1. Explain in detail the income tax treatment in respect of the following items and justify your answer by quoting the relevant section of the Income Tax Act 1967:

1. Interest income on overdue trade debts (note 2);
2. Bad debts written off in respect of study loan advanced to ex-marketing executive (note 3);

iii) Acquisition of trademark (note 4);

iv) Sponsorship of bus stops as part of a public amenities for community programme approved by the relevant authorities (note 5);

v) Salary expenses paid to a disabled staff member (note 10)

5. Referencing your work The Harvard method of referring to publications and of arranging references uses the author's name and the date of the publication. References are listed at the end of the text in alphabetical order by author's name. The general format of a journal reference is shown below: Smith, J. (1999) How to succeed! Journal of Entrepreneurs, 1(2), p. 34-56 Author/s name and initials are listed first, followed by year of publication in brackets. Then there is the title of article and the journal where article appears, which is underlined or in italics. Finally, state the volume and issue Number (in brackets) along with the pages where article can be located. Case Study: Volition Sdn Bhd is a wholly owned subsidiary company of TSB Pte Ltd, a company incorporated and resident in Australia. Volition Sdn Bhd have five directors, two of them are citizens and resident in Australia, the remaining two being Canadian and one is Malaysian. Most of the time, the board of directors' meeting are held in Australia and Canada. Volition Sdn Bhd is a company which involved in manufacturing and selling audio speakers in Malaysia. The company was incorporate in Malaysia in year of assessment 2017. Joe Edwards, the managing director of Volition Sdn Bhd, came to Malaysia to meet the director of TGV Sdn Bhd to finalise the merger and acquisition of 30% stake interest in TGV Sdn Bhd. Joe Edwards had finally decided to acquire TGV Sdn Bhd with 30% stake interest on 1st November 2018. Volition Sdn Bhd has an authorised ordinary share capital of RM3.5 million. The issued ordinary share capital on 31 December 2020 is RM2.7 million. During the year, the company had issued RMO.2 million of shares. Jerome, the finance director of the company, had shown you the financial information of the company for the year ended 31 December 2020 as follows: Note RM'000 Revenue (turnover) Less: Cost of sales RM'000 3,933 (1,866) 1 Gross profit Add: Interest income Add: Special skilled training grant from government WN 2,067 18 4 2,089 Less: Expenses: Bad debts written off Consultancy fees Donations Foreign exchange loss Interest expenses Training expenses Repair and maintenance expenses Staff salaries expense and EPF 4 5 6 7 8 9 10 11 4 24 161 7 17 13 230 242 (698) Net profit before taxation 1,391 ======= Notes: 1) The cost of sales includes: Provision for stock obsolesces b/f Provision for stock obsolesces c/f Depreciation expenses RM'000 150 270 60 2) Interest income comprises: RM'000 7 Interest income on overdue trade debts Interest income from fixed deposit placed with Public Bank Bhd 11 3) Volition received the grant from 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) 4) The company had advanced a sum of RM4,000 study loan to an ex-account executive. The ex-account executive was subsequently declared bankrupt during the year. 5) Consultancy fees paid comprise: Secretarial fees Preparation of income tax return filing fees Acquisition of trademarks RM'000 2 12 10 Total: SSSSS 24 6) Donation comprise: RM'000 60 31 Donation to an approved old folk center Sponsorship of bus stops as part of a public amenities for community' programme approved by the relevant authorities Cash contribution to public libraries 70 161 ==== 7) The foreign exchange loss includes an unrealized payment of RM6,000 due to a supplier. 8) The interest expense includes an amount of RM8,000 relates to a loan taken from Fastspeed (Tokyo) Ltd, the funds from which were used in the acquisition of machinery for the production of the audio speakers. No withholding tax was deducted from this interest or paid to the Inland Revenue Board. 9) It includes an amount of RM5,000 in respect of the training of employees for conducting the Skim Latihan 1 Malaysia for unemployed graduate for a period of up to 12 continuous months. It also includes the cost of the skills training programme undertaken as part of the government's human capital development programme (as in note 2 above) attributable to the grant of RM4,000 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 RM10,000 of purchasing photocopy machine for office used. 11) Staff salaries expense and EPF comprise: RM'000 200 Salary expenses (It included salary paid to a disabled staff member of RM24,000 p.a. (duly certified by the relevant authorities) EPF (21%) Total: 42 242 ==== 12) The total capital allowance available to claim for the year is RM200,000. 5. Referencing your work The Harvard method of referring to publications and of arranging references uses the author's name and the date of the publication. References are listed at the end of the text in alphabetical order by author's name. The general format of a journal reference is shown below: Smith, J. (1999) How to succeed! Journal of Entrepreneurs, 1(2), p. 34-56 Author/s name and initials are listed first, followed by year of publication in brackets. Then there is the title of article and the journal where article appears, which is underlined or in italics. Finally, state the volume and issue Number (in brackets) along with the pages where article can be located. Case Study: Volition Sdn Bhd is a wholly owned subsidiary company of TSB Pte Ltd, a company incorporated and resident in Australia. Volition Sdn Bhd have five directors, two of them are citizens and resident in Australia, the remaining two being Canadian and one is Malaysian. Most of the time, the board of directors' meeting are held in Australia and Canada. Volition Sdn Bhd is a company which involved in manufacturing and selling audio speakers in Malaysia. The company was incorporate in Malaysia in year of assessment 2017. Joe Edwards, the managing director of Volition Sdn Bhd, came to Malaysia to meet the director of TGV Sdn Bhd to finalise the merger and acquisition of 30% stake interest in TGV Sdn Bhd. Joe Edwards had finally decided to acquire TGV Sdn Bhd with 30% stake interest on 1st November 2018. Volition Sdn Bhd has an authorised ordinary share capital of RM3.5 million. The issued ordinary share capital on 31 December 2020 is RM2.7 million. During the year, the company had issued RMO.2 million of shares. Jerome, the finance director of the company, had shown you the financial information of the company for the year ended 31 December 2020 as follows: Note RM'000 Revenue (turnover) Less: Cost of sales RM'000 3,933 (1,866) 1 Gross profit Add: Interest income Add: Special skilled training grant from government WN 2,067 18 4 2,089 Less: Expenses: Bad debts written off Consultancy fees Donations Foreign exchange loss Interest expenses Training expenses Repair and maintenance expenses Staff salaries expense and EPF 4 5 6 7 8 9 10 11 4 24 161 7 17 13 230 242 (698) Net profit before taxation 1,391 ======= Notes: 1) The cost of sales includes: Provision for stock obsolesces b/f Provision for stock obsolesces c/f Depreciation expenses RM'000 150 270 60 2) Interest income comprises: RM'000 7 Interest income on overdue trade debts Interest income from fixed deposit placed with Public Bank Bhd 11 3) Volition received the grant from 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) 4) The company had advanced a sum of RM4,000 study loan to an ex-account executive. The ex-account executive was subsequently declared bankrupt during the year. 5) Consultancy fees paid comprise: Secretarial fees Preparation of income tax return filing fees Acquisition of trademarks RM'000 2 12 10 Total: SSSSS 24 6) Donation comprise: RM'000 60 31 Donation to an approved old folk center Sponsorship of bus stops as part of a public amenities for community' programme approved by the relevant authorities Cash contribution to public libraries 70 161 ==== 7) The foreign exchange loss includes an unrealized payment of RM6,000 due to a supplier. 8) The interest expense includes an amount of RM8,000 relates to a loan taken from Fastspeed (Tokyo) Ltd, the funds from which were used in the acquisition of machinery for the production of the audio speakers. No withholding tax was deducted from this interest or paid to the Inland Revenue Board. 9) It includes an amount of RM5,000 in respect of the training of employees for conducting the Skim Latihan 1 Malaysia for unemployed graduate for a period of up to 12 continuous months. It also includes the cost of the skills training programme undertaken as part of the government's human capital development programme (as in note 2 above) attributable to the grant of RM4,000 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 RM10,000 of purchasing photocopy machine for office used. 11) Staff salaries expense and EPF comprise: RM'000 200 Salary expenses (It included salary paid to a disabled staff member of RM24,000 p.a. (duly certified by the relevant authorities) EPF (21%) Total: 42 242 ==== 12) The total capital allowance available to claim for the year is RM200,000