Q3.AB Development Sdn. Bhd. ('the company') was incorporated on 1 October 2015 with the objective of constructing and developing commercial and residential properties. The company bought a piece of land in February 2016, and applied for development approval in May 2016. However, due to some technical problem, the land was bought over by the government in November 2019, for the purpose of agriculture project. The company was paid RM75 million in March 2020 as the final settlement. The Inland Revenue Board raised an assessment on the compensation received by the company, under the Income Tax Act 1967 (as amended) for the year of assessment 2020. However, the company, on the advice of its lawyers, objected to the assessment. The company filed a notice of objection but was rejected.

The lawyers quoted the Final Report of the Royal Commission on the Taxation of Profits and Income Tax in the United Kingdom, 1955 listed several indicators, commonly known as the 'badges of trade', to determine whether a particular single isolated transaction is a one-off capital transaction or an adventure in the nature of trade.

Required:

(a)Explain any FIVE (5) badges of trade giving a brief overview of the particular 'badge' with a supporting case law for the relevant 'badge'. (15 marks)

(b)Explain the basis on which the Inland Revenue Board raised an assessment on the RM75 million compensation received by the company.(3 marks)

(c)State the basis used by AB Development's lawyers in advising the company

to object the assessment.(7 marks)