UNIVERSITI TEKNOLOGI MARA

TAX517
TOPIC 3 : CAPITAL ALLOWANCES (IBA)

A. TEST Nov 2019

Healthy Life Manufacturing Industries Sdn Bhd (accounting year end 30 June annualy is a company
manufacturing wide range of health products, acquired a piece of land in Bukit Jelutong, Shah Alam
for RM 5 million in January 2016

HLSB subsequently constructed a building consist of factory together with office at a cost of RM 2
850 000 The total built up area of this building was 275 000 sq ft of which the sales/administration
office occupied 41 250 sq ft The whole building was completed and brought into use in April 2017
The whole building was sold for RM 3 500 000 in May 2018 to Samporna Sdn Bhd ( a freight
forwarding company involved in the transportation of goods SSB used the whole building as a
workshop to service and repair the company’s lorries

In March 2017 Healthy Life Sdn Bhd ( purchased a three storey building in Petaling Jaya for RM 3
million and rented it to EduBest Sdn Bhd ( for a monthly rental of RM 250 000 ESB use the building
as an educational institution approved by the Minister of Education

Required:

a. Calculate the industrial building allowances, balancing allowances/charges (if any) for all relevant
years of assessment for Healthy Life Manufacturing Industries Sdn Bhd
b. Explain breifly whether EduBest Sdn Bhd is eligible to claim for industrial building allowances
c. Define the meaning of ‘within same curtilage’ in the context of industrial buildingCalculate the
capital allowances, balancing charge or balancing allowance (if any) available to Omar Sdn Bhd
for all the relevant years of assessment up to year of assessment 2019.
B. PYQ June 2019

Bio Enterprise manufactures specialty food and beverages, commenced its business on 1 June 2015 and
makes up its account to 31 December annually. It has been operating its business in a rented factory.
Bio Enterprise then built a factory in Sungai Buloh with the following costs:

Capital expenditure

Cost of demolishing old industrial building 250,000

Architect fees 40,000

Cost of internal road and drainage system 600,000

Construction cost

Wiring and plumbing 50,000

The building was completed and put into use on 1 March 2016. Bio Enterprise used 80% of the built up
area as a factory, 15% as an administration office and the balance as a recreation room for factory
workers.
Below are the assets owned by Bio Enterprise:
a. A sealing machine
On 1 April 2016, the company purchased a sealing machine for RM45,OOO. The cost of installing
the sealing machine was RM5,OOO and the cost of preparing the site to install it was RMIO,OOO.
On 1 November 2018, the machine was sold for RM20,OOO.
b. A van (New)
A van used for delivery of goods to customers which was acquired on hire purchase term. The cash
price of the delivery van was RM150,OOO. A deposit of RM25,OOO was paid on 1 June 2016.
The balance is to be settled in a 40 monthly installments of RM3,350 starting from 1 July 2016.
Required:
Compute the Schedule 3 allowances and balancing charge (if any) for all the relevant years of
assessment up to year of assessment 2018.
(19 marks)
C. PYQ Feb 2021

Spa-Q Sdn Bhd has been in operation for 5 years. Due to high demand, Spa-Q Sdn

Bhd decided to construct a factory to manufacture its own cosmetic products. In February 2019, Spa-Q
Sdn Bhd bought a land where an existing industrial building has been previously located. The total
costs involved were RM3.5 million. The factory was completed and put into operation on 1 January
2020. Spa-Q Sdn Bhd closes its accounts on 31 December annually.
The breakdown of the total cost above is shown below:
RM
Cost of land 1,000,000
Demolition of an existing factory building 45,000
Legal fees for:
• Agreement for purchase of land 65,000
• Agreement with the contractor 25,000
Architect fees and building plan 30,000
Wiring and plumbing 70,000
Cost of internal roads 40,000
Construction costs 2,225,000
TOTAL 3,500,000

The floor space of the building was utilized in the following manner:
Production floor 75%
Warehouse 13%
Administrative office 12%
100%

In April 2020, Spa-Q constructed another building as a canteen and recreation room for its employees
at a cost RM450,000. In addition, Spa-Q also constructed a building as a living accommodation for its
employees at a cost of RM700,000.
Required:
Calculate the industrial building allowances of Spa-Q for the year of assessment 2020.
(9 marks)
D. PYQ July 2021

Impak Maksima Sdn Bhd is a manufacturing company in Kuala Lumpur. As part of the
business expansion, a factory was built on a piece of land in Cheras. The building was
completed in August 2020 and brought into use in November 2020. The company closes its
accounts annually on 31 December.
The following were the cost incurred in the construction of the factory:
Date Expenditure incurred RM
1 Jan 2019 Cost of land 250,000
2 Feb 2019 Architect’s fees 9,500
3 Feb 2019 Legal fees-agreement with contractor 15,000
4 Apr 2019 Cost of laying foundations for electric cables 20,000
8 May 2019 The cost of preparing plan for approval of the local 5,500
authority
1 Sept 2019 Labour, materials, management, and supervision 185,000
5 May 2020 Installation of fixtures and fittings 3,200

The company occupies 75% of the building for factory, 12% for administrative use and the
remaining areas for storage of materials.
A special machine was later installed in the factory in June 2020. The following is the capital
expenditure incurred:
RM
Cost of machinery installed 95,000
Cost of preparing a site to install the machine 205,000

In July 2020, the company purchased a house and use it as living accommodation for the
administrative workers. The house, which cost RM250,000 includes RM155,000 being the
cost of land.
Impak Maksima Sdn Bhd has also built a canteen for its staff at the cost of RM55,000 and
was completed on 1 December 2020. The canteen was only put into use in February 2021.
Required:
Calculate the industrial building allowance for the year of assessment 2020 for Impak
Maksima Sdn Bhd.
(9 marks)