Over the years, the courts in Malaysia have laid down various guidelines or tests to distinguish gains arising: INTRODUCTION TO TAXATION Assignment, Malaysia


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  1. Over the years, the courts in Malaysia have laid down various guidelines or tests to distinguish gains arising from the disposal of investment and gains from trade or an adventure or concern in the nature of trade. The acid test is the ‘badge of trade’. There are ten badges of trade, and it is the total effect of all relevant factors and circumstances to determine the substance of the transaction.

The tax authorities are known to use the ‘badges of trade’ to argue that a taxpayer did engage in an ‘adventure in the nature of trade’. Thus, any profit will be assessable as business income. On the other hand, the taxpayer relying on the same ‘badges of trade’ argues that he is merely realizing a long-term investment, which is capital in nature. Any gains would be capital receipts. The badge of trade is the same, but the perspective of each party is entirely different. It rests with the learned Superintendent or Commissioner and judges of the court to decide on the issues in dispute.


Explain ANY FIVE (5) badges of trade in Malaysia with relevant case law to be quoted.

(50 marks)


  1. Section 4 of the Act categories various classes of income on which tax is chargeable. Gains or profits from employment and charged under Section 4(b) of the Act Under Section 4(b), the Act further explained Section 13(1) of the Act which categorizes various types of employment income.  The tax treatment for each of the above sections varies and this would affect the tax payable of the employee


Discuss in detail the content of Section 13(1)(a) & Section 13(1)(b) of Income Tax Act 1967 for Malaysia tax purpose.  Your discussion should include a detailed explanation, relevant diagram, or relevant mind map of both sections.

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