This is an appeal by way of a case stated by the appellant against the decision of the pesuruhjaya khas cukai pendapatan made on 24 January 1997 which ruled that:

Adalah diputuskan bahawa amaun berjumlah RM881,270 yang telah disperuntukkan dalam akaun perayu, termasuk amaun yang telah dikenakan kepada akaun untung rugi, tidak dienarkan sebagai potongan di bawah s33(1) Akta Cukai Pendapatan 1967.

Maka dengan ini adalah diperintahkan bahawa rayuan ini ditolak ...

The background of this case can be summarized as follows. The appellant had set up a retirement and resignation benefits [scheme] for its employees in accordance with the provisions of the National Employees Benefit Manual. The purpose of the scheme was to provide benefits for employees who resign or whose services have been terminated other than for cause. For the Years of Assessment 1986 to 1991, the appellant had set aside a total sum of RM881,270 and charged this amount as vesting benefits in its relevant accounting records and claimed the said amount as a deduction of income. The Pengarah Hasil Dalam Negri (?the respondent?) disallowed the said sum to be regarded as a deduction. As a result of that, an appeal to the pesuruhjaya khas cukai pendapatan was lodged by the appellant.

The main issue for the determination of the pesuruhjaya khas cukai pendapatan was whether the provision for accrued vesting benefits payable totalling RM881,270 could qualify for deduction under s 33(1) of the Income Tax Act 1967 in computing the adjusted income of the appellant for the Years of Assessment 1986 to 1991. At the end of the hearing of the appeal, the pesuruhjaya khas cukai pendapatan concluded that the said sum of RM881,270 did not qualify as deduction under s 33(1) of the said Act and as such the appeal was dismissed. It was against this decision that the appellant made this appeal to this High Court.

Counselfor the appellant and the respondent had agreed to give their submissions in writing. After having considered their written submissions in relation the decision made by the pesuruhjaya khas cukai pendapatan, I held the view that the conclusion made by the pesuruhjaya khas cukai pendapatan wasperfectly in order and I was unable to find any reason whatsoeverto disturb it. As such I dismissed the appeal with costs. My reasons are as follows.

This is a very clear and straight forward case. I agree completely with the view of the pesuruhjaya khas cukai pendapatan when they said that in order to obtain a deduction under s33(1) of the Income Tax Act, four elements have to he satisfied, namely:

(i) outgoing and expenses;

(ii) wholly and exclusively;

(iii) incurred during that period; and

(iv) in the production of income.

This means that the test of deductibility is that all outgoings and expenses must be incurred during the relevant period wholly and exclusively in the production of income. It w as the conclusion of the pesuruhjaya khas cukai pendapatan that the provisions of the benefits, the amount of which could not be determined with exact/definite accuracy and which relate to future expenses cannot be allowable expenses deserving deduction under s33(1) of the Income Tax Act. The Pesuruhjaya Khas relied on the House of Lords case of Southern Railway of Peru Ltd v Owen (Inspector of Taxes)[1957] AC 334 which I consider to be a very relevant authority on the issue before this court. In their decision, the pesuruhjaya khas cukai pendapatan had considered Owen'scase not only at stage in the House of Lords but also at the level f the High Court as well as the Court of Appeal. I shall first begin to refer to the judgment of Jenkins LJ, sitting as a judge in the Court of Appeal, who stated:

?The principle ... justifying the deduction is, I think, only applicable as far as liabilities are concerned where both the following conditions are satisfied, namely: (i) the liability must be certain not contingent ...; and (ii) the benefit, in respect of which the liability is incurre