JUDGMENT

Introduction

The issue in this tax appeal is this: whether 9 units of shophouses received as dividend by Taritipan Sdn. Bhd. ("the Appellant") and taken as stock-in-trade immediately upon receipt should be valued at the gross amount of the dividend of RM6,666,667.00 or at the market value of RM4,000,000.00. The Appellant, has objectives which included the acquisition of shares for investment and the acquisition and sale of immovable property. On August 27, 1976, the Appellant purchased 200,000 ordinary shares in a company called Segama Sdn Bhd ("Segama"). On November 3, 1977, Segama declared dividends in the following words:-

It was resolved that the Company confirms the recommendation of the Directors that a Dividend of $3,389,270/= (Ringgit Three million three [2] hundred eighty nine thousand two hundred and seventy only) be declared and that payment of the dividend be satisfied by the distribution to shareholders on the register of the Company on November 3, 1977 by the distribution of the 17 shophouses standing in the books of the company at $2,616,795/= (Ringgit Two million six hundred sixteen thousand seven hundred and ninety five only) and the balance in cash.

It wa