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1. #AskKtpTax
Rental income tax Malaysia
Business income 4(a)
Vs
Non-business income 4(d)
How to classify under business (active) or non-
business (passive) in tax ?
03/01/2022

2. #AskKtpTax
Tax case
03/01/2022
BCSB
vs
DIRECTOR GENERAL OF
INCOME TAX

3. Scenario:
Income is received
from the letting of the
properties.
Declared and taxed
under section 4(a) ITA
1967 as a business
income from YA 2001
to 2011.
#AskKtpTax 03/01/2022

4. Issue:
Tax audit finding:
Income received from
letting the properties from
YA 2011 is to be taxed
under section 4(d) of the
ITA as rental income
pursuant to Public Ruling
No. 4/2011.
#AskKtpTax 03/01/2022

5. Tax audit action:
1. Withdrew Capital
Allowance for the
properties
2. Capital Allowance for
the properties
03/01/2022
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6. Tax audit action:
3. Added back the same
in the tax computation
for YA 2011.
4. Raised the Notices of
Additional Assessment
for YA 2010 and 2011.
#AskKtpTaxCase 03/01/2022

7. The Company’s opinion
1. The rental income is the
business income under
section 4(a) of the ITA
since its commencement
in 2001.
2. The Public Ruling No
4/2011 has no force of
law.
03/01/2022
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8. IRB argument:
1. The Company had failed
to provide
comprehensive & active
maintenance to the
properties.
03/01/2022
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9. IRB argument:
2. The Company only
provided maintenance
upon request by the
tenants.
#AskKtpTax 03/01/2022

10. IRB argument:
3. Public Ruling 4/2011 offers
guidelines for the tax
treatment of the rental
income.
03/01/2022
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11. IRB argument:
4. The Company is
disallowed to claim
the administration
expenses and capital
allowance for this
non-business income.
#AskKtpTax 03/01/2022

12. IRB argument:
5. The interest expenditure
for the term loan and
bank overdraft claimed
by the Company are
also not permitted.
03/01/2022
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13. IRB argument:
6. Section 4 does not
determine whether an
income falls under
subsection (a),(b),(c),
(d),(e) or (f).
03/01/2022
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14. IRB argument:
7. Therefore, the DGIR is
authorized under s.138A
of the ITA to issue a
public ruling.
03/01/2022
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15. Decision
The Special
Commissioners of Income
Tax" (SCIT) agreed with
the IRB submission and
totally dismissed the
Company appeal.
03/01/2022
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16. Decision
The assessment and
penalty imposed by the
IRB for YA 2010 and 2011
are confirmed and
maintained.
03/12/2022
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