In Director General of Inland Revenue v Pan Century Edible Oils Sdn Bhd (1998) MSTC 3675, the High Court confirmed the Special Commissioners' decision that interest derived from excess cash placed on short and long term deposits was taxable as business income and not interest income.

The taxpayer carried on the business of refining and processing palm oil. The price of palm oil fluctuated and when its price fell, the taxpayer placed the excess cash on short term and long term deposits and on negotiable Certificates of Deposit. The Revenue raised an assessment on the taxpayer on the basis that the interest income was chargeable under Section 4(c) of the Income Tax Act, 1967. The issue was whether the interest income constituted income from a business carried on by the taxpayer under Section 4(a) or investment income under Section 4(c) of the Income Tax Act, 1967.

The Special Commissioners held that interest income was business income as the transactions were indicative of a business or an adventure or concern in the nature of trade.

On appeal to the High Court, the Revenue argued that the income was interest income and therefore taxable under Section 4(c) of the Income Tax Act, 1967. The High Court found that the company's purpose was to make as much profit as possible for its shareholders and the excess funds were in fact temporary surplus working capital of the taxpayer. It was therefore income in respect of gains or profits from a business under Section 4(a) of the Income Tax Act, 1967.
 
   
  The High Court confirmed the Special Commissioners' decision that property purchased for the development of a hotel and theatre and later used for commercial and housing development, amounted to trading stock [Mount Pleasure Corporation Sdn Bhd v Ketua Pengarah Hasil Dalam Negeri (1998) MSTC 3680].
   



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