Capital and Revenue Receipts. There are different types of business income whether it is capital receipt or revenue receipt.

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1.0 Question 1

There are different types of business income whether it is capital receipt or revenue receipt. The differences between capital and revenue receipt are shown in Table 1 (Veerinderjeet. S, 2008)

Scenario 1:

In my opinion, for the first scenario, the receipt of RM50, 000 is a Revenue Receipt. It is liable to income tax and it is supported by the following case.

In the case of Kelsall Parsons & Co. v CIR, the Court of Session held that the compensation was taxable and the Lord President commented that the sum which appellants received was paid as compensation for the cancellation of the agency contract. That was a contract incidental to the normal course of the appellant's business and it was to obtain as many business carried on as many contracts of this kind as they could. So the business of the company is not really affected even though any of the agents terminated the contract. (Veerinderjeet. S, 2008)

Mistron Bhd v Cuai Bhd reflected the similar situation in Kelsall case. Cuai Bhd is only one of the supplier among the various suppliers of Mistron Bhd. Mistron Bhd's business won't be affected