Dec-11

1. Kelana Suria Sdn. Bhd is in business of manufacturing rubber. For the

financial year ended 31st December, the company incurred the new
factory expenditure for the purpose of its business.

RM
Cost of land 120,000
Legal fee for the land acquisition 12,500
Legal fee (factory) 20,000
Cost of demolished a non factory building 62,000
Contraction cost 474,500
Drainage and irrigation 50,000
Labour and transportation cost 250,000
Cost of changed land status 62,500
Cost of plant 40,000
Cost of preparing a site to install the plant 125,000

The building was constructed and used in 2003 and divided as a office and
showroom for 1//11 from the total building space. Due to financial problems,
Kelana Suria Sdn. Bhd stopped the rubber production and the building was sold to
Wawasan Gemilang Ltd on 1st September 2010 for RM 1,250,000 of which
RM 250.000 was related to the cost of land. Wawasan Gemilang Ltd’s
financial year report ended 31st December every year and involved in the
manufacture of medical equipment.

You are required to:

Determine the qualifying building expenditure and calculate the

industrial building allowance for each company for the relevant year of
assessment up to year assessment 2010.
 ffice and
problems,
lding was sold to
of which
ANSWER:

KELANA SURIA SDN. BHD.

Year Ended 31 December every year

Rule of 75%
RM
Cost of plant 40,000
Cost of preparing site 12,500
TOTAL COST 165,000

𝟏𝟐𝟓𝟎𝟎𝟎
/𝟏𝟔𝟓𝟎𝟎× 100 % = 76% > 75%
𝟎

∴ The Cost of preparing site is more than 75%, so the cost of entitled for
Industrial building.

RM
Cost of land NIL
Legal fee for the land acquisition NIL
Legal fee (factory) 20,000
Cost of demolished a non factory building 62,000
Contraction cost 474,500
Drainage and irrigation 50,000
Labour and transportation cost 250,000
Cost of changed land status NIL
Cost of plant 40,000
Cost of preparing a site to install the plant 125,000
TOTAL COST 1,021,500

Rule of 10%

Test : 1∕11 × 100 % = 9% < 10%

∴ Office and showroom is less than 10%.

So, office and showroom are entitled for Industrial Building and
can claimed Industrial Building Allowance (IBA) .
Therefore, the QBE is RM 1,021,500
Computation of Industrial Building Allowance

Year Assessment 2003

Qualifying Building Expenditure 1,021,500
(-) Initial Allowance ( 10% ) 102,150
(-) Annual Allowance ( 3% ) 30,645
Residual Expenditure 888,705

Year Assessment 2004 - 2009

(-) Annual Allowance ( 6 Years × RM 30,645) (183,870)
Residual Expenditure 704,835

Year Assessment 2010

Disposal value ( 1,250,000 - 250,000) 1,000,000

Balancing Charge 295,165

Total Industrial Building Allowance (IBA) that are claimed:

= ( RM 30,645 × 7 Years) + RM 102,150
= RM 316, 665

∴ The Balancing Charge is RM 295,165

Wawasan Gemilang Ltd

Year ended : 31 December every year

Purchase of building = RM1,250,000 - RM 250,000

= RM1,000,000

∴ Since the entire building use as manufacture of medical equipments,

So, the entire building is entitled as Industrial Building.