6. Anak Chips Sdn Bhd manufactures and sells electronic chips. Anak Chips has an issued share capital of RM1,000,000 and is wholly owned by Mother Board Sdn Bhd, a company with an issued share capital of RM25,000,000. Malaysian individuals own 70% of the shares in Mother Board. Anak Chipss statement of profit or loss for the financial year ended 31 October 2020 is as follows: Note RM000 RM000 Sales 8,366 Less: Cost of sales 1 (4,233) Gross profit 4,133 Add: Other income Special skilled training grant from the government 2 1 Interest income 3 27 28 4,161 Less: Expenses Bad debts written off 4 4 Consultancy fees 5 16 Donations/sponsorships 6 121 Foreign exchange loss 7 34 Interest expense 8 14 Miscellaneous expenses 9 3 Repairs and maintenance expenses 10 470 Staff costs 11 2,205 (2,867) Profit before tax 1,294 4 Notes: (1) The cost of sales includes: RM000 Allowance for slow moving inventories (see below) 100 Depreciation 120 The allowance for slow moving inventories account showed the following: RM000 Balance brought forward 31 Add: Allowance for current year 111 142 Less: Allowance no longer required (11) Less: Amounts written off (28) Balance carried forward 103 (2) Anak Chips received the grant from the government in respect of a skills training programme which the company undertook as part of its human capital development programme (see also note 9 below). (3) Interest income comprises: RM000 Interest from time deposits placed at HSBC Jalan Ampang (see also note 8 below) 23 Interest received on overdue trade debts 4 27 (4) Anak Chips advanced a sum of RM4,000 to a supplier who required funds to meet some working capital requirements. The supplier was subsequently declared bankrupt during the year and documentary evidence of this is available. (5) Consultancy fees paid consists of: RM000 Income tax return filing fees 11 Tax fees for a report on the acquisition of a new business 5 16 5 (6) Donation/sponsorships consists of: RM000 Sponsorship of food aid to vagrants programme approved by Dewan Bandaraya Kuala Lumpur and Director General of Inland Revenue (DGIR) 119 Donation to shelter approved by DGIR 2 121 (7) The foreign exchange loss relates to an unrealised payment due to a supplier. (8) The interest expense relates to a loan taken from an overseas company, the funds from which were placed in a time deposit at HSBC Jalan Ampang (as in note 3 above). No withholding tax was deducted from this interest or paid to the Inland Revenue Board. (9) The miscellaneous expenses include the cost of the skills training programme undertaken as part of the governments human capital development programme (as in note 2 above) attributable to the grant of RM1,000 received from the government. It has been confirmed that this expense was not eligible for any further deduction. (10) The repairs and maintenance expenses include the cost of purchasing a video camera of RM1,000. (11) Staff costs include: RM000 Salary paid to a disabled staff member (duly certified by Department of Social Welfare) 21 Equipment expenses incurred to enable the disabled staff member to gain access to the office 3 24 (12) The capital allowances for the current year of assessment have been computed as RM236,000. 6 Required: (a) Compute the chargeable income and income tax payable by Anak Chips Sdn Bhd for the year of assessment 2020. Note: You should indicate by the use of the word nil any item referred to in the question for which no adjusting entry needs to be made in the tax computation. [30 marks] (b) Explain rational behind the introduction of withholding tax in Malaysia. [10 marks] (c) Provide the compliance requirements how a Anak Chips Sdn Bhd can claim capital allowance under schedule 3 of the Income Tax Act 1967 (as amended). [10 marks] END OF PAPER