Gill FJ:

The appellant in this case is a rubber merchant and landed proprietor. Before the last war he acquired 7 lots of land at Sepang, which he sold in 1952. He bought 78 acres of land at Ulu Klang known as B Rubber Estate in 1949, which he sold in 1964. In 1951 he bought 187 acres of rubber land at Rawang, which he sold in 1960.

In or about December 1957, jointly with four other persons, he entered into an agreement for the purchase at a price of $197,837.60 of a rubber estate known as D Estate, two miles from Seremban town. They completed the purchase on 28 February 1958 and the land was registered as to one-half undivided share in the name of the appellant and as to one-eighth undivided share in the name of each of his four co- purchasers.

At the beginning of 1958 the co-purchasers of D Estate approached a firm of accountants with a view to forming a limited company to be known as the D Company Limited. On 19 September 1958 the manager of D Estate, one of the co-owners, wrote a letter to the District Officer, Seremban, informing him of a scheme to develop 16 acres of the land for the erection of 20 bungalows and to ask whether there would be any objection to the scheme. No subdivision of the land was contemplated, as the intention was to build the bungalows for the purpose of renting to a certain organisation. Development of the housing site commenced on receipt in March 1959 of a definite undertaking from that organisation that the houses would be taken on lease. The land was levelled and drains, sewers and roads constructed at a cost of approximately $50,000.

The D Company Limited was incorporated and registered on 8 May 1959. Prior to the date of such incorporation and registration the land had been valued by a licensed appraiser at $765,000. Soon afterwards, the appellant and his four co-owners transferred the land to the company in consideration of the company issuing fully paid up shares to the value of $765,000. For his half undivided share the appellant became entitled to shares to the value of $382,500 but he had himself registered as the owner of $10,000 shares only.

The appellant was one of the two subscribers to the memorandum and articles of association of the company. The objects of the company as set out in the memorandum of association, inter alia, were -

(a) To purchase or acquire land or lands with the object of laying out for building purposes, and to build on, improve let on building leases, advance money to person's building on, and otherwise develop the same, in such manner as may seem expedient to advance the company's interest.

(b)To develop and turn to account any land acquired by the company or in which it is interested, and in particular by laying out and preparing the same for building purposes, constructing, altering, pulling down, decorating, maintaining, fitting up, and improving buildings and conveniences, and by planting, paving, draining, farming, cultivating, letting on building leases or building agreement, and by advancing money to and entering into contracts and arrangements of all kinds with builders, tenants and others.

(c)To purchase for investment or resale and to traffic in land and houses and other property of any tenure and any interest therein and generally to deal in, traffic by hold and leasehold ground rents and to make advances upon the security of land or houses or other property or any interest therein and generally to deal in, traffic by way of sale, lease, exchange or otherwise with land and house property and any other property whether real or personal.

Building operations having commenced after the company was incorporated, the houses were completed in March, 1960, and they were let out on rent as from 8 May 1960 with one year's rental of $78,000 having been received in advance. Two additional bungalows, each of two storeys, were built on the land in 1964, and they were also let out on rental. The rubber trees on the land matured for tapping in Apri