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Taxation of Partnerships - Capital Allowance

Since a partnership is not a legal person it cannot own fixed assets. These, therefore, belong jointly to the individual partners.

Those who own the plant or machinery and use it in the course of their trade, business, or profession are the ones who are generally eligible for the capital allowances. Nevertheless, a notable exemption is provided for beneficial ownership in Director General of Inland Revenue v Teo Tuan Kwee(1998) MSTC 3,648.


那些本身拥有工厂或机器并在其贸易、业务或专业过程中使用的人,通常有资格获得资本津贴。然而,在马来西亚内陆税收局 诉Teo Tuan Kwee(1998)MSTC 3,648 一案中,对实际所有权 [Beneficial Ownership] 提供了明显的豁免。

Director General of Inland Revenue v Teo Tuan Kwee
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Director-General of Inland Revenue v Teo Tuan Kwee(1998) MSTC 3,648. The taxpayer was the proprietor of a lorry transport business. He purchased four motor lorries for his business. Three of the lorries were acquired on hire purchase while the fourth was purchased directly from the seller.
The taxpayer was assessed to income tax on his income from his lorry transport business and dividends from shares.
The taxpayer appealed against the assessment. He argued that no deductions were allowed by the Revenue in respect of capital allowances which he claimed were due to him under Sch. 3 of the Income Tax Act 1967 (“the Act”) on the capital expenditure incurred by him for the purchase of the four motor lorries.
The Revenue had rejected the taxpayer's claim for initial and annual allowances on the lorries on the grounds that the taxpayer was not the legal owner of the lorries.
The lorries had been registered in the names of third parties who had lent their names in consideration of earning monthly rentals for the haulage permits which were in their respective names.
The Special Commissioners held that the taxpayer was entitled to capital allowances under Sch. 3 of the Act as he had incurred capital expenditure by purchasing the four lorries for his lorry transport business.
The Revenue appealed to the High Court. The Revenue contended that capital allowances were only available to the owner of the lorries. Although the taxpayer had incurred capital expenditure in acquiring the lorries, he was not the registered owner of the lorries.
The question for determination was whether para. 15 and 46 of Sch. 3 of the Act referred to legal ownership or could be extended to beneficial ownership
Held: Appeal Dismissed
马来西亚内陆税收局 诉Teo Tuan Kwee(1998)MSTC 3,648 纳税人是一家货车运输公司的经营者,他为其业务购买了四辆货车。其中三辆货车是以租购方式购买的,而第四辆则是直接从卖家处购买。
税收局特别专员 [The Special Commissioners] 认为,纳税人有权获得《1967年所得税法令》第3章所规定的资本津贴,因为他却好似为其运输业务购买了四辆货车,并产生了资本支出。

As a result, 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 the insufficiency of profits is carried forward and forms part of the allowances for the next assessment year.



Where there is a change in the partnership, for example, cessation or admission of a partner, so long as the businesses remain substantially the same and are carried on as one continuing business, capital allowances are calculated as if the business was conducted by the same persons.

That is to say that the capital allowances are allocated only amongst those who are partners at the end of the relevant basis period in their profit-sharing ratios.



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