Faiza Tamby Chik J:

The issue in this case is whether the following sums are "income" or "capital" in the hands of the respondent:

(i) A sum of RM1,199,651 was paid to the respondent over 23 equal installments commencing on 31 August 1990, under a "Settlement Agreement" dated 31 July 1990;

(ii) In addition certain adjustments were made by the new partnership of Ernst and Young to a total of RM20,262 which sum was also taxed on the respondent;

It is observed that there is no loss of revenue to the Inland Revenue Board, since no deduction ought to have been given in the partnership accounts and that would mean that the individual partners of the new partnership of Ernst and Young would pay the tax. That should have been the correct procedure to adopt for the Inland Revenue Board upon the facts as found in the case stated.

The respondent submitted that:

(i) The sums paid to the respondent are capital consideration for retirement from the partnership owing to the change in the business framework or structure of the partnership in which they were partners, or in the alternative;

(ii) The sums paid to the respondent are withdrawal of capital in respect of goodwill upon ret