Question 1

(a) David has signed six contracts with six different companies during 2018 to provide marketing and business restructuring consultancy work. Each contract stipulates the compensation that needs to be borne by David should he fail to deliver the job within the specified time. In return, he will receive his full payment upon the delivery of the final reports to the companies. At the moment, he has four assistants to help him to execute the job. David will monitor and ensure that all reports are prepared according to the companies expectations. He provides the equipment and tools for all his assistants. All of them are paid on the basis of jobs completed. Required: Determine whether David is exercising contract of service (employment) or contract for service (business).

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(b) The principal activity of Easy Software Bhd is selling software. It maintains a website, which is hosted in a server located in Singapore, to facilitate the customers in choosing the products, answering queries, ordering online and making payments for the products purchased. All the business activities such as maintenance of the website, supplying of information for the website and procurement of the software are carried on in Malaysia. Required: Determine whether the income derived by the company is taxable under the Income Tax Act 1967 and the reasons for arriving at your answer.

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(c) Michael makes a living by fetching workers to and from a nearby factory with an old bus. However, the old bus that he was driving was not considered as roadworthy by the authorities. He does not have the financial resources to buy a new or even a second-hand bus. He tried to apply for a permit but was rejected many times as the authorities are of the opinion that the bus is not considered as roadworthy. Because of this, the bus fares that he charges the passengers are lower than the market price and the passengers are happy with this arrangement. As he does not have a permit for operating the bus, he did not register his business. Michael is wondering whether he should report his income since the income is illegal. Michael has approached you to advise him whether his income is chargeable to income tax. Required: Advise Michael and support your answer with appropriate case law.

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(d) Ravi is a lecturer at a local private university in Penang. He specializes in the field of management. He discovered that there was a shortage of a particular textbook for one of his course. He requested his brother in Kuala Lumpur to purchase the textbook and mailed it to him. During his first class, he discovered that all his 150 students did not have the textbook. So, he took the initiative to send the book to the printing shop and made 150 copies of it and sold them to the students. He made a profit of RM5,000 out of this arrangement. Required: Would this profit of RM5,000 be taxable under the Income Tax Act 1967? Support your answer with the relevant badges of trade.

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(e)

Azizi Grocery Sdn Bhd operates three mini-markets in Kuala Lumpur, Klang and Petaling Jaya. The company invests surplus funds in the stock market. In 2018, the company bought and sold shares on two occasions and made a gain of RM500,000. This gain was reflected as an extraordinary gain in the audited accounts of the company. Would this extraordinary gain be taxable on the company? Support your answer with the relevant badges of trade.