OWNERSHIP OF PLANT AND MACHINERY FOR THE PURPOSE OF CLAIMING CAPITAL ALLOWANCES
(Translation from the original Bahasa Malaysia text)

1.0 TAX LAW

This Ruling applies in respect of ownership of plant and machinery for the purpose of claiming initial and annual allowances under paragraphs 10 & 15, Schedule 3 to the Income Tax Act, 1967. It is effective from the year of assessment 2000 (current year basis) and subsequent years of assessment.
    3.1
 Deduction for capital allowances
In computing the statutory income from a business, capital allowances under Schedule 3 of the Income Tax Act 1967 [hereinafter referred to as capital allowances and the Act, respectively] are deductible from the adjusted income of that source.

3.2.1

 To qualify for initial allowance in respect of plant or machinery for a year of assessment, a person has to satisfy all the following conditions:
      • A.
 he was carrying on a business during the basis period;

3.2.2

 To qualify for annual allowance in respect of plant or machinery for a year of assessment, a person has to satisfy all the following conditions:
      • A.
 he was carrying on a business during the basis period;
    3.3
 Ownership of the asset

3.3.1

 “Ownership” of an asset refers to either legal or beneficial ownership.
      • A.
 the asset is registered in the name of one person (the legal owner) [ see paragraph 4.4 below ] although the qualifying plant expenditure has been incurred by another person (the beneficial owner) [see paragraph 4.3 below]; or
    3.4
 Asset owned by and used for the purpose of the business of the same person

A person who is both the beneficial and legal owner of an asset and uses that asset for the purpose of his business is entitled to claim the capital allowances in respect of that asset.
Example
Encik Salleh purchases a van on 21.06.2000 and registers it in his own name. He uses the van in his grocery business, for which accounts are prepared to 31 December every year. As at 31.12.2000, the van is still in use.In computing the statutory income from his grocery business for year of assessment 2000, Encik Salleh qualifies for capital allowances on the van as he has fulfilled the prescribed conditions [see paragraph 3.2 above]:
      • A.
 he was carrying on a business during the basis period;
    3.5
 Asset used for the purpose of the business of a person but registered in the name of another person

3.5.1

 Asset used for the purpose of the business of the beneficial owner but registered in the name of another person

Where a person has:
      • A.
 incurred the qualifying plant expenditure on the asset; and
      • that person (the beneficial owner) is entitled to claim both the initial and annual allowances in respect of that asset, even though he is not the registered owner of the asset.
- Example
Encik Azmi purchases a lorry in basis year 2001 and registers it in the name
of Encik Musa.The lorry is used by Encik Azmi in carrying on his transpor-
tation business. In computing the statutory income from the business of
Encik Azmi for year of assessment 2001, initial and annual allowances may
be claimed by him as he has fulfilled the prescribed conditions. Encik Musa
is not entitled to claim any of the allowances as he has not incurred the
qualifying plant expenditure.

3.5.2

 Asset registered in the name of a person and used for the purpose of the
business of more than one beneficial owner
Where:
      • A.
 more than one person has incurred qualifying plant expenditure on an asset;
- each of the beneficial owners of the asset is entitled to claim the capital allowances in respect of that asset in the appropriate proportion as determined by his respective share of the qualifying plant expenditure incurred.
[In such a situation, a statement to the effect that more than one person is claiming the capital allowances in respect of the same asset (together with details of the apportionment) must be made in their respective tax computations.]
Note: The above does not apply to a similar situation which involves a partnership, for which there are specific rules: see the Income Tax (Capital Allowances and Charges) Rules 1969 [P.U.(A) 96/1969].
Example
Brothers Ahmad and Ali, each operating his own restaurant business, together purchase a van costing RM56,000 on 01.09.2001. Ahmad pays RM30,000 and Ali pays RM26,000. The van is registered in Ahmad’s name. The van is used in both Ahmad’s and Ali’s businesses in the basis period for the year of assessment. The accounts of both businesses are closed on 31 December.
Initial and annual allowance should be computed as follows:
-
-
-
-
-
      • Year of assessment 2001

Ahmad

Ali
- For year of assessment 2001, Ahmad can claim capital allowances amounting to RM12,000 and Ali can claim RM10,400 in respect of the van.
      • A.
 although it has incurred capital expenditure, Syarikat X Bhd. did not incur it for the purpose of its business, nor did it use the asset for the purpose of its business; and
4.0 INTERPRETATION

For the purpose of this Ruling:
    4.1
 “Asset” means plant or machinery used for the purpose of the business on which qualifying plant expenditure has been incurred.