Snackzo Sdn Bhd (Snackzo) is a company manufacturing and selling snacks. One of its shipments to an overseas client was sabotaged by a former worker of the packing department, the resentful worker put nails in the packages because his employment was terminated by the company. The overseas client sued Snackzo for selling food products that contain harmful substances. After a series of negotiations, both parties agreed to a settlement whereby Snackzo would pay a compensation of RM5 million to the overseas client. After this incident, Snackzo decided to increase the sample size for quality control procedures.

Required: 

Explain, with reasons, whether the compensation of RM5 million paid by Snackzo is deductible.

Answer rating: 100% (QA)

The compensation of RN5 million paid by Snackzo is tax deductible Detailed Explanation Companies can ... View the full answer