INCOME TAX ACT 1967 (ACT 53)




SCHEDULE 4 - Expenditure On Prospecting Operations. [Am. Act 309: s.18]



1. Qualifying prospecting expenditure for the purposes of this Schedule is expenditure wholly and exclusively incurred in searching for, discovering or winning access to deposits of minerals in an eligible area or in testing any such deposits, but excludes expenditure on the acquisition of-
[Am. Act A471: s.13]

2. (a) A person who has incurred qualifying prospecting expenditure may elect to claim, within three months after the beginning of a year of assessment in the basis period in which the expenditure was incurred or within such period in that year of assessment as the Director General may allow, a deduction to be made under subparagraph 5(a) (in this Schedule that person and that year of assessment being referred to as the "prospector" and "the relevant year" respectively).

(b) Where no election has been made under subparagraph (a), a person who has incurred qualifying prospecting expenditure may claim for the relevant year a deduction under subparagraph 5(b).

[Subs. Act 309: s.18]
3. A claim under paragraph 2 shall-



in the case of subparagraph (b) or (c), shall contain such other information as may be necessary to enable the Director General to dispose of the claim in accordance with this Schedule.
[Subs. Act 309: s.18]
4. The declaration referred to in subparagraph 3(c) is a declaration by the prospector that-
[Am. Act 309: s.18]
[Ins Act 309:18]

5. Subject to this Schedule, there shall be deducted for the relevant year under subsection 44 (1)-


Provided that where the area specified in subparagraph 3(b) ceased to be an eligible area by reason of a lease, licence or certificate (other than a prospecting licence or certificate) granted or issued under any written law regulating mining being granted, issued or assigned to the prospector in any year of assessment subsequent to the relevant year, there shall be added under paragraph 43 (1) (c) in ascertaining the prospector's aggregate income for that year of assessment subsequent to that relevant year an amount equal to that prospecting expenditure or where a prospecting expenditure has been made to him for more than one relevant year the aggregate of all those expenditure for all those years; or
[Subs. Act 309: s.18]
6. Where-
[Am. Act 309: s.18]
he may make those amendments and allow the claim (in whole or in part) as amended.

7. Subject to paragraph 8, where a claim under this Schedule in respect of any area and expenditure has been allowed or disallowed, no other claim may be made for any year of assessment in respect of that area or expenditure.

8. Where a claim under this Schedule in respect of any area and expenditure is disallowed because the Director General is not satisfied as to any matter or which the declaration described in paragraph 4 relates, a further claim in respect of that area and expenditure may be made for a subsequent year of assessment.

9. Where a claim is made under this Schedule in respect of any area and expenditure, the amount of any deduction which would otherwise be made under subsection 44 (1) pursuant to this Schedule for any or all relevant years shall be reduced to the extent provided by paragraphs 10 to 13 (that amount being referred to in those paragraphs as the provisional deduction).
[Am. Act 309: s.18]
10. (1) Where machinery or plant has been purchased by the prospector and used in any operation connected with any qualifying prospecting expenditure to which the provisional deduction relates (whether or not is was first used in that way), the provisional deduction under subparagraph 5(a) shall be reduced-




(2) Where machinery or plant has been purchased by the prospector and used in any operation connected with any qualifying prospecting expenditure to which the provisional deduction relates (whether or not is was first used in that way), the provisional deduction under subparagraph 5(b) shall be reduced-



[Subs. Act 309: s.18]
11. For the purposes of paragraph 10, the consideration for a sale of machinery or plant shall be ascertained by taking the amount of any monetary consideration and the amount of the market value of any non-monetary consideration or, where there is only non-monetary consideration, by taking the amount of the market value of either-
[Am. Act 309: s.18]
whichever is the greater:

Provided that the consideration shall be taken to be the amount of the market value of the plant or machinery at the time of the sale in any case where the monetary consideration is less than the market value and the Director General is satisfied that the sale is a transaction to which section 140 applies.

12. The provisional deduction shall be reduced-


[Am. Act 309: s.18]

13. Where, by reason of the fact that as regards the prospector there is for the relevant year no or no sufficient defined aggregate, a deduction which would otherwise be made under subsection 44 (1) pursuant to this Schedule cannot be made or can be made only in part, the deduction (or, where the deduction can be made only in part, so much of the deduction as cannot be made) shall be made for the first year of assessment (being a year of assessment subsequent to the relevant year) for which in computing the total income of the prospector there is a defined aggregate, and so on for the years of assessment subsequent to that first year until the whole amount of the deduction has been made.

14. Where the operator uses in operations connected with qualifying prospecting expenditure any machinery or plant acquired by him otherwise than for such a use, the market value of the machinery or plant when first used in any of those operations (and not its price or market value when it was first acquired by him) shall be deemed to be included in that expenditure.

15. Where-


such adjustments in the ascertainment of the prospector's total income for any year of assessment shall be made as are necessary to compute the tax paid by him which would not have been paid if there had been allowed to him the deduction which would have been allowed if that sum or that part of that sum, as the case may be, had not been taken into account as receivable; and a sum equal to any tax so computed shall be repaid to the prospector by the Director General:

Provided that, where this paragraph has been applied to a part of that sum, that part shall be left out of account in any subsequent application of this paragraph.

16. Where the prospector receives in the basis year for a year of assessment subsequent to the relevant year which coincides with the year in which he permanently ceased to search for, win access or test deposits of minerals in that area-
[Am. Act 309: s.18]

the amount so received shall be added under paragraph 43(1)(c) in ascertaining the prospector's aggregate income for that subsequent year:

Provided that the amount (if any) so added in ascertaining the prospector's aggregate income for a year of assessment by virtue of this paragraph, together with any amount so added in ascertaining his aggregate income for any previous year of assessment in relation to the same claim, shall not exceed the total deductions allowed in pursuance of the claim under any of the foregoing paragraphs for the relevant year and any subsequent year of assessment.

17. In this Schedule-

"defined aggregate", in relation to the prospector and a year of assessment, means his aggregate income for that year reduced by any deduction falling to be made for that year pursuant to subsection 44 (2);

"eligible area" means any particular area in Malaysia which does not consist of or include an area with respect to which there is or has been in force at any time before the end of the basis year for the relevant year any lease, licence or certificate (other than a prospecting licence or certificate) granted or issued under any written law regulating mining and granted, issued or assigned to the prospector before the end of that basis year.


Related reading:
[Act A471: s.13; Act 309: s.18]


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