Camellia Holdings (Singapore) Pte Ltd (CHS) is an investment holding company incorporated in Singapore in 2000. Its interest is in the tea trade and it sells tea and tea related products in South East Asia through various subsidiaries in the region. CHS is owned equally by friends and tea aficionados, Matcha Ong and Oolong Tay. In Singapore, CHS is the sole shareholder of Jellylicious Pte Ltd (JPL) which holds the franchise selling a leading brand of bubble tea from Taiwan. CHS has been operating a Chinese tea house in Singapore through its 100% subsidiary, Cha Pte Ltd (CPL). Both JPL and CPL were incorporated in Singapore. Due to intense competition, the tea house will cease its operations on 31/12/2017 and switch to wholesale trading of high-grade tea sourced from China. On 1 April 2017, CHS incorporated another Singapore subsidiary, Earthmama Pte Ltd (EPL), after it won the franchise to sell T3 herbal teas in Singapore. The group structure in Singapore can be summarized as follows: Camellia Holdings (Singapore) Pte Ltd Jellylicious Pte Ltd Cha Pte Ltd Earthmama Pte Ltd (incorporated on 1 April 2017)

All the companies in Singapore have a 31 December year end. In addition, the tax position of the various Singapore subsidiaries are as follows: Jellylicious (JPL) Cha (CPL) Earthmama (EPL) Year of Assessment 2017: Assessable Income Unabsorbed loss c/f Unabsorbed donations c/f NIL NIL ($10,000) NIL ($20,000) NIL NA NA NA Year of Assessment 2018: Adjusted trade profit Capital allowances $260,000 ($300,000) (Note 1) $70,000 ($400,000) $120,000 ($30,000) Year of Assessment 2019 (forecasted): Adjusted trade profit Capital allowances $500,000 ($150,000) $330,000 ($48,000) $250,000 ($40,000) Note 1: JPL has not decided whether to claim the $300,000 capital allowances in YA 2018 or defer the said claim. These capital allowances relate to the remaining capital allowances claimable on plant and machinery bought in previous years. The capital allowances for all entities are computed on the accelerated basis. CHS also provides routine support services as specified by Inland Revenue Authority of Singapore to only its subsidiaries and has been charging service fee to its subsidiaries on the Cost-Plus Mark-up basis. For the year ended 31 December 2017, its P & L A/C shows the following: Service Fee income from subsidiaries (local and foreign) $20,000 Dividend income JPL Foreign subsidiaries (re-invested into the subsidiaries) $45,000 105,000 150,000 Total income 170,000 Less: Depreciation Cash donation to Club Rainbow (Singapore), an institution of public character Other operating expenses (revenue in nature) Reimbursement from subsidiaries 40,000 20,000 340,000 400,000 (400,000) 0 Net profit for the year 170,000

Required:

(a) Compute the assessable income for CHS for YA 2018.

(b) Evaluate how the group can immediately maximize the use of CPLs unabsorbed capital allowances of $330,000 arising from YA 2018, using a combination of deferral of capital allowances and group relief. In your answer, you should also address if the unabsorbed capital allowances should be carried forward to future years, stating clearly the basis of your answer. In this regard, please note that CPL cannot defer the capital allowances of $400,000 as they arose from balancing allowances arising from the disposal of its plant and machinery used in the tea house business. (13 marks) (c) Determine the chargeable income of all 4 companies for YA 2018 taking into consideration the following: Deferral of JPLs YA 2018 capital allowances amounting to $300,000; Group relief of CPLs unabsorbed capital allowances of $330,000 by transferring to EPL first, then JPL and lastly to CHS if there are any remaining allowances. There are 365 days in year 2017 and 28 days in February 2017