The court reaffirmed that income from the sale of a property is taxable in the year the sale agreement becomes unconditional, not upon physical completion.

[1] This is an appeal by the appellant Office Park Development Sdn Bhd against the decision of the Special Commissioners of Income Tax ('Special Commissioners') dated 11 September 2007 ('said deciding order'). The appellant's appeal is confined to item 1 of the said deciding order. In item 1 of the said deciding order, the Special Commissioners held that the proceeds from the sale of building A were to be assessed for income tax in the year of assessment 1999.

[2] The respondent, the Director General of Inland Revenue, had cross-appealed against item (ii) and (iii) of the said deciding order, which the Special Commissioners had ruled in favour of the appellant.

[3] The issues for determination by the Special Commissioner were as follows:

(a) In, which basis year is the sale of building 'A' to be recognised for tax purpose?

(b) Whether revenue was correct in imposing a penalty under s 113(2) of the Income Tax Act 1967 ('ITA') on the tax payer for the year of assessment 1999?

(c) Whether the golf membership expenses incurred by the tax payer are disallowable under s 39(1)(I) of the ITA by reason of it being entertainment expenses?

[4] The material part of the said deciding order reads as follows:

ADALAH DIPUTUSKAN bahawa perolehan daripada penjualan Bangunan A Citra Emas Sdn Bhd hendaklah ditaksir dalam tahun taksiran 1999; (item (i))

ADALAH DIPUTUSKAN JUGA bahawa penalty yang dikenakan dibawah Seksyen 113(2)Akta Cukai Pendapatan 1967 bagi Tahun Taksiran tersebut hendaklah dibatalkan; (item (ii))

SETERUSNYA DIPUTUSKAN JUGA bahawa perbelanjaan sebanyak RM780,000.00 adalah dibenarkan dibawah Seksyen 33(1) Akta Cukai Pendapatan 1967 ... (item (iii))

[5] The brief facts as agreed and stated by the Special Commissioners which are material to item (i) are as follows:

(a) The appellant and the purchaser signed a sale and purchase agreement ('SPA') on 4 March 1998 in relation to building A.

(b) The SPA was conditional on the purchaser obtaining approval from the foreign investment committee ('FIC') within two months from the date of the SPA. The condition was fulfilled on 9 May 1998.

(c) The purchaser wrote to the appellant on 15 May 1998 and requested for the completion to be extended to 30 April 1999 due to the difficulty in paying.

(d) The appellant agreed by letter dated 20 May 1998 to extend the completion date to 30 April 1999 provided:-

(i) the appellant would collect the rents until 30 April 1999; and

(ii) the appellant would charge the purchaser a 5% interest until 30 April 1999 on the deposit.

(e) The appellant collected the rent from the time the building became tenanted until 30 April 1999. From 1 May 1999 onwards the purchaser collected the rent.

(f) The rent collected by the appellant were recorded as business income in the books of the appellant. The appellant was accordingly assessed for income tax on the business income by the respondent.

(g) The appellant's books recorded the interest due and payable as interest income. The appellant was accordingly assessed for income tax on the interest income by the respondent.

(h) After the completion date, namely after 30 April 1999, the appellant ceased to collect the rent and imposed a 5% interest.

(i) The appellant's first witness ('AW1') testified that the appellant took efforts to sell building A to third parties when the purchaser had difficulty to secure finance for the property.

(j) AW1 also testified that the appellant paid the service charge and made maintenance contribution for building A until 30 April 1999.

(k) The appellant's second witness ('AW2') testified that the appellant's treatment of the sale of building A to be completed on 30 April 1999 was in accordance to the a