her share of the partnership income.

1.1.1 List down types of partners
a. Full partners
These are the “real” partners who share in the conduct of the business and in the profit
or losses it generates. Their income is assessed to tax under sec 4(a) as income from a
business or professional source.

b. Salaried partners
Such partners, although held out to the world as partners, are in fact merely employees
of the partnership drawing a fixed salary with or without commissions or bonuses.

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They do not share in the losses of the partnership. The income of salaried partners is
assessed to tax under sec 4(b) as income from an employment source.

In some cases, however the income of salaried partners is assessed under sec 4(a) as
income from carrying on a business. An example of this is in the case of share brokers
who are salaried partners in broking firm. These persons do not draw salaries but
derive commissions on the business they put through the organization.

c. Sleeping partners
Such partners only contribute capital to the business. They leave the conduct of the
business to others. Their income is assessed under sec 4(a).

d. Limited partners
Such partners only subscribe to a certain fixed amount of capital and their liability is
limited to this amount. They do not take part in the management of the partnership
business and normally have no powers to bind the organization. A body corporate can
be a limited partner. In ascertaining the share of profits of a limited partners the same
rules as those relating to full partners are applied.

e. Corporate partners
Corporate partner is the in full partnership with individuals. It may also refer to two
or more companies which form a partnership.

1.1.2 Discuss the creation and existence of a partnership.

A partnership can be formed by at least two persons but not exceeding 20 persons
agreeing to carry on a business with a view to make profit. The definition of a
partnership suggests the following.
i) It is an association of some kind between persons.
ii) It is an agreement between persons to combine their rights, powers, property,

labour or skill in a partnership for the purpose of carrying on a business and
iii) Sharing of profits within the partner.

Normally, a partnership agreement is drawn out between partners. In certain
circumstances, however a partnership may exist even though there is no partnership
agreement. In determining whether a partnership exists, the following guidelines can
be used:
i) Preparation of profit and loss accounts showing the partners’ share of profits

or losses.

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Manner in which partners operate their bank accounts and whether there are
ii) limitations to the signing of cheques.
Name used in carrying on the business as shown in trade directories and
iii) business correspondence.
Records showing partners’ remuneration, drawing, capital contribution and
iv) interest paid for capital loaned to the business.

1.2UNDERSTAND THE CALCULATION OF PROVISIONAL ADJUSTED INCOME

1.2.1 Calculate the provisional adjusted income
(Refer to example 1.1)
The income of a partnership for any period is computed in the same manner and on
the same basis as that of a person carrying on a trade or business. This income is
usually different from the figure of profit in the partnership accounts.

The profit figure is normally net after certain adjustments are made for partners’
salaries, interest on a partner’s capital and other personal expenses charged in the
partnership accounts. Such appropriations are not allowed for tax purposes.

EXAMPLE 1.1

The following is an extract from a partnership business styled as Nelly & Nelda

Enterprise.

Nelly &Nelda Enterprise
Profit and Loss Account

Sales Year Ended 31 December 20XX RM
(-) Cost of sales RM 260,000
Gross profit (200,000)
Less: Expenses 20,000 60,000
Revenue items
Depreciation 5,000
Partners’ salaries 10,000

Partners’ private expenses 5,000 (40,000)
Net Profit 20,000

It is assumed that Nelly and Nelda are entitled to half of the profit/loss of the
partnership profits.

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Required:
Compute the adjusted income of the partners for basis year 20XX.

Answer Nelly & Nelda Enterprise
The Provisional Adjusted Income for the basis year 20XX
RM
RM

Net profit as per account 20,000

Add: 5,000 (20,000)
Depreciation 10,000 40,000
Partners’ salaries 5,000
Partners’ private expenses
Provisional Adjusted Income

1.3UNDERSTAND THE ASSESSMENT OF PARTNERS

1.3.1 Calculate the divisible income, adjusted income and statutory income of
partners.
The divisible income for the basis period of the partnership is the provisional adjusted
income less:
a) Partners’ wages or salaries
b) Interest payable to a partner, and
c) Private expenses of the partners charged to the partnership account.

The adjusted income of an individual partner for a basis period is the
a) Share of divisible income and
b) Remuneration, interest, private expenses from the partnership.

RM RM

Provisional Adjusted Income 40,000

Less: Partners’ salaries- Nelly 5000
- Nelda 5000
Partners’ private expenses-Nelly 5000 (15,000)
Divisible Income 25,000

The adjusted income of Nelly and Nelda from the partnership for year of assessment
20XX is computed as follows:
Nelly Nelda
(RM) (RM)

Partners’ salaries 5,000 5,000

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Partner’ private expenses 5,000 0
Divisible income 12,500 12,500
Adjusted income 22,500 17,500
1.3.2 Compute aggregate income and total income

(Refer to format of computation)

1.3.3 Prepare Form P
Form P requires the following additional information:
- Nature of business of the partnership
- Business registration number
- Address of each branch
- Changes in constitution of the partnership during the basis year
- Full particulars of partners and the allocation of Malaysian and non-Malaysian
income from businesses
- Statement of foreign income received in Malaysia and the foreign tax suffered, if
any and
- Declaration of disposal of chargeable assets (lands, buildings and shares in real
property companies) under the Real Property Gains Tax Act 19765.

The tax filing deadline for partnership is 30 June of the following year.

1.4UNDERSTAND THE CHANGES IN PARTNERSHIP

Where a change occurs in a partnership, as a result of retirement, death or dissolution of
the partnership or the admission of a new partner, a new partnership in effect comes into
being.

In the case where at least one partner from the old partnership is also a partner in the new
partnership and the nature of trade of both the partnership is virtually the same, then the
partner who is in the old and new partnerships is deemed to have one continuing source
of income in respect of the old and new partnership.

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Thus, the business will be divided into two different partnership business which are:

a) Before new admit or retirement – old partnership
b) After new admit or retirement –new partnership

(C –retirement) (D- Admission)
____________________________________________________________________________________

1/1/20XX (A,B.C) 1/4/20XX (A,B) 1/7/20XX (A,B,D) 31/12/20XX

The Changes will affect as follows:

1. Changing in Period of Accounting-
E.g : From year ended 31th March to end of 31th December

2. Sharing Profit & Loss
E.g: From sharing equally to capital ratio

3. Capital Contribution
E.g: Capital injection or withdrew the capital by partner.

4. Salary & Interest on capital
E.g: Month salary from RM 2,000 to RM 2,500 and interest on capital from 2% to 3%
per year.

Allocation of capital allowance among the partners

a) Although the partnership is assessed as business source, capital allowance claim is
attributable to individual partners instead of the partnership.

b) The capital allowance is allocated with reference to the profit-sharing ratio of the
partner at the end of each basis period.

c) Admission or retirement of partners will not affect the claim of capital allowance as
the partnership is treated as continuing business if at least one partner of the old the
partnership continues to be partner in the new partnership.

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EXAMPLE 1.2

An old partnership of Min and Moon, profit being divided equally, makes up its accounts
annually to 31 December. Min retires on 30 September 20xx and Man joins the
partnership on the same date sharing profit and losses equally.

The provisional adjusted income of both the partnerships are:

a) Partnership of Min and Moon RM20,000
i) Year ended 30.9.20xx RM7,000
ii) Period ended 31.12.20xx

b) New partnership of Moon and Man RM18,000
i) Year ended 31.09.20xx

Determine the Adjusted Income of all the partners for the year of Assessment.

Allocation of Partners’ Income

Period ended 30.9.20xx Moon Min Man
Year ended 31.12.20xx RM RM RM
Period ended 31.09.20xx 10,000 10,000 -
3,500 - 3,500
9,000 9,000

Adjusted Income for the Year of Assessment

Year of Assessment Moon Min Man
RM RM RM

20xx 13,500 10,000 3,500
20xx 9,000 9,000

1.4.1 Explain the allocation of capital allowance and approved donation among the
partners

Since a partnership is not a legal person it cannot own fixed assets. These therefore
belong jointly to the individual partners. Capital allowances are allocated only amongst
those who are partners at the end of the relevant basis period in their profit-sharing
ratios. Any capital allowances allowed for income tax purposes in respect of assets are
calculated for the year of assessment and these are divided among the partners in
accordance with the profit-sharing ratios. Any allowance that cannot be set off due to

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the insufficiency of profits is carried forward and forms part of the allowances for the
next assessment year. If the approved donation is made by the partnership, it shall be
apportioned based on the profit-sharing ratio of the partners at the time the donation
given.

Tax treatment of capital allowance in partnership
a) Capital allowance allocation for the partnership based on the partners in the

partnership at the end of each basis period.
b) The allocation will be based on profit sharing ratio of each partner at the end of basis

period.
c) If any allowance that cannot be set off owing to be insufficiency of profit is carried

forward and forms part of the allowances for the next assessment year.

Tax treatment of donation made by partnership business
a) Donation made by a partnership will be apportioned to partners at the time the

donation is made.
b) When there are changes in a partnership, the date of a donation made and partners’

profit sharing ratio must be taken into consideration when computing donation of
each partner.

1.4.2 Apply the returns and account to partners.

There is no statutory requirement for partnership accounts to be audited. If the
Director General is satisfied that the books and records are so maintained that they
enable the determination of the partnership income, these are accepted. Director
General has, however the power to prescribe the form of these records and the way
they should be kept, if he so wishes. He can also compel the production of audited
accounts within a specific time by exercising his powers under sec 82(5).

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FORMAT OF COMPUTATION

ZAS PARTNERSHIP xx
COMPUTATION OF DIVISIBLE INCOME
XX
YA 20XX (x)
(x)
Net profit (before taxation) (x)
XX
(+) Partners’ remuneration x
(Salary, Allowance, Bonus)
x
Partners’ Interest on capital x
Private and domestic expenses of partners x
Non Allowable Expenses
(Donation, fine, depreciation etc.)

(-) Non Business Income (x)
RPGT (x)
Dividend, Rental, Interest (x)
Gain on disposal of asset

(-) Double Deduction (x)

Provisional Adjusted Income- Sec 55(2)

(-) Section 55(3) x
Partners’ Salary x
Partner A x
Partner B
Partner C

Interest on Capital x
Partner A x
Partner B x
Partner C

Private Expenses x
Partner A x
Partner B x
Partner C

Divisible Income

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COMPUTATION OF TOTAL INCOME

Partners C
AB X
X
Divisible Income XX X
Partners’ Salary XX X
Interest on Capital XX X
Private Expenses XX (x)
(x)
(+) Balancing charge (devide equally or X X XX
based on agreement) (x) (x)
(-) Balancing Allowance (x) (x) X
XX XX X
Capital Allowance(devide equally or X
based on agreement) X X X
Statutory Income X X X
X X XX
(+) Other Statutory Income X X
S.4(b) Salary X X (x)
S.4(c) Dividend & Interest
S.4(d) Rental & Royalty XX XX XX
S.4(e) Pension &Anuity
S.4(f) Other than Sec 4(a) – (e) (x) (x)

Aggregate Income
(-) Donation (devided equally or based
on agreement)

Total Income XX XX

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Example 1.3
A partnership of Perdana and Gen-2 made up its annual accounts to 31 December each year.

On 1 April 20XX, they admitted Exora as a partner. Given below are the accounts of
partnership.
Pandalela Enterprise
Statement of Comprehensive income for the year ended 20XX

Administration expenses 23,000 Trading profit 125,000
Salaries of employee 36,000
Repairs 40,000
Depreciation 20,000

Gross profit 6,000

125,000 11,000 125,000 6,000
Partner’s salary: 15,200 Gross profit 10,000
Perdana 4,800 Other income 18,400
Gen-2 Net Loss
Exora

Partner’s Interest on capital: 1,800
Perdana 1,100
Gen-2 500
Exora
34,400
34,400

Additional Information:

i. The profit sharing ratio is as follows:

Perdana Gen-2 Exora
1 -
1/1/20XX-31/3/20XX 2 2 1

1/4/20XX-31/12/20XX 3

ii. Repairs include an extension to an existing store amounting to RM 32,000.
iii. The capital allowance for the year of assessment 20XX is RM 12,000

Required:
Calculate the statutory income for each partner for the year of assessment 20XX.

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TUTORIAL EXERCISES

QUESTION 1

Partnership Adiani is owned by Adi and Ani. This partnership distribute printing card. Closing

date of account is on 30 June every year. Profit and Loss Account for year ended 30 June 20XX

is as follows:

RM RM

Gross profit 195,000

(-) Expenses

Salary (i) 90,400

Advertising (ii) 25,000

Office rental 5,500

Stationery and postage 4,500

Interest on capital 3,270

Depreciation 1,200

Repair of office equipment 2,000

Office renovation 3,500 (135,370)

Net profit 59,630

Additional information:

i. Salary is included partners salary and employee salaries.

ii. Included in advertising expenses is a personal expense of Ani amounting to RM 1,200

and donation to approved institution amounted RM 250 on 2/01/2xxx.

The terms of agreement between Ani and Adi are as follows:

Ani Adi

Yearly partners salary RM 36,000 RM 28,000

Interest on capital per annum 6% 5%

Capital RM 30,000 RM 24,000

Profit sharing ratio 0.5 0.5

On 1 April 20XX, Amani become a partner for Adiani Partnership and the new terms of

agreement are as follows:

Ani Adi Amani

Yearly partners salary RM 40,000 RM 28,000 RM 12,000

Interest on capital 6% 5% 3%

Capital RM 35,000 RM 30,000 RM 16,000

Profit sharing ratio 0.5 0.3 0.2

This partnership was closed on 30 June. Capital allowance for year ended 30 June 20XX is RM

3,200.

Required:

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1. Calculate divisible income for each partner for year assessment 20XX.
2.Calculate partner’s total income for year assessment 20XX.

(PAI = RM137,050, DI =RM 64580)
(TOTAL INCOME ANI =RM70641, ADI = RM 57252, AMANI = RM 5709)

QUESTION 2

Aisha and Balqis are partner of Aiqish Enterprise which was established on 1 January 2014

and accounting period is closed on 31 December every year. The terms of agreement between

Aisha and Balqis are as follows:

Aisha RM Balqis RM

Monthly salary 2,000 2,500
Capital 70,000 105,000

Interest on capital 10% per annum 10% per annum

Profit sharing ratio 2/5 3/5

On 30 September 20XX, Aisha quit from the partnership and she took out all the capital that

she had invested in the partnership.

On 1 October 20XX, Camelia joined the Aiqish Partnership. Closing accounting period was

same as before. Below are terms of agreement for the new partnership:

Balqis Camelia
RM RM

Monthly salary 2,500 2,500

Capital 100,000 100,000
Interest on capital 10% per annum 10% per
annum

Profit sharing ratio 1/2 1/2

Below is Income Statement for Aiqish Partnership for year ended 31 December 20XX:

Income from construction contract RM
(-) Construction cost 8,418,600
Construction profit (7,961,400)
(+) Other income
457,200
(-) Overhead 190,700
Net profit
Additional information; 647,900
420,300

227,600

1. Overhead was included: RM
55,500
Partners salary 18,125
Interest on capital

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Depreciation for fixed asset 30,700

2. Capital allowance for year assessment 20XX is RM 30,500

Required:
1. Calculate divisible income for each partner for year assessment 20XX.

2. Calculate partner’s total income for year assessment 20XX.

(DI = RM67,6000) (PAI = RM 141225)
(CAPITAL ALLOWANCE = BALQIS = RM 15,520, CAMELIA = RM 15,250
(TOTAL INCOME AISHA =RM43530, BALQIS = RM 159345, CAMELIA = RM 98550)

QUESTION 3
Mahathir and Zakaria agreed to form a partnership, Mahakarya Partners’ operating supplying
painting since 2010. On 1 April 20XX, Yahya joined partnership. Below is Profit and Loss
Account for the partnership:

MAHAKARYA PARTNERS
PROFIT AND LOSS ACCOUNT FOR YEAR ENDED 31 DECEMBER 20XX

Administrative expenses 33,000 Sale profit 205,000
Employee salary and
partners 79,200 Interest 6,000
Repairs expenses 5,000

Depreciation 7,500
Interest on capital 3,325
Painting and exhibition
Expenses 20,000

Net profit 62,975

211,000 211,000

Additional information:

1. The profit sharing are:

Mahathir Zakaria Yahya

1/1/20XX to 31/3/20XX 2 1

1/4/20XX to 31/12/20XX 3 21

2. Partners salaries:

a. Mahathir : RM 1,500 per month

b. Zakaria : RM 1,000 per month

c. Yahya : RM 800 per month

3. Partners’ capital:

Partners Capital Interest on capital per
Mahathir 30,000 annum
Zakaria 20,000 7%
10,000 5%
Yahya 3%

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4. Repair expenses include renovation for painting hall valued at RM 2,000.
Painting equipment costing RM 25,000 since 2014. Annual allowance is 20% and
initial allowance is 10%

Required:
Calculate aggregate income for each partner for year assessment 20XX.

(PAI = RM107, 000, DI = RM 66,475,)
(STATUTORY INCOME= MAHATHIR RM53607, ZAKARIA RM 33492, YAHYA RM 14901)
(AGGREGATE INCOME = MAHATHIR =RM 56607, ZAKARIA = RM 35492, YAHYA =RM15901)

QUESTION 4
The partnership of Amy and Barney made up its annual accounts to 31 December each year.
On 1 April 20XX, they admitted Carry as a partner. Given below are the accounts of
partnership.

AMY, BARNEY AND CARRY
PROFIT AND LOSS ACCOUNT FOR YEAR ENDED 31 DECEMBER 20XX

Administrative expenses RM Trading profit RM
Salaries of employees 23,000 Gross loss 113,000
Repairs expenses 36,000
Depreciation 40,000 6,000
20,000

119,000 119,000

Gross loss 20,000
Partners' salaries:
Amy 11,000
Barney 15,200

Carry 4,800 40,400
Partners' interest capital:
Amy 1,800
Barney 1,100
Carry
500 Net loss

40,400 40,400

Additional information:
1. The profit sharing ratio is as follows:

Amy Barney Carry

1/1/20XX to 31/3/20XX 3 2 1 2. Repairs
1/4/20XX to 31/12/20XX 3 2 include an

extension to an existing store amounting to RM 32,000.

3. The capital allowance for year assessment 20XX was RM 12,000

Required:

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Calculate the statutory income for each partner for year assessment 20XX.

(PAI = RM 46,000, DI =RM 11,600) (STATUTORY NCOME = AMY = RM 12,890, BARNEY =
RM 16,360, CARRY =RM 4,750)

QUESTION 5

Raman and Kumar, who are partners, have been selling souvenirs since 2007. Their
partnership accounting period ends on 31 December annually. Raman made a capital
contribution of RM 40,000 and whereas Kumar’s made a capital contribution amounted to RM
65,000. The terms of their agreement are as follows:

Salary (per month) Interest on capital (per year) Profit and loss sharing ratio

Raman RM 2,200 5% 1/3

Kumar RM 2,500 5% 2/3

On 31 March 20XX, Raman opted for retirement and withdrew all of his capital. Johan was
admitted to be a new partner on 1 April 20XX and his capital contribution amounted to RM
65,000. On that day, Kumar increased his capital contribution by RM 10,000. The new terms
of their agreement are as follows:

Salary (per month) Interest on capital (per year) Profit and loss sharing ratio

Kumar RM 3,250 7% 1/2

Johan RM 2,700 7% 1/2

Additional information:
1. The provisional adjusted income for the year of assessment 20XX is RM 42,230
2. The provisional adjusted income for the year of assessment 20XX is RM 27,600
You are required to:
Compute the statutory income for each partner for the year of assessment 20XX and for year
of assessment 20XX.

QUESTION 6
a) “Section 3(1) of Partnership Act 1961 defines a partnership as the relation with
subsists between persons carrying on business in common with a view of profit”.

You are required to : (5 marks)
i) List FIVE (5) types of partners in partnership business.

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[Pick the DPA5033 MALAYSIAN TAXATION 2
date]

ii) State FIVE (5) elements that determine the existence of a partnership
business (5 marks)
b) Ara and May are partners in a kopitiam business “Karipap & Kopi” since 2014. Each of
them contributed equal capital of RM 100,000. On 1st July 20XX, Mimi was admitted as

a new partner and she is responsible to manage the Karipap & Kopi. Mimi injected RM
50,000 capital into the business. The partnership accounting year ends on 31
December each year.

The terms of the partnership agreement provided that:

i. Each partner is to be paid a salary of RM 2,000 per month
ii. Interest of 8% per annum is to be paid to each partner based on the capital

contribution.

Below were information related to the business:

1 January 20XX-30 June 20XX 1 July 20XX – 31 December 20XX

Ara May Ara May Mimi

Profit & loss sharing 1: 1 1:1:1
ratio

Divisible income RM 60,000 RM 150,000

Capital allowance RM 24,000

Gift of money for State RM 1,000 RM 1,500
Government

You are required to:

Calculate the total income for partner for year assessment 20XX. (15 marks)

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