SECOND SCHEDULE [Section 7] (Real Property Gains Tax Act 1976

Real Property Gains Tax Act 1976 (Act 169)

SECOND SCHEDULE [Section 7]

CHARGEABLE GAINS AND ALLOWABLE LOSSES

ARRANGEMENT OF PARAGRAPHS

Paragraph

1. Interpretation.
2. Acquisition and disposal generally.
3. Transactions in which disposal price is deemed equal to acquisition price.
4. Acquisition price.
5. Disposal price.
6. Incidental costs.
7. Excluded expenditure.
8. Effect of acquisition of capital sum in certain cases.
9. Certain transactions deemed to be at market value.
10. Subsequent disposal of asset deemed to be acquired at market value.
11. Definition of market value.
12. Gifts.
13. Exchanges.
14. Time of accrual of chargeable gains.
15. Date of disposal and acquisition generally.
I5A. Date of disposal in particular cases.
I5B. Date of acquisition in specific cases.
16. Conditional contracts.
17. Transfer of assets between companies in same group.
18. Acquirer's default in payment.
19. Acquisition price in particular cases.
20. Incumbrances.
21. Part disposals.
22. Distribution of assets of partnership, etc.
23. Connected persons.
24. Certain acquisitions before coming into force of Act.
25. Leases.
26. Contingent liabilities.
27. Options.
28. Dealings by nominees and certain trustees.
29. Dealings for enforcement of security.
30. Exclusion of reimbursed expenditure.
31. Prohibition of deduction for tax relief for allowable losses from tax assessed for earlier years.
32. Deductions allowable only once.
33. Certain losses not to be allowable.
34. Transfer of assets to controlled companies.
34A. Acquisition and disposal of shares in real property companies.
35. Trustees and partners.
36. Conclusiveness of income tax decisions.

CHARGEABLE GAINS AND ALLOWABLE LOSSES

1. Interpretation.

(1) In this Schedule, unless the context otherwise requires—

"asset" means a chargeable asset;

"child" means a legitimate child, a step-child or a child adopted by an individual or the husband or wife of the individual in accordance with any law;

"connected person" has the meaning assigned by paragraph 23;

[ Am. Act 328; 557 ]

"Islamic bank" has the meaning assigned to it under the Islamic Banking Act 1983 [Act 276] and includes a person carrying on banking or financing activities in accordance with the Syariah;

[Ins. Act 323:s:39, Sub Act 328:s:23 ]

"lease" means a lease over land, and includes a sub-lease, tenancy or licence, an agreement for a lease, sub-lease, tenancy or licence;

"legatee" includes any person entitled under a testamentary disposition or on an intestacy or partial intestacy;

"permitted expenses" means the expenditure specified in paragraph 5 (1) (a) and (b);

"relative" means child, brother, sister, ancestor or lineal descendant.

[Am. Act 557:s:38]

(2) For the purposes of this Schedule, a principal company and all its subsidiaries form a group and, where a principal company is a member of another group as being itself a subsidiary, both groups shall be treated as one group for those purposes.

(3) References to a disposal of an asset include, except where the context otherwise requires, references to a part disposal of an asset.

(4) For the purpose of this Schedule, "a consideration consisting substantially of shares" means a consideration consisting of not less than 75 per cent of shares.

[Ins. Act 323:s:39]

(5) Any reference in this Schedule to interest shall apply, mutatis mutandis, to expenses incurred in lieu of interest, in transactions conducted in accordance with the principles of Syariah.

[Ins. Act 323:s:39]

2. Acquisition and disposal generally.

Subject to this Schedule, every method, scheme or arrangement by which the ownership of an asset is transferred from one person to another shall constitute an acquisition of the asset by the transferee and a disposal of the asset by the transferor.

[ Am. Act 264:s:14]

3. Transactions in which disposal price is deemed equal to acquisition price.

In the following cases the disposal price shall be deemed to be equal to the acquisition price, that is to say-

(a) the devolution of the assets of a deceased person on his executor or legatee under a will or intestacy or on the trustees of a trust created under his will;

(b) the transfer of assets between spouses or the transfer of assets owned by an individual, by his wife or by an individual jointly with his wife or with a connected person to a company (whether or not resident in Malaysia) controlled by the individual, by his wife or by the individual jointly with his wife or with a connected person for a consideration consisting of shares in the company, or for a consideration consisting substantially of shares in the company and the balance of a money payment;

[ Am. Act 264:s:14]

(c) acquisitions from or disposals to a nominee or trustee resident in Malaysia by an individual or his wife or by both being absolutely entitled as against the nominee or trustee:

(d) the conveyance or transfer of an asset by way of security, or the transfer of a subsisting interest or right by way of security in or over an asset (including re-transfer on the redemption of the security);

(e) gifts made to the Government, a State Government, a local authority or a charity exempt from income tax under the income tax law; or

[ Am. Act 264:s:14]

(f) the disposal of an asset as a result of a compulsory acquisition under any law.

[ Ins. Act 264:s:14]

(g) the disposal of an asset by a person to an Islamic Bank under a scheme where that person is financed by such bank in accordance with the Syariah.

[Ins. Act 323:s:39, Am. Act A431]

4. Acquisition price.

(1) Subject to sub-paragraphs (2), (3) and (4) and the other provisions of this Schedule, the acquisition price of an asset is the amount or value of the consideration in money or money's worth given by or on behalf of the owner wholly and exclusively for the acquisition of the asset (together with the incidental costs to him of the acquisition) less-

(a) any sum received by him by way of compensation for any kind of damage or injury to the asset or for the destruction or dissipation of the asset or for any depreciation or risk of depreciation of the asset;

(b) any sum received by him under a policy of insurance for any kind of damage or injury to or the loss, destruction or depreciation of the asset; and

(2) Subject to sub-paragraph (3). where any sum of the kind mentioned in sub-paragraph (1) (a), (b) or (c) which is received by the owner of an asset exceeds the consideration and incidental costs referred to in that sub-paragraph, the amount of the excess shall constitute a chargeable gain accruing to the owner at the time when he receives the sum.

(3) Where an asset, which is disposed of, was acquired by the disposer prior to 1st January 1970, the market value of the asset as at the 1st January 1970 shall be substituted for-

(a) the consideration and incidental costs of the kind mentioned in subparagraph (1);

(b) the market value of the asset as at the date of transfer of ownership of the asset mentioned in paragraph 19 (1) and (3A);

(c) the amount of the legacy or the market value of the asset as at the date of transfer of ownership of the asset, whichever is the lower, mentioned in paragraph 19 (2); or

(d) the value of the asset for estate duty purposes referred to in paragraph 19 (3),

as the case may be, and the sum of the kind referred to in subparagraph (1) (a), (b) or (c) which relates to the period prior to the 1st January 1970 shall be disregarded.

[Ins. Act 323:s:39]

(4) Where-

(a) on the transfer of an asset the acquisition price paid for the asset by the transferor plus the permitted expenses incurred by him or, if the asset was acquired by that transferor prior to 1st January, 1970, the market value of that asset as at 1st January, 1970 plus the permitted expenses incurred by that transferor as from 1st January, 1970 less the sum of the kind referred to in paragraph 4 (1) (a), (b) or (c) received by or forfeited as the case may be to that transferor as from 1st January, 1970 are to be taken for the purposes of this Schedule as the acquisition price paid by the transferee; and

(b) subsequently to the transfer, the transferee receives any sum of the kind mentioned in sub-paragraph (1) (a), (b) or (c),

that sum shall be deducted from the acquisition price taken to have been paid by the transferee to the same extent as it would have been deducted from that transferor's acquisition price if it had been received by that transferor before the transfer:

Provided that where that sum exceeds the acquisition price taken to have been paid by the transferee, the amount of the excess shall constitute a chargeable gain accruing to the transferee at the time when he receives that sum.

(5) Where by virtue of sub-paragraph (2) or the proviso to subparagraph (4) any sum constitutes a chargeable gain accruing to a person in respect of an asset, his acquisition price for that asset shall. in relation to any subsequent disposal of that asset by him, be taken as nil.

5. Disposal price.

(1) Subject to sub-paragraph (2), the disposal price of an asset is the amount or value of the consideration in money or money's worth for the disposal of the asset less-

(a) the amount of any expenditure wholly and exclusively incurred on the asset at any time after its acquisition by or on behalf of the disposer for the purpose of enhancing or preserving the value of the asset, being expenditure reflected in the state or nature of the asset at the time of the disposal;

(b) the amount of any expenditure wholly and exclusively incurred at any time after his acquisition of the asset by the disposer in establishing, preserving or defending his title to, or to a right over, the asset; and

(2) Where an asset which is disposed of was acquired by the disposer prior to 1st January, 1970, the amount of the expenditure of the kind mentioned in sub-paragraph (1) (a) and (b) which relates to the period prior to 1st January, 1970 shall be disregarded.

6. Incidental costs.

(1) For the purposes of paragraphs 4 and 5 the incidental costs of the acquisition or disposal of an asset shall consist of expenditure wholly and exclusively incurred by the disposer for the purposes of the acquisition or (as the case may be) the disposal, being-

(a) fees, commission or remuneration paid for the professional services of any surveyor, valuer, accountant, agent or legal adviser;

(b) costs of transfer (including stamp duty);

(c) in the case of an acquisition, the cost of advertising to find a seller and, subject to subparagraph (2), any interest paid on capital employed to acquire the asset; and

(d) in the case of a disposal, the cost of advertising to find a buyer and costs reasonably incurred for the purposes of this Act in making any valuation or in ascertaining market value.

(2) Where the interest paid on capital employed to acquire an asset is expenditure of the kind mentioned in subsubparagraph 7 (a), (b) or (c), it shall be disregarded for the purposes of subsubparagraph (1) (c).

7. Excluded expenditure.

There shall not to be taken into account in computing the acquisition price or disposal price of an asset—

(a) any outgoings and expenses allowable as a deduction in computing any adjusted income or adjusted loss for income tax purposes;

(b) any outgoings and expenses which would have been allowable for income tax purposes, but for an exemption or insufficiency of gross income; and

(c) without prejudice to the preceding provisions of this subparagraph, any outgoings and expenses which, if the asset on or in respect of which they were incurred was and had at all times been held or used as part of the fixed capital of a business the profits or gains of which were chargeable with income tax, would be allowable as a deduction in computing the adjusted income or adjusted loss of the business for income tax purposes.

8. Effect of acquisition of capital sum in certain cases.

(1) There shall be deemed to be a disposal of assets by their owner where any capital sum, not being a sum of the kind mentioned in paragraph 4 (1) (a), (b) or (c) is derived in respect of assets notwithstanding that no asset is acquired by the person paying the capital sum, and this paragraph applies in particular to-

(a) capital sums received in return for forfeiture or surrender of rights, or for refraining from exercising rights; and

(b) capital sums received as consideration for use or exploitation of assets.

(2) In the case of a disposal within the meaning of sub-paragraph (1) the time of the disposal shall be the time when the capital sum is received and the sum received shall constitute a chargeable gain accruing at that time.

9. Certain transactions deemed to be at market value.

The acquisition or disposal of an asset by a person shall be deemed to be for a consideration equal to the market value of the asset-

(a) where he acquires or disposes of the asset otherwise than by way of a bargain made at arm's length and, in particular, where he acquires or disposes of it by way of gift:

(b) where he acquires or disposes of the asset wholly or partly-

(i) for a consideration that cannot be valued;

(ii) in connection with his own or another's loss of office or employment or diminution of emoluments; or

(iii) in consideration for or recognition of his or another's services or past services in any office or employment or of any other service rendered or to be rendered by him or another;

(c) where he acquires an asset as trustee for the creditors of any person in full or part satisfaction of any debt due from that person or where he transfers an asset as trustee for the creditors of any person to the creditors in full or part satisfaction of any debt due to the creditors;

(d) where he acquires or disposes of an asset in a transaction for the transfer of a business for a lump sum consideration; or

[ Am. Act 264:s:14]

(e) where section 25(2) applies.

[ Ins Act 264:s:14]

10. Subsequent disposal of asset deemed to be acquired at market value.

Where a person-

(a) is deemed for the purposes of this Act to acquire an asset at its market value; and

(b) subsequently disposes of the asset, the market value at which he is deemed to have acquired the asset shall be adopted as the acquisition price for the purpose of computing any gain accruing to or loss suffered by him on the disposal.

11. Definition of market value.

(1) Subject to this paragraph, the market value of an asset, which is acquired or disposed of is the price which it would fetch if it were sold in a transaction between independent persons dealing at arm's length at the time of the acquisition or disposal.

(2) If-

(a) the parties to the disposal of an asset are unable to agree on its market value; or

(b) there is only one party to the disposal of an asset; or

(c) the Director General is of the opinion that the market value of an asset as agreed on by the parties to its disposal is incorrect,

the market value in question shall be determined by the Director General.

12. Gifts.

Where an asset is disposed of by way of a gift, the disposal shall be deemed to be a disposal at the market value of the asset:

Provided that, where the donor and recipient and husband and wife, parent and child or grandparent and grandchild, and the gift is made within five years after the date of acquisition of the asset by the donor, the donor shall be deemed to have received no gain and suffered no loss on the disposal and the recipient shall be deemed to have acquired the assets at an acquisition price equal to the acquisition price paid by the donor plus the permitted expenses incurred by the donor.

[Sub. Act 337:s:19, Am.Act A431]

13. Exchanges.

Where an asset is disposed of by being exchanged for another asset (whether chargeable or not) the market value of the asset received by the disposer shall be taken as the consideration for the disposal:

Provided that, if the asset received by the disposer has no market value, the Director General may take the market value of the asset disposed of as the consideration for the disposal.

14. Time of accural of chargeable gains.

Subject to this Schedule, where an asset is disposed of, the chargeable gain or allowable loss is deemed to accrue to or suffered by the disposer at the time of the disposal whether the consideration is payable by instalments or not.

15. Date of disposal and acquisition generally.

(1) Except where this Schedule provides otherwise, a disposal of an asset shall be deemed to take place—

(a) where there is a written agreement for the disposal of the asset, on the date of such agreement; or

[Am. Act 557:s:38 ]

(b) where there is no written agreement, on the date of completion of the disposal of the asset.

[Am. Act 557:s:38 ]

(2) Except where this Schedule provides otherwise, where there is a disposal of an asset, the date of acquisition of the asset by the acquirer shall be deemed to coincide with the date of disposal of that asset by the disposer to that acquirer.

(3) For the purposes of this Schedule-

(a) the date of completion of a disposal means-

(i) the date on which the ownership of the asset disposed of is transferred by the disposer; or

(ii) the date on which the whole of the amount or value of the consideration (in money or money's worth) for the transfer has been received by the disposer,

whichever is the earlier

(b) a transfer or ownership of an asset is deemed to take place on the date when the last of all such things shall have been done under any written law as are necessary for the transfer of ownership of the asset.

15A. Date of disposal in particular cases.

A disposal of an asset shall be deemed to take place-

(a) in the case of a gift of an asset on death, on the date of transfer of ownership of the asset to the recipient;

(b) in the case where a legatee accepts an asset in place of a money legacy, on the date of transfer of ownership of the asset to the legatee;

(c) in the case where an asset of a deceased person is transferred to a legatee by his executor (irrespective of whether he himself is the legatee or not) or by the trustee of a trust created under his will, on the date of transfer of ownership of the asset to the legatee.

[ Ins.Act 323:s:39 ]

I5B. Date of acquisition in specific cases.

(1) Where an asset of a deceased person is disposed of (otherwise than to a legatee) by his executor or by the trustee of a trust created under his will such executor or trustee shall be deemed to have acquired it on the date of death of the deceased person.

(2) Where an asset is acquired with a financing facility provided by an Islamic Bank in accordance with the Syariah, the acquirer shall be deemed to have acquired the asset on the date of the agreement for the acquisition of the asset entered into between the acquirer and a person other than such Islamic bank or, in the case where the asset is owned by such bank, on the date of the agreement for the acquisition of the asset entered into with the bank.

[ Ins.Act 323:s:39, Am. Act 337]

(3) Where land vested in a person as a result of a partition mentioned in section 2 (4) is disposed of, the disposer shall be deemed to have acquired it on the date of acquisition of his undivided share in the land as a co-proprietor.

[Ins Act 337:s:19]

16.Conditional contracts.

Where-

(a) a contract for the disposal of an asset is conditional; and

(b) the condition is satisfied (by the exercise of a right under an option or otherwise),

the acquisition and disposal of the asset shall be regarded as taking place at the time the contract was made, unless the amount of the consideration depends wholly or mainly on the value of the asset at the time when the condition is satisfied in which case the acquisition and disposal shall be regarded as taking place when the condition is satisfied.

17. Transfer of assets between companies in same group.

(1) Subject to this paragraph, where with the prior approval of the Director General—

(a) an asset is transferred between companies in the same group to bring about greater efficiency in operation for a consideration consisting of shares in the company or substantially of shares in the company and the balance of a money payment;

(b) an asset is transferred for any consideration between companies in any scheme of reorganisation, reconstruction or amalgamation; or

(c) an asset is distributed by a liquidator of a company and the liquidation of the company was made under a scheme of reorganisation, reconstruction or amalgamation:

and the transferee company is resident in Malaysia, the transfer shall be treated as a disposal on which the transferor company or the liquidator receives no gain and suffers no loss:

Provided that no approval shall be given for any transfer or distribution of asset in any scheme under subsubparagraph (1) (b) or (1) (c) unless the Director General is satisfied that such an asset is transferred to implement any such scheme directly connected with any transfer or distribution of ownership of an asset in Malaysia to a company resident in Malaysia which is being restructured under such scheme in compliance with Government policy on capital participation in industry.

[ Ins. Act 264:s:14]

(2) Where in a transfer of the kind mentioned in subparagraph (1)-

(a) the asset is taken into the trading stock of the transferee company on or after the coming into force of this Act; and

(b) the value at which the asset is so taken in exceeds the acquisition price paid by the transferor company plus the permitted expenses incurred by the transferor company or, if the asset was acquired by that transferor company prior to 1 January, 1970, the market value of the asset as at 1st January 1970 plus the permitted expenses incurred by that transferor company as from 1 January 1970 less the sum of the kind referred to in subsubparagraph 4 (1) (a), (b) or (c) received by or forfeited as the case may be to that transferor company as from 1 January 1970,

the taking in shall be deemed to be a disposal of the asset by the transferee company and the excess shall constitute a chargeable gain accruing to the transferee company at the date when the asset or part thereof was taken into stock.

(3) The Director General may withdraw any approval for a transfer given under sub-paragraph (1) within three years after giving it if-

(a) it appears to him that the transfer was made wholly or partly for some purpose other than the purpose mentioned in that subparagraph;

(b) in the case of approval under subparagraph (1) (a), the transferee company ceases to be in the same group of companies as the transferor company; or

(4) Where approval of a transfer is withdrawn under sub-paragraph (3)-

(a) the provisions of subparagraph (1) as to the acquisition and disposal prices shall cease to have effect; and

(b) the Director General shall make such assessment on the transferor or transferee company as he considers proper in the circumstances.

(5) Notwithstanding the provisions of other paragraphs in this Act and for the purposes of this paragraph where an asset is transferred for the purposes of restructuring in compliance with Government policy on capital participation in industry which has been approved by the Director General, the date of acquisition by the transferee company is deemed to be the date when the transferor company first acquired that asset.

[ Am. Act A431; Act 264; 293:s:29; 323 ]

18. Acquirer's default in payment.

Where the disposer of an asset satisfies the Director General that by reason of the acquirer's default the consideration for the disposal (or part thereof) has not been received by the disposer, the chargeable gain accruing in respect of the disposal shall be reduced by an amount equal to the value of so much of the consideration as has not been received, and the Director General shall make such adjustment by way of repayment of the tax or otherwise as the circumstances require:

Provided that any subsequent receipts of any kind relating to the disposal by the disposer shall be brought into account as part of the chargeable gain and may be assessed by the Director General accordingly.

19. Acquisition price in particular cases.

(1) Subject to subparagraph 4 (3), in the case of a gift of an asset on death, there shall be deemed to be an acquisition of the asset by the recipient at an acquisition price equal to the market value of the asset as at the date of transfer of ownership of the asset to the recipient less the sum of the kind referred to in paragraph 4 (1) (a), (b) or (c) received by or forfeited as the case may be to that recipient.

[Sub. Act 323:s:39]

(2) Subject to subparagraph 4 (3), where a legatee accepts an asset in place of a money legacy, there shall be deemed to be acquisition of the asset by the legatee at an acquisition price equal to the amount of the legacy or the market value of the asset as at the date of transfer of ownership of the asset to the legatee, whichever is the lower less the sum of the kind referred to in subsubparagraph 4 (1) (a), (b) or (c) received by or forfeited as the case may be to that legatee.

[Am. Act 323:s:39]

(3) Subject to subparagraph 4 (3), where an asset of a deceased person is disposed of (otherwise than to a legatee) by his executors or by the trustees of a trust created under his will, such executors or trustees shall be deemed to have acquired it at an acquisition price equal to the market value of the asset as at the date of the death of that deceased person less the sum of the kind referred to in subsubparagraph 4 (1) (a), (b) or (c) received by or forfeited as the case may be to such executors or trustees.

[Am. Act 476:s:26]

(3A) Subject to subparagraph 4 (3), where an asset of a deceased person is transferred to a legatee by his executor (irrespective of whether he himself is the legatee or not) or by the trustee of a trust created under his will, there shall be deemed to be an acquisition price equal to the market value of the asset as at the date of transfer of ownership of the asset to the legatee less the sum of the kind referred to in subsubparagraph 4 (1) (a), (b) or (c) received by or forfeited, as the case may be, to that legatee.

[Ins. Act 323:s:39]

(4) Where an asset which with the prior approval of the Director General under paragraph 17 has been transferred from one company to another is subsequently disposed of, the disposer shall be deemed to have acquired the asset at an acquisition price equal to the acquisition price paid for the asset by the transferor plus the permitted expenses incurred by the transferor or, if the asset was acquired by the transferor prior to 1 January 1970, the market value of the asset as at 1 January 1970 plus the permitted expenses incurred by the transferor as from 1st January 1970 less the sum of the kind referred to in subsubparagraph 4 (1) (a), (b) or (c) received by or forfeited as the case may be to the transferor as from 1 January 1970.

(5) Where an asset which has been transferred under subparagraph 3 (b) is subsequently disposed of by the spouse or the company, the disposer shall be deemed to have acquired the asset at an acquisition price equal to the acquisition price paid by the transferor plus the permitted expenses incurred by the transferor or, if the asset was acquired by the transferor prior to 1 January 1970, the market value of the asset as at 1 January 1970 plus the permitted expenses incurred by the transferor as from 1 January 1970 less the sum of the kind referred to in subsubparagraph 4 (1) (a), (b) or (c) received by or forfeited as the case may be to the transferor as from 1 January 1970;

[ Am. Act 264:s:14]

(6) Where an asset on being transferred to a company in the circumstances mentioned in subparagraph (5) is taken into the trading stock of the company at a value which exceeds the acquisition price paid by the transferor plus the permitted expenses incurred by him or, if the asset was acquired by the transferor prior to 1 January 1970, the market value of the asset as at 1 January 1970 plus the permitted expenses incurred by the transferor as from 1 January 1970 less the sum of the kind referred to in subsubparagraph 4 (1) (a), (b) (c) received by or forfeited as the case may be to the transferor as from 1st January 1970, the taking in shall be deemed to be a disposal of the asset by the company and the excess shall constitute a chargeable gain accruing to the company at the time when the asset or part thereof is taken into stock.

(7) Where an asset is acquired by a person (hereinafter referred to as "the acquirer") with a financing facility provided by an Islamic bank in accordance with the Syariah, the acquisition price of the asset shall be the amount or value of the consideration given by or on behalf of the acquirer to the person disposing that asset other than such Islamic bank or in the case where the asset is owned by such bank, the amount or value of the consideration given to the bank, for the acquisition of the asset (together with the incidental costs to him of the acquisition) less the sum of the kind referred to in subsubparagraph 4 (1) (a), (b) or (c) received by or forfeited, as the case may be, to that acquirer.

(8) Where land vested in a person as a result of a partition mentioned in subsection 2 (4) is disposed of, the disposer shall be deemed to have acquired it at the acquisition price paid by him for the acquisition of his undivided share in the land as a co-proprietor or, if his undivided share in the land was acquired by him prior to 1st January 1970, at the market value thereof as at 1st January 1970 plus the permitted expenses incurred by him as from 1st January 1970 less the sum of the kind referred to in subsubparagraph 4 (1) (a), (b) or (c) received by or forfeited as the case may be to him as from 1st January 1970.

[Ins. Act 337:s:19, Am.Act A431; 476]

20. Incumbrances.

(1) Where an asset is acquired subject to a subsisting charge or incumbrance, any payment made by the acquirer on account of the charge or incumbrance shall be deemed to form part of the acquisition price.

(2) Where an asset is disposed of subject to a subsisting charge or incumbrance, the full amount of the liability assumed by the acquirer shall be deemed to form part of the disposal price.

21. Part disposals.

(1) There is a part disposal of an asset where, on a person making a disposal, any description of property derived from the asset remains undisposed of.

(2) Subject to subparagraph (3) and the other provisions of this Act, where at any time the owner of an asset disposes of a part of that asset, whenever necessary, the acquisition price of the asset and the amounts of all such additions and deductions as would have fallen to be made under paragraph 4 and subsubparagraphs 5 (1) (a) and (b) if the asset had been disposed of at that time shall each be apportioned between that part of the asset and the remainder thereof on whatever basis is most appropriate, and so much of that price and of those amounts as are so apportioned to the part of the asset disposed of shall be taken in applying paragraph 4 and subsubparagraphs 5 (1) (a) and (b) to the acquisition and disposal of that part.

(3) Where an asset consists of a lease and part of the asset becomes subject to a sub-lease for which a premium is paid, a fraction of the acquisition price of the asset bearing the same proportion to the whole price as the multiple of the duration of the sub-lease and the area sub-leased bears to the multiple of the duration and area of the lease shall be taken as the acquisition price paid by the disposer for the part subleased.

22. Distribution of assets of partnership, etc.

Where an investment club, an investment trust, a unit trust or (notwithstanding subparagraphs 23 (1) and (4)) a partnership makes a distribution of any of its assets among all its members who are entitled to share in its profits, each member shall be deemed to acquire the assets received by him at an acquisition price equal to the acquisition price paid for those assets (plus the permitted expenses incurred) by the investment club, investment trust, unit trust or partnership or, if the asset was acquired by the investment club, investment trust, unit trust or partnership prior to 1 January 1970, the market value of the asset as at 1 January 1970 plus the permitted expenses incurred by the investment club, investment trust, unit trust or partnership as from 1 January 1970 less the sum of the kind referred to in subsubparagraph 4 (1) (a), (b) or (c) received by or forfeited as the case may be to the investment club, investment trust, unit trust or partnership as from 1 January 1970.

23. Connected persons.

(1) An asset acquired as the result of a transaction between connected persons is acquired otherwise than by way of a bargain made at arm's length.

(2) A person is connected with an individual if that person is the individual's husband or wife or is a relative (or the husband or wife of a relative) of the individual or of the individual's husband or wife.

(3) A person in his capacity of trustee is connected with any individual who in relation to the trust is a settlor and with any person who is connected with such an individual.

(4) A person is connected with any person with whom he is in partnership, and with the husband, wife or relative of any individual with whom he is in partnership.

(5) A company is connected with another company-

(a) if the same person has control of both, or a person has control of one and persons connected with him (or he and persons connected with him) have control over the other; or

(b) if two or more groups of persons have control of each company and the groups either consist of the same persons or could be regarded as consisting of the same persons by treating (in one or more cases) a member of either group as replaced by a person with whom he is connected.

(6) A company is connected with another person if that person has control of it or if that person and persons connected with him together have control of it.

(7) Any two or more persons acting together to secure or exercise control of a company shall be treated in relation to that company as connected with one another and with any person acting on the directions of any of them to secure or exercise control of the company.

(8) Any reference in subparagraphs (2) to (7) to a person being connected with another shall be taken as meaning that they are connected persons.

24. Certain acquisitions before coming into force of Act.

(1) Where in the case of an asset consisting of land-

(a) the land was acquired before the date of coming into force of this Act; and

(b) the construction of a building on the land was either-

(i) begun on or after the date of coming into force of this Act;

(ii) begun before that date but left unfinished; or

(iii) begun before that date but finished on or after that date.

then, without prejudice to any right the owner may have under subsubparagraph (5) (1) (a) or (b) to deduct the cost of construction or any other permitted expenses from the disposal price on any subsequent disposal, the asset shall be deemed to have been acquired on the date the construction was begun in a case where item (1) (b) (i) or (ii) applies or on the date the construction was finished in a case where item (1) (b) (iii) applies at a price equal to the acquisition price of the land:

Provided that this item shall not apply where the Director General is satisfied that the building in question has been constructed for the purpose of working an estate, plantation, farm, mine or forest or for the provision of accommodation to employees in an estate, plantation, farm, mine or forest and in all such cases the cost of construction of the building is not substantially reflected in the state or nature of the asset at the time of disposal by the owner.

(2) Where, under an agreement made before the date of coming into force of this Act for the disposal of an asset, payment for the asset is to be in instalments, the date of disposal and acquisition shall be the date on which the ownership of the asset is transferred to the purchaser, unless-

(a) all the instalments were paid before the date of coming into force of this Act, in which case the disposal and the acquisition shall be treated as having taken place before the date of coming into force of this Act.

(b) all the instalments were paid after the date of coming into force of this Act, in which case the disposal and acquisition shall be treated as having been made after that date.

(3) For the purposes of this paragraph the term "instalments" refers to two or more payments of the acquisition price (other than any deposit or advance payment) as stipulated in the agreement as agreed to by the parties.

[Ins Act 241:s:26, Am. Act A431; Am Act 264:s:14]

25. Leases.

(1) The grant of a lease is the disposal of an asset, namely, the lease.

(2) Where a lessee transfers a lease for which he has paid a premium, a fraction of the premium paid by him, arrived at by dividing the number of years of the unexpired term by the number of years of the full term, shall replace the full premium in the computation of the acquisition price of the lease.

(3) Where a lease for which a premium has been paid is transferred without consideration or for a consideration which is of only nominal value, the premium (or in the case to which subparagraph (2) applies, the fraction mentioned in that subparagraph) shall be disregarded in computing the acquisition price of the lease on the subsequent disposal of the lease by the transferee.

(4) The question whether a consideration is of only nominal value for the purposes of subparagraph (3) shall be decided by the Director General, whose decision shall be final and not subject to appeal.

(5) A person who disposes of land which is or has been leased to a lessee shall not be entitled to deduct from the disposal price under paragraph 5 any expenditure incurred by the lessee in erecting buildings on or otherwise improving the land.

26. Contingent liabilities.

(1) Subject to subparagraph (2), no allowance shall be made in the computation of a disposal price—

(a) in the case of a disposal by way of transferring a lease, for any liability remaining with or assumed by the disposer which is contingent on a default in respect of liabilities assumed by the acquirer under the terms and conditions of the lease;

(b) for any contingent liability of the disposer in respect of any covenant for quiet enjoyment or other obligation assumed by the transferor of the asset; or

(2) If after a disposal of the kind mentioned in sub-paragraph (1) it is shown to the satisfaction of the Director General that a liability of the kind mentioned in that subparagraph has become enforceable and is being or has been enforced, he shall make such adjustment by way of repayment of the tax or otherwise as the circumstances require.

27. Options.

(1) The grant of an option over a chargeable asset is the disposal of a chargeable asset, namely, the option.

(2) Where a right under an option is exercised so that the asset to which the option relates is disposed of to the person exercising the right, the grant of the option and the disposal shall be regarded as one transaction and the amount paid for the option shall be deemed to be part of the consideration for the disposal of the asset.

(3) Where a right under an option is disposed of at a loss by the person entitled to exercise the right, the loss shall not be taken as an allowable loss suffered by that person unless the right is subsequently exercised by the person acquiring the right or his successors.

28. Dealings by nominees and certain trustees.

In relation to assets held by a person as nominee for another person, or as trustee for another person absolutely entitled as against the trustee (or for two or more persons jointly so entitled), this Act shall apply as if the assets were vested in, and the acts of the nominee or trustee in relation to the assets were the acts of the person or persons for whom he is the nominee or trustee (acquisitions from or disposals to the nominee or trustee by that person or those persons being disregarded accordingly).

29. Dealings for enforcement of security.

Where a person entitled to an asset by way of security or to the benefit of a charge or incumbrance on an asset deals with the asset for the purpose of enforcing or giving effect to the security, charge or incumbrance, his dealings with it shall be treated as if they were done through him as nominee by the person entitled to the asset subject to the security, charge or incumbrance; and this paragraph shall apply to the dealings of any person appointed to enforce or give effect to the security, charge or incumbrance as receiver and manager as it applies to the dealings of the person so entitled.

30. Exclusion of reimbursed expenditure.

Expenditure in respect of which a disposer has been or is to be directly or indirectly reimbursed by any other person or by any government or other authority shall not be taken into account as expenditure for the purposes of subsubparagraphs 5 (1) (a) or (b) and where the expenditure is reimbursed after the disposer has been assessed the Director General may vary the assessment so as to take account of the reimbursement:

Provided that the receipt of a sum of the kind described in paragraph 4 (1) (a) or (b) shall not be regarded as a reimbursement for the purposes of this paragraph.

31. Prohibition of deduction for tax relief for allowable losses from tax assessed for earlier years.

Tax relief for any allowable loss suffered in a year of assessment shall not be allowed as a deduction from the tax assessed on chargeable gains accruing in any earlier year of assessment.

32. Deduction allowable only once.

No amount given by way of a deduction shall be allowable on the disposal of an asset by any person in a computation under this Schedule more than once.

33. Certain losses not to be allowable.

A loss suffered in respect of a disposal shall not be allowable if-

(a) the date of the disposal was before the date of coming into force of this Act;

(b) any gain accruing in respect of the disposal would have been exempt from the tax under this Act;

(d) the disposal is a disposal of a chargeable asset under paragraph 34A.

[Am. Act 364:s:24]

34. Transfer of assets to controlled companies.

(1) Where an asset is transferred to a company under subparagraph 3(b) for a consideration consisting of shares in the company, or for a consideration consisting substantially of shares in the company and the balance of a money payment, the acquisition price paid for the asset by the transferor, plus the permitted expenses incurred by him and minus the amount of any money payment or, if the asset was acquired by the transferor prior to 1 January 1970, the market value of the asset as at 1 January 1970 plus the permitted expenses incurred by the transferor as from 1 January 1970 less the sum of the kind referred to in subsubparagraph 4 (1) (a), (b) or (c) received by or forfeited as the case may be to the transferor as from 1 January 1970, and minus the amount of any money payment, shall be taken as the acquisition price of the shares:

Provided that, where the money payment exceeds the acquisition price paid for the asset by the transferor plus the permitted expenses incurred by him or, if the asset was acquired by the transferor prior to 1 January, 1970, the market value of the asset as at 1 January 1970 plus the permitted expenses incurred by the transferor as from 1 January 1970 less the sum of the kind referred to in subsubparagraph 4 (1) (a), (b) or (c) received by or forfeited as the case may be to the transferor as from 1 January 1970, the acquisition price of the shares shall be deemed to be nil and, if the payment was made on or after the date of coming into force of this Act, the excess shall constitute a chargeable gain accruing to the transferor.

[Am.Act A431]

(2) A disposal of any of the shares acquired by the transferor under sub-paragraph (1) shall be deemed to be a disposal of a chargeable asset by the transferor.

34A. Acquisition and disposal of shares in real property companies.

(1) An acquisition of shares in a real property company (hereinafter referred to in this paragraph as "the relevant company") shall be deemed to be an acquisition of a chargeable asset, and where such shares are disposed of, such a disposal shall be deemed to be a disposal of a chargeable asset notwithstanding that at the time of disposal of such shares the relevant company is not regarded as a real property company.

(2) The chargeable asset in this paragraph shall be deemed to be acquired-

(a) on the date the relevant company becomes a real property company; or

(b) on the date of acquisition of the chargeable asset.

Proviso [Repealed by Act 578:31]

(3) For the purposes of this paragraph, the acquisition price of a chargeable asset shall-

(a) where subparagraph (2)(a) applies, be deemed to be equal to a sum determined in accordance with the formula-

A x C,
B

where

A is the number of shares deemed to be a chargeable asset;

B is the total number of issued shares in the relevant company at the date of acquisition if the chargeable asset; and

C is the defined value of the real property or shares or both owned by the relevant company at the date of acquisition of the chargeable asset;

(b) where subparagraph (2)(b) applies, be determined in accordance with paragraph 4 or 9.

[Ins.Act 578:s:31]

(4) notwithstanding paragraph 5, the disposal price of the chargeable asset in this paragraph is the amount or value of the consideration in money or money's worth for the disposal of the chargeable asset.

(5) This paragraph shall not apply to an acquisition or a disposal of any shares under paragraph 34.

(6) For the purposes of this paragraph -

"controlled company " means a controlled company as defined under the Income Tax Act 1967; Act 53.

" defined value " means the market value of real property or the acquisition price of shares as determined under subparagraph (3);

" real property company " means-

(a) a controlled company which, as at 21 october 1988, owns real property or shares or both, the defined value of which is not less than seventy-five per cent of the value of its total tangible assets; or

(b) a controlled company to which subsubparagraph (a) is not applicable, but which , at any date after 21 October 1988, acquires real property or shares or both whereby the defined value of real property or shares or both owned at that date is not less than seventy-five per cent of the value of its total tangible assets:

Provided that where at any date the company disposes of real property or shares or both whereby the defined value of real property or shares or both owned at that date and thereafter is less than seventy-five per cent of the value of its total tangible assets, that company shall not be regarded as real property company as from that date;

" shares " refers to shares owned in a real property company;

" value of its total tangible assets " means the aggregate of the defined value of real property or shares or both and the value of other tangible assets.

[Ins. Act 36424; Am. Act 578]

35. Trustees and Partners.

(1) Where an asset is an asset of a trust or partnership, then in whatever persons the ownership of the asset is vested, any acquisition or disposal of the asset shall be treated as an acquisition or disposal by the trustee or the partnership, as the case may be, and any gain or loss in respect of a disposal shall be assessed on or attributed to the trustee or the partnership.

(2) Where a person who is the owner of an asset-

(a) is a member of a partnership; or

(b) becomes a member of a partnership on its formation or in any other way,

and transfers the asset to the partnership, the partnership shall be deemed to have acquired the assets at an acquisition price equal to the acquisition price paid by that person plus the permitted expenses incurred by that person before he so transferred it or, if the asset was acquired by that person prior to 1 January 1970, the market value of the asset as at 1 January 1970 plus the permitted expenses incurred by that person as from 1 January 1970 less the sum of the kind referred to in subsubparagraph 4(1)(a), (b) or (c) received by or forfeited as the case may be to that person as from 1 January 1970.

(3) Where one partnership is succeeded by another and at least one person who was a member of the succeeded partnership is a member of the succeeding partnership , both partnerships shall be treated for the purposes of this Act as one continuing partnership.

(4) Where on the dissolution of a partnership a person who was a member of the partnership immediately before its dissolution carries on the business formerly carried on by the dissolved partnership and acquires any assets which were formerly assests of the dissolved partnership, he shall be deemed to have acquired those assets at the price at which the partnership acquired or is deemed to have acquired them or, if the asset was acquired by the partnership prior to 1 January 1970, at the market value of the asset as at 1 January 1970 plus the permitted expenses incurred by the partnership as from 1 January 1970 less the sum of the kind referred to in subsubparagraph 4(1)(a), (b) or (c) received by or forfeited as the case may be to the partnership as from 1 January 1970.

(5) Where after the death of a member of a partnership his executor or legatee withdraws from the partnership and thereby causes any asset of the partnership (or any interest in such an asset ) to cease to be an asset or interest of the partnership, there shall be deemed to be a disposal of the asset or interest by the partnership at a price equal to its acquisition price.

36. Conclusiveness of income tax decisions.

Any decision of the Special Commissioners or the court on any matter for income tax purposes shall be conclusive so far as under this Act liability to the tax or any other matter relating to the tax depends on the provisions of the income tax law.