1. At a hearing held in Kuala Lumpur on 14 February 2000, the Special Commissioners of Income Tax heard the appeal by Syabas Permai Sdn. Bhd. (hereinafter referred to as "the Appellant") against a Notice of Assessment dated 8 August 1998 showing RM596,000.00 being tax payable for the Year of Assessment 1997 issued by the Director General of Inland Revenue (hereinafter referred to as "the Respondent") under the Real Property Gains Tax Act, 1976 (hereinafter referred to as "the Act").

2. The issues for our determination were -

(i) Whether the provisions of paragraph 34A(3) Schedule 2 of the Act which were in force at the time of acquisition of the shares in question are applicable for purposes of computation of the acquisition price in respect of the 80,000 ordinary shares and the 1,920,000 bonus shares in Syarikat Awal Eksklusif Sdn. Bhd. which were acquired by the Appellant on 29.12.1994 and 16.1.1997 respectively.

(ii) What is the nature of bonus shares in law? Further, does the nature of the bonus shares have any legal bearing while computing the acquisition price pursuant to paragraph 34A Schedule 2 of the Act.

However, the Appellant decided not to proceed with issue No. 2(ii) above.

3. Encik Sukdev Singh Randhawa, Advocate and Solicitor, appeared for the Appellant. Puan Salmah binti Kasim and Encik Azalarry bin Abdullah, Legal Officers of the Inland Revenue Board appeared for the Respondent.

4. Both parties did not call any witness and the case proceeded based on the documentary evidence tendered and submission of Counsel.

5. The following documents were tendered at the hearing -

(i) Issues - A

(ii) Statement of Agreed Facts - B

(iii) Bundle of Agreed Documents - C

(iv) Appellant's Submission - D

(v) Appellant's Bundle of Authorities - E

(vi) Respondent's Submission - F

(vii) Respondent's Bundle of Authorities - G

6. As a result of the documentary evidence adduced before us, the following facts were admitted or proved -

(i) On 29.12.1994 the Appellant acquired 80,000 shares in Syarikat Awal Eksklusif Sdn. Bhd. (hereinafter referred to as "Awal Eksklusif'). Awal Eksklusif was at all material times a Real Property Company by reason of its ownership of property held under Certificate No. 8171, Presentation No. 85431, Lot No. 74, Section 1, in the Town of Kuala Lumpur.

(ii) Subsequently on 16.1.1997 the Appellant acquired 1,920,000 bonus shares in Awal Eksklusif

(iii) Thereafter on 15.12.1997 the Appellant disposed of 2,000,000 Awal Eksklusif shares.

(iv) Meanwhile paragraph 34A(3) of Schedule 2 of the Act was amended vide Finance (No.2) Act 1997 with effect from 17.10.1997.

(v) The Appellant computed the loss in respect of the disposal of the said 2,000,000 Awal Eksklusif shares based on paragraph 34A(3) Schedule 2 of the Act before its amendment. The said computation is as follows -

Disposal Price at 15.12.1997 RM2,000,000.00

Less: Acquisition price at 29.12.1994 None

No. of Shares acquired in Awal Eksklusif

Total No. of issued Shares in Awal Eksklusif x Defined value of relevant asset owned by Awal Eksklusif

29.12.1994

80,000

200,000 x 1,407,539 (Based on audited accounts for the year ended 31.12.1994) (563,015.60)

l 16.1.1997

l 1,920,000

5,000,000 x RM5,000,000 (1,920,000.00)

Loss: (483,015.60)

(vi) The Respondent computed the chargeable gain in respect of the disposal of the said 2,000,000 Awal Eksklusif shares based on paragraph 34A(3) Schedule 2 of the Act which was amended with effect from 17.10.1997. The said computation is as follows -

80,000 Shares

(a) Disposal price at 15.12.1997

80,000

2,000,000 x 2,000,000 80,000

Acquisition Price at 29.12.1994 80,000 None

(b) 1,920,000 Shares

Disposal price at 15.12.1997

1,920,000

2,000,000 x 2,000,000 1,920,000

Acquisition Price on the Bonus Shares at 16.1.1997 0 1,920,000

Chargeable Gain 1,920,000

Tax on 1,920,000 @ 30% 576,000

Penalty under section 29(3)(a) 20,000

Tax Payable 596,000

(vii) The Respondent issued a Notice of Assessment dated 8.8.1998 f