Mokhtar Sidin JCA:

[1] In this case the appellant is a company incorporated under the Companies Act 1965. On 28 March 1980 the appellant purchased the following pieces of land for the sum of RM6,100,000:-

	Land Title	Lot No	Land Areas (sq ft)
GT 2047	(New Land Title GT 9344)	43)
		)
GT 2048	(New Land Title GT 9345)	44)
		)	101,004.75
GT 2049	(New Land Title GT 9346)	45)
		)
GT 2050	(New Land Title GT 9347)	46)
GT 9348		54)
		)
GT 16200		74)	89,243.55
		)
GT 16201		84)
			190,248.30

[2] On 20 August 1982, the appellant obtained approval from the Kuala Lumpur City Hall to build a 31-storey office block on the land. In the Annual Report dated 4 June 1983, the chairman of Hoklian Holdings Sdn Bhd, which has through its wholly-owned subsidiary company 50% equity participation in the appellant's company said:-

The Company has also through its wholly-owned subsidiary, Hoklian Development Sdn Bhd, entered into a joint-venture with Koperasi Jaya Diri Malaysia Bhd on a 50-50 basis, to acquire the entire issued capital of ALF Properties Sdn Bhd for $41.25 million. The Agreement for the said acquisition has been signed with the shareholders of ALF Properties Sdn Bhd recently. ALF Properties Sdn Bhd owns a piece of land exceeding 190,000 sq. ft. at the junction of Jalan ampang and Jalan Yap Kwan Seng, Kuala Lumpur. Plans are being made to develop the said land into an office complex for rental. The Board foresees the prevailing good demand for office space in Kuala Lumpur will enable the Company to enjoy very good rental income.

[3] It was not disputed that at the time when the statement was made, the maker of the statement had not acquired any interest in the appellant's company. It was also not disputed that at that time the appellant and Hoklian Holdings Bhd were two separate legal entities. Out of the total 190,000 sq ft of the appellant's land only 101,004.75 sq ft was required and approved for the purpose of the proposed 31-storey office block building. Sometime after 20 August 1982 but before 23 April 1985 a new management took over the appellant's company. The original plans of the proposed 31-storey office block building which were approved on 20 August 1982, were amended by the new management to one of a 30-storey office block building. The amended plans were approved vide development order dated 24 April 1985. It was also not disputed that before the plans were drawn out, the appellant had incurred fees in drawing the development and building plans and testing the soil which the appellant called "development expenditure". This development expenditure also included compensation paid to squatters and clearing of site. At the material time the total development expenditure was RM1.44 million. It was in evidence and not disputed that from 1987 to 1990 part of the land was rented out and the income was charged to tax and assessed by the Inland Revenue Department as rental income under s 4(d) of the Income Tax Act 1962. On 26 July 1990, the appellant entered into a sale and purchase agreement to sell a portion of the land which was not included in the development plan to Chanrai Investment Corporation for a total consideration of RM42,500,000. By Notices of Assessment dated 9 July 1992, the respondent (the Inland Revenue Department) raised additional assessments for Years of Assessment 1988, 1989, 1990 and 1991 as follows:-

Year of Assessment	Amount of Tax
1988	758.75
1989	5,704.80
1990	7,464.60
1991	13,185,916.09

[4] The appellant, being unhappy with the additional assessments appealed to the Special Commissioners of Income Tax (Special Commissioners). The appellant raised the following issues before the Special Commissioners:-

(i) The gain from the disposal of the subject land was not assessable to income tax under s 4(a) of the Income Tax Act, 1967 being proceeds from the disposal of a capital asset. Originally at the time of purchase of the land it was intended for long-term investment and not with the intention of trading as reflected by:-

(a) revaluation of the subject land as discl