Recognise Your Income First, Then Only Eligible to Claim Bad and Doubtful Debt!
M Company v. Ketua Pengarah Hasil Dalam Negeri
D Company awarded a contract to M Company ("the Appellant") for site-clearing, earth filling and levelling works.
The contract amount was RM3.4 million, payable over 6 months.
M Company subcontracted the work to S company for RM3.2 million with a completion date of 18th January 1998.
S company submitted a claim of RM900,000 to M Company for the first interim payment, and M Company paid RM700,000 to S company.
After that, M Company sent D Company a payment claim for the year that ended on January 31, 1998 (Y/A 1999) for RM950,000, but D Company didn't pay it.
The works were not completed on 18.1.1998 and have been suspended and abandoned since then.
D公司与M公司（“申诉人”）签署了一份清理工地、填土和整平工程的合同。
合同金额为340万令吉，在6个月内付款。
M公司将工作分包给S承包公司，合同金额为320万令吉，完工日期为1998年1月18日。
随后，S公司向M公司提交了900千令吉的第一次按工程进度付款索款 (Progress Payment Claim)，M公司支付了700千令吉给S公司。
然后，M公司向D公司提交了1998年1月31日结束的年度（1999财政年度）的按工程进度付款索款 (Progress Payment Claim)，金额为950千令吉，但D公司却没有履行支付的责任。
工程无法在1998年1月18日完成，从那时起就被暂停和放弃了。
M Company reported the claim amount of RM950,000 under the Trade Debtors Account in the Balance Sheet as of 31.1.1998 for YA 1999. The amount of the subcontractor’s charge of RM900,000 was also reported under the Trade Creditors Account for the balance of RM200,000 (RM9000,000 less RM700,000 paid).
From 1998 to 2000, M Company recovered RM341,268.75 from D Company through contra of accounts with other related companies, but there was still a balance of RM608,731.25 outstanding as of 31st January 2003.
M Company made a provision for bad and doubtful debt in their profit or loss account for the year ended 31st January 2004 and claimed a tax deduction for the balance of trade debt (RM608,731.25) for that year.
M公司在1998年1月31日（1999年纳税年度）的资产负债表（Balance Sheet）报告了950千令吉的索赔金额在贸易债权人账户（Trade Debtors Account）。
至于S承包公司900千令吉的承包费用也被报告在贸易债务人账户（Trade Creditors Account）下，以抵消剩余的200千令吉（900千令吉减去已支付的700千令吉）。
从1998年到2000年，M公司通过与其他关联公司的对账 (contra of accounts)收回了341,268.75令吉，但截至2003年1月31日仍有608,731.25令吉未偿还。
M公司在截至2004年1月31日的损益表 (profit or loss account) 中为烂账和呆账作出拨备(Provision)，并在当年索取 608,731.25令吉的所得税扣除。
During a Tax Audit | 当税务审计时
KPHDN found that the value of work done (RM950,000) and the amount incurred (RM900,000) in the basis year ending 31st January 1998 was not recognised as income and expense in the Profit or Loss Account for the year ending 31st January 1998 and up to the year ending 31st January 2004.
As a result, the tax authorities (KPHDN) disallowed the deduction and imposed a penalty under the Income Tax Act 1967.
M Company appealed the decision to the Special Commissioner of Income Tax (SCIT) on two issues:
Issue A: the deductibility of the provision for bad and doubtful debt under section 34(2) of the ITA 1967; and
Issue B: the justification of the penalty imposed, is it bad and wrong in law?.
The SCIT dismissed the appeal on the deductibility of the debt but allowed the appeal on the penalty imposed.
M Company then appealed to the High Court on Issue A, and KPHDN cross-appealed on Issue B.
在截至1998年1月31日的会计年度和2004年1月31日的会计年度中，税务局发现已完成的工程价值（RM950,000）和已支出的费用（RM900,000）没有在M 公司的损益账户中确认为收入 (Revenue) 和支出 (Expenses)。
因此，税收局（KPHDN）不允许608,731.25令吉的所得税扣除，并根据《1967年所得税法令》对其进行了罚款处罚。
M 公司在两个问题上向特别所得税委员（SCIT）上诉： 问题 A：根据《1967年所得税法令》第34(2)条的规定，对烂账和呆账的拨备，是否可扣税； 问题 B：罚款的处罚是否不当和非法？
SCIT 驳回了对烂账和呆账的拨备可扣除的上诉，但允许了对罚款处罚的上诉。
M 公司随后在问题 A 上向高等法院提出上诉，而 KPHDN 则在问题 B 上提起反诉。
M Company's Contentions | M 公司的诉求
The contract work hasn't been finished, and there was no profit.
Because of this, M Company doesn't have to count RM950,000.00 as gross income for Y/A 1999.
In the Balance Sheet for YA 1999:
the amount of RM950,000 was also listed under the Trade Debtors Account, and
the rest of the subcontractor's charge was listed under the Trade Creditors Account.
No one is trying to avoid paying taxes, so there shouldn't be a penalty.
合同的工作还没有完成，因此没有利润。
有鉴于此，M 公司 不必将 950千令吉计入为 1999 年财政年度的总收入。
在 1999 年财政年度的资产负债表中：
950千令吉的金额也列在了贸易债权人账户 （Trade Debtors Account）下，
剩下的分包商的收费则列在了贸易债务人账户 （Trade Creditors Account） 下。
没有人试图逃避纳税，因此不应该有罚款。
KPHDN's Contentions | 内陆税收局的论据
KPHDN said that when S.34 of the ITA is read with S.24 of the ITA.
It is clear that for M Company to claim a tax deduction for a bad debt under S.34(2) of the ITA, the debt must first be included in M Company's gross income for the basis period for a year of assessment before the year of assessment to which the relevant period relates.
When figuring out what the provisions mean, strict interpretation must be used, and the amount claimed as a provision for doubtful debt must be counted as gross income when the debt owed to M Company came up in 1999.
Since S.34 of the ITA wasn't followed, the amount of RM608,731 doesn't fit the definition of "debt," so it can't be deducted for the provision of doubtful debt.
When M Company asked for a deduction for the amount of RM608,731, they filed an incorrect return and gave incorrect information.
So, the penalty was rightly put in place according to S.113(2) of the ITA.
The words used in S.34 and S.24 of the ITA are clear, and there is no way to interpret them in a way that would make the penalty go away.
内陆税收局 （KPHDN）指出，1967年所得税法令第34条文需要与第24条文一起阅读。
因此，当 M公司要根据1967年所得税法令第34(2)条要求对呆账进行扣税时，该债务首先必须在扣税相关评估年之前，计入了M公司在该基础时期的总收入。 也就是说，任何的呆账或烂账，若要扣税的话，前提是相关的债务在之前曾经被公司认列为公司的总收入（Revenue)。
在弄清这些条款的含义时，必须采用严格的解释，即：当现在作为可呆账拨备的金额的债务 (D 公司的欠款) 在那时候（在1999年）出现时，必须当作M公司的总收入。
由于没有遵循1967年所得税法令第34条文，因此，608,731令吉的金额不符合 "债务 "的定义，所以不能被扣税。
当M公司要求扣除608,731令吉的金额时，他们提交了一份错误的报表，并提供了错误的信息。
因此，根据1967年所得税法令第113(2)条文，罚款处罚是正确的。
1967年所得税法令第34条和第24条所使用的措辞是明确的，我们没有办法作出取消罚款的解释。
High Court's Decision | 高庭的裁决
The High Court turned down M Company's appeal on issue A and allowed KPHDN's cross-appeal on issue B.
The High Court ruled that M Company did not follow S.34 of the ITA, and there is no question of how this should be interpreted technically.
高等法院驳回了M公司对问题A的上诉，并允许KPHDN对问题B的反上诉。
高等法院裁定，M公司没有遵循1967年所得税法令第34条文，应该解释的技术问题并不存在。
5 games to keep employees of CCS & Co Plt - Chartered Accountants and Bispoint Group of Accountants connected.
We put a lot of emphasis on ensuring that our team members enjoy a balanced life outside work.
Hence, our firm's Sports and Social Committee is responsible for actively organising an exciting variety of events, such as the Annual Dinner, Annual Trips and Inter-accounting Firm Tournament.
These events are planned so that our professionals can take some time off to relax and, more importantly, come together to strengthen their sense of community and teamwork.
This year's Inter-Accounting Firm Tournament will be held on February 25 and 26, 2023 (Saturday and Sunday). We welcome your support!
5项活动让 CCS 特许会计师 和 Bispoint Group of Accountants 的员工保持联系。
我们非常重视我们的团队成员享受工作以外的平衡生活。
有鉴于此，我们公司的康乐委员会积极举办各种令人兴奋的活动，如年度晚宴、年度旅行和会计师事务所之间的比赛。
这些活动的策划是为了让我们的专业人员可以抽出一些时间来放松，更重要的是，他们可以聚在一起加强社区意识和团队精神。
今年的会计师事务所之间的比赛将于2023年2月25日和26日（星期六和星期日）举行。我们欢迎你前来支持!
Our website's articles, templates, and material are solely for you to look over. Although we make every effort to keep the information up to date and accurate, we make no representations or warranties of any kind, either express or implied, regarding the website or the information, articles, templates, or related graphics that are contained on the website in terms of its completeness, accuracy, reliability, suitability, or availability. Therefore, any reliance on such information is strictly at your own risk.Keep in touch with us so that you can receive timely updates |
要获得即时更新，请与我们保持联系
1. Website ✍️ https://www.ccs-co.com/ 2. Telegram ✍️ http://bit.ly/YourAuditor 3. Facebook ✍
4. Blog ✍ https://lnkd.in/e-Pu8_G 5. Google ✍ https://lnkd.in/ehZE6mxy
6. LinkedIn ✍ https://www.linkedin.com/company/74734209/admin/
QCHB v KPHDN
.pdf
Download PDF • 340KB