Question 1 First of all, Ms. Pitiful has been working with a multinational computer company in Malaysia.

According to Section 13(2) (a) Income Tax Act (ITA) 1967, her income was derived from Malaysia because the place of discharging her duties was within Malaysia. What she earned from the company was categorize as employment income according to Section 4 income. For her resident status in year 2000, she had work in Malaysia for 199 days. So, she was a resident by virtue of Section 7(1) (a). For the subsequence years until December 2010, she was also a resident in Malaysia because she had been working for the company and staying in Malaysia for the whole period. So, her income was chargeable based on the scale rate which is 0-26% and is able to claim for personal relief and allowances as well as rebates. On 13 May 2008, she has met with an accident while travelling to work. As a result she is required to use leg supporting aid to move around due to her permanent health condition. Based on the above facts, she can claims amount to RM 15,000 for her personal reliefs from year 2008 onwards. In additions, she also can claims for a deduction for the basic supporting equipment up to maximum RM 5,000 for the subsequences years starting from year 2008. For the company tax computation, it can claims for a double deduction for the remuneration of Ms. Pitiful for the year 2008 and the subsequences years by satisfied the allowable conditions as provided in section 33. On 14 December 2010, the company introduced a Voluntary Separation Scheme for staff. The Scheme was open to officers who were, inter alia, suffering from illnesses. Employees are not required to state their reasons for participate the scheme neither for the company. Ms. Pitiful had take part in this Scheme and opted for an early retirement under the Scheme and her application was accepted. She received amount of RM 480,000 under the Scheme and she had claimed full exemption for the amount received by virtue of Paragraph 15(1) (a), Schedule 6 of the ITA which refer to the payment is made on account of loss of employment due to illhealth. However, Mr. Halim who is the tax officer of Internal Revenue Board (IRB) refused the claim. He contended that Ms. Pitifuls loss of employment was because she participated in the Scheme and not because of any other reasons according to Paragraph 15(1) (b), Schedule 6 of the ITA which is exemption of RM10,000 per completed year of service with the same employer or different employers under common control or management provided that such separation schemes do not expressly or impliedly provided for the employee to be reemployed by the same employer or any other employer. Based on the above situation, there is a similar case HO SOON GUAN V KETUA PENGARAH HASIL DALAM NEGERI (2002) MSTC 3,887 (HIGH COURT). The fact was the taxpayer who worked for a Bank, suffered from an illness which required him to wear a neck collar. In 1997, the Bank introduced a Separation Scheme for Resident Officers. It was open to officers who were, inter alia, suffering from illnesses. However, an employee was not required to furnish any reasons to participate in the Scheme, and similarly the Bank was not obliged to furnish any reason for accepting or rejecting an application. The taxpayer opted for early retirement under the Scheme and his application was accepted. He received an amount of RM390,437 under the Scheme. The amount was brought to tax after

deducting the amount exempted of RM4, 000 per completed year of service pursuant to Paragraph 15(1)(b), Schedule 6 of the ITA. The High Court held that the Senior Counsel (SC) was correct in deciding that the decision to be made was based on a question of fact. In this case, it was to be decided whether the compensation received by the taxpayer was received for loss of employment as a result of ill health or not. The SCs decision was based on the findings of primary facts and was not ex facie bad in law. The SCs findings that ultimately the taxpayer had retired and received the compensation under the Scheme and not on account of his ill health, was not wrong in law. Based on the above case, Ms. Pitiful was in a similar situation. Based on the facts, both of them were: Opted for an early retirement under the Scheme and their application were accepted. Received retirement income under the Scheme.

The only different was the amounts that they received. So, she is not entitled to claimed full exemption of RM 480,000 under Paragraph 15 (1) (a), Schedule 6 of the ITA because of the nature that her loss of employment was because of participated in the Scheme but not because of the ill health. According to Paragraph 15 (1) (b), Schedule 6 of the ITA, Ms. Pitiful is entitle to claim an amount of RM 10, 000 x 9 years of completed services with the same employer which is RM 90,000 exemption of the amount RM 480,000 provided that she will not be reemployed by the same employer. Why Mr. Ho Soon Guan was only entitle for the exemption of RM 4,000 per completed years of service? This is because there was a change in law during period of 2002 to 2011. In the year 2002, the amount is subject to RM 4,000 per number of completed years of service under Paragraph 15 (1) (b), Schedule 6 of the ITA. The amount increased to RM 6,000 per number of completed years of service in year 2008 and finally increased to RM 10,000 per number of completed years of service by virtue Paragraph 15 (1) (b), Schedule 6 of the ITA.