BAC4644 ADVANCED TAXATION

Trimester 2, 2013/2014

Submission date: 13 / 01 / 2014

Facilitator: Mdm Lim Kwee Pheng

Name
TAN YI WEN
YEAP CHUN LUN
CHAN YONG ANN
TOTAL

Prepared by:
Student ID
1112702374
1092701123
1102700090

Contribution %
34%
33%
33%
100%

Signature

Declaration by group leader

(This section is to be filled in the students own handwriting.)

I hereby declare that all group members names are correctly included in the above
section. I hold a copy of this assignment which I can produce if the original is lost or
damaged. I certify that no part of this assignment has been copied from any other
students work or from any other source except where due acknowledgement is
made in the assignment.

Group leaders signature

: _____________________________

Group leaders name

: _____________________________

Group leaders student ID

: _____________________________

Date

: _____________________________

Table of Contents
Introduction .................................................................................................................... 3
Fact ................................................................................................................................. 5
Issue ............................................................................................................................... 5
Held ................................................................................................................................ 5
Judgment ........................................................................................................................ 6
Parties in Legal Action ............................................................................................... 6
Federal Counsels Submissions.................................................................................. 6
Special Commissioners of Income Taxs Submission (In Previous Hearing) ........... 7
Courts Reasoning / Rationale ................................................................................... 9
Court Holding (In Detailed) ....................................................................................... 9
Discussion .................................................................................................................... 10
Case Summary.......................................................................................................... 10
Points of view about the case ................................................................................... 10
Definition of the word unmarried should be given its original and primary
meaning ................................................................................................................ 10
The decree of nullity in this case brought no retrospective effect ........................ 11
Marriage means a mutual view of spouses to consummation .............................. 12
Conclusion ................................................................................................................... 13
Bibliography ................................................................................................................ 14

2|Page

Introduction
According to Section 3 of Income Tax Act 1967 (hereinafter refer as the Act), any
person who accruing in or derived income from Malaysia or received income in
Malaysia from outside Malaysia are subjected to income tax for each year of
assessment involved.
Due to a tax resident individual in Malaysia would obtain an overall preferential tax
treatment as compared to a non-tax resident individual. Hence the residence status of
an individual plays an important role in computation of his tax liability.
One of the main benefit a tax resident individual would be given are personal reliefs
and rebates. Tax liability of an individual will be determined through aggregating all
his sources of income to arrive at total income. Reliefs and rebates would then be used
to reduce the amount of tax payable of the tax resident individual.
According to Section 48 (1) of the Act, an individual who is resident for the basis
year for a year assessment would be entitled to claim child relief under any of the
following circumstances:
(a) pays (wholly or in part) in that basis year for the maintenance at any time in
that basis year of an unmarried child who at any time in that basis year is
under the age of eighteen years;
(b) pays (wholly or in part) in that basis year(i)

for the maintenance at any time in that basis year of an unmarried

child who at any time in that basis year is receiving full-time
instruction at any university, college, school or other similar
educational establishment; or

(ii)

for that instruction;

(c) pays (wholly or in part) in that basis year for the maintenance at any time in
that basis year of an unmarried child (in subparagraphs (i) to (ii) referred to
as the child) who at any time in that basis year is serving under articles or
indentures with a view to qualifying in a trade or profession or-

3|Page

(i)

pays (wholly or in part) in that basis year for any part-time education
which is received by the child at any time in that basis year and relates
to that trade or profession;

(ii)

pays (wholly or in part) in that basis year on behalf of the child any
premium payable under or in connection with those articles or
indentures; or

(iii)

makes in that basis year on behalf of the child any other payment
payable under or in connection with those articles or indentures; or

(d) pays (wholly or in part) in that basis year for the maintenance at any time in
that basis year of an unmarried child if it is proved to the satisfaction of the
Director General that the child is physically or mentally disabled,
there shall be allowed for that year of assessment in respect of the child the
appropriate deduction, if any, specified in subsection (2):
Provided that where a wife living together with her husband is assessed
separately for any year of assessment on her income, she may elect in writing that
the appropriate deduction be wholly allowed to her for that year of assessment.
Hence, any child of taxpayer that meets the requirement under Section 48 (1) of the
Act would entitle the tax resident individual for a claim for deduction in calculating
his total chargeable income.
However, the meaning unmarried child was not explained by the Act. Should a
divorce child be claimed as an unmarried child?

4|Page

DIRECTOR-GENERAL OF INLAND REVENUE v T [1974] 1 MLJ 99

Fact
The respondent, Mr T had claimed a child relief deduction for his daughter, P, who
was doing her full time Ph.D. degree course in England. He claimed that her daughter
was an unmarried child and she fulfilled the requirement under Section 48 (1) (b) of
the Act.
P was married to her husband, K at Kuala Lumpur on 10 August 1966. However, two
months later, she separated with her husband, one K filed a petition to High Court at
Kuala Lumpur in Divorce Petition No. 22 of 1971 on 4 October 1971 pronounced and
declared the marriage "to have been and to be absolutely null and void to all intents
and purposes in the law whatsoever, by reason of the wilful refusal of the respondent
to consummate the marriage". Although she had been married, the marriage was
annulled upon the application of her on the ground of her wilful refusal to
consummate the marriage.
The Director General of Inland Revenue disallowed Mr Ts claim for child relief
deduction. However Mr T was later appealed to the Special Commissioners, the
decisions held later was he entitled to claim the child relief deduction. Due to the
annulment of his daughters marriage, her status was then reverted to unmarried child.
Hence, the Director General of Inland Revenue appealed to the High Court.

Issue
Whether the status of the daughter was reverted to unmarried child within the
meaning of that term in Section 48 of the Act, consequent upon the annulment of her
marriage on 4 October 1971 and the taxpayer thus entitled the deduction?

Held
In this case, the court held that decree of nullity had no effect in reverting the
daughter of respondent to the status of an unmarried child to serve the purpose of
Section 48 (1) of the Act. Hence, the child relief deduction claimed by respondent
was not valid.
5|Page

Judgment
Previously the respondent appealed to the Special Commissioners of Income Tax
regarding his income tax assessment for the year of assessment 1972 as contained in
the Notice of Assessment dated 26 August 1972. The Director General of Inland
Revenue was then appealed to the High Court.

Parties in Legal Action

The appellant was represented by En. Mohamed bin Mohamed Said, Federal
Counsel while the respondent appeared in person.

Federal Counsels Submissions

The appellant claimed that the ordinary and primary meaning of unmarried should
be never having been married instead of not having a husband at any one time.
Hence, the issue before the court should be whether the divorce of P would revert her
to the state of an unmarried child as stated under Section 48 of the Act. There is no
definition to justify unmarried child in the Act. Thus he claimed that the word
should follow its ordinary meaning.
Due to Ps marriage is voidable instead of void ab initio, the Director General of
Inland Revenue argued that the decree of nullity of marriage cannot revert P to her
former status as an unmarried child. In Re Sergeant1, Pearson J. at page 576 said:
"I cannot say that I entertain any doubt whatever about this case. The question
is what is the meaning of the word 'unmarried'. I agree that you must construe
the word which is capable of two meanings according to the context in which
you find it. It may mean either 'never having been married' or 'not having a
husband' at the time in question. In order not to defeat the evident intention of
a testator the court have in some cases held that the word meant 'not having a
husband', but I think its primary or natural sense is 'never having been
married.' ... if I was asked to construe the word as occurring in an absolutely
colourless instrument, I should construe it 'never having been married'."

26 Ch D 575 page 575

6|Page

In Dalrymple v Hall2, Hall V.C. at page 716 said:

"I must construe the word 'unmarried' according to its ordinary meaning. It is
said that the ordinary meaning is 'without ever having been married'. If this is
so, I must adopt it; and, having regard to what has been said upon the subject
in the authorities, I must take it to be so ... This is a case without any context
to indicate the meaning of the word 'unmarried', and I must, therefore,
attribute to it its ordinary meaning, namely, without ever having been
married'."
The court in this cited case held that the words unmarried child have to be
interpreted according to its ordinary or primary meaning as never having been
married in the absence of context showing a contrary intention, the word "unmarried"
must be construed according to its ordinary or primary meaning, as "never having
been married" due to the absence of context showing a contrary intention.
Furthermore, in Dodworth v Dale 3 , the issue is whether a decree of nullity of
marriage by the reason of the incapacity of one of the spouses has retrospective effect
that enables the Revenue Authorities to make additional assessment on the portion of
the personal allowance obtained by male party (respondent) to the void marriage and
the court held that after a marriage had been declared null and void, concluded
transactions and things which had been done could not be reopened or undone.

Special Commissioners of Income Taxs Submission (In Previous

Hearing)
For this cases issue, Special Commissioners of Income Tax had cited the case of Re
Wombwells Settlement4. In this case, the court held that the settler was entitled to
the funds comprised in the settlement under and by virtue of the express trust in his
favour as the marriage was declared to have been absolutely null and void ab initio
due to the husbands impotence.

[1880-1881] 16 Ch D 715
[1936] 2 All ER 440
4
[1922] 2 Ch 298
3

7|Page

At page 305, Russell J said:

"The result of a decree of nullity is that not only are the parties now not
married but they never were. There never was any valid marriage..." (The
italics are mine).
and at page 306 said:
"Those expressions show that, in the opinion of the judges of the Court of
Appeal, a marriage which has been annulled on the ground of impotence was
never a marriage at all, although no doubt, it is recognized as valid until one
of the parties to it takes proceedings to annul it."
and at page 307 Russell J. went on to this:
"Therefore there never was a marriage although the ceremony was gone
through, and the parties lived together as man and wife after that date. The
marriage is pronounced null and void ab initio. Not only are they not now
married, but they never were."
In this case, the marriage was declared null and void by the reason of husbands
impotence. One of the spouses is said to be impotence when a practical impossibility
subsists at the period of marriage of consummating the marriage. Regarding to the
impotency of a male spouse, in any circumstances where it is not possible for the
female spouse to come to the knowledge of his impotency at or before her marriage to
him, it is not the female spouses fault in getting married to one who is impotent and it
is reasonable and proper to say that if the decree of nullity of marriage due to the
reason of impotency is obtained by the female spouse, this would render the marriage
to be void ab initio and the female will revert back to a status of never having been
married in the term of law.
Hence, by referring by this case, the special commissioners of Income Tax submitted
that the marriage of P is void ab initio and so P should be reverted to a status of
unmarried child.

8|Page

Courts Reasoning / Rationale

Though the court was in entire agreement with the meaning in the case of Re
Wombwells Settlement, in the courts point of view, the ruling in the case could not
be applied to the ongoing case of Director-General of Inland Revenue v T before
the court as there was a significant difference between the referred case and the
ongoing case by which the former was dealing with an issue of impotency whilst the
latter was dealing with an issue of wilful refusal to consummate the marriage.
On the other side, court fully agreed with submission of counsel for the appellant
about the word unmarried child in Section 48 of the Act, that the ordinary and
primary meaning of the word unmarried is never having been married and not
not having a husband at any one time

Court Holding (In Detailed)

The court declared and pronounced that
1. The decree of nullity on the ground of impotence should always make the
marriage to be null and void ab initio and hence restore the parties to position
of not having been married at all if and only if one spouse does not know
about his or her marriage partners physical defect, which is the impotency at
or before their marriage.
2. A decree of nullity on the ground of wilful refusal to consummate the
marriage cannot have the effect of nullifying the marriage ab initio as both
parties had a view to consummation while entering the bond of marriage and
the wilful refusal to consummate by one of the parties gives to a breach of
such marriage bond.
3. The decree of nullity in Director-General of Inland Revenue v T did not
have the effect of reverting P. to the position of an unmarried child for the
purpose of Section 48 of the Act.
4. Deciding order of the Special Commissioners dated 9 August 1973 was set
aside and substituted by an order that confirmed the Notice of Assessment
dated 26 August 1972.

9|Page

Discussion
Case Summary
In this case, the issue is whether the respondents daughter could be reverted to the
status of an unmarried child for the purpose of Section 48 of the Act in order to
enable the respondent to claim deduction due to the annulment of her marriage on the
ground of her wilful refusal to consummate the marriage. In the end, the court had
made final decision and held that the decree of nullity did not have the retrospective
effect of reverting the respondents daughter to the position of an unmarried child
and thereupon the respondent could not claimed deduction for his daughter.

Points of view about the case

After reading the journal report about this case, we have come out with a conclusion
that we agreed with the court decision. The reasons of our entire agreement with the
court decision are as follow:
Definition of the word unmarried should be given its original and primary
meaning

In Re Sergeant, Pearson J. said that unmarried may mean either never

having been married or not having a husband and he agreed that people
must construe this word according to the context related. For example, court in
certain cases declared that the word meant not having a husband with the
intention not to defeat the evident intention of a testator. However, without the
existence of context showing a contrary intention, the word unmarried
should be given its original and primary meaning, which is never having been
married.

In the matter where any individual is entitled to a deduction in respect of an

unmarried child, this case could be considered as having no context to indicate
the meaning of the word unmarried. Hence, the word unmarried should be
construed to its original and primary meaning, as never having been married.
As such, in the case discussed, though respondents daughters marriage was
declared as null and void, in fact she was married and therefore there was no
reason for her to obtain the position of the original and primary meaning of an
unmarried child.
10 | P a g e

This point is also stressed and supported in another case, Dalrymple v Hall,
that the word unmarried should be attributed to its original and primary
meaning.

The decree of nullity in this case brought no retrospective effect

In the case Dodworth v Dale, the learned judge held that a decree of nullity of
marriage has no retrospective effect that enable the Revenue Authorities to
make additional assessment for the male party to the void marriage. In such,
this case brought us a picture that a decree of nullity in marriage of P to one K
did not let P to have an opportunity of reverting to the position of an
unmarried child for the purpose of Section 48 of the Act. In fact, P did
marry to one K last time and this was an undeniable reality that the status of
unmarried could not be given back to P due to the absence of retrospective
effect in a decree of nullity.

However, in the case of Re Wombwells Settlement, it stressed that a

marriage that had been declared null and void ab initio on the ground of either
spouses impotence could bring spouses back to the original meaning of
unmarried status, namely never having been married. But, there was a
significant difference between this cited case and our case discussed. The
difference between them was the nature of the causes that lead to non
consummation of marriage. The cause of non consummation of marriage in
former is the natural cause, called as impotency, whilst the cause in latter is
non natural cause, which is the wilful refusal to consummate the marriage.
Since the basis in these two cases is different, the ruling in Re Wombwells
Settlement could not be applied in our discussed case.

Also, since the marriage in the case referred came to a decree of nullity due to
Ps personal reason for being so and there was no valid reason and valid
evidence to support that the failure of marriage was due to the issue of
impotency of either party, the decree of nullity in this case did not have the
effect of nullifying the marriage ab initio.

11 | P a g e

Marriage means a mutual view of spouses to consummation

A marriage implies that both the parties decided to be bonded with a view to
consummation. Since P was married to one K., this showed that both parties
intended and were voluntary to consummate the marriage after their intended
marriage became valid and effectual. Furthermore, prior to reaching the
marriage stage, it was always assumed that both parties had deep
understanding on each other and were in a view of forming a complete
marriage relationship in the future. Therefore, there is no reason and excuse
for either party to revert to the position of unmarried as the wilful refusal to
consummate the marriage is considered as breaching the marriage bond and in
additional they did have the intention and motive to consummate the meaning
and they did perform their duty to consummate the marriage before the
marriage was declared as null and void.

12 | P a g e

Conclusion
Every tax resident individual in Malaysia should have understand the concept of
income exemption, deduction and relief when filing the tax return for the basis year of
the year of a year of assessment so that correct assessment of income tax can be
prepared for Inland Revenue Board. Also, the tax benefits available under the Act can
be maximized by every tax resident individual prior to paying the legally required
amount of income tax.
In order to relieve tax resident individuals tax burden, the Act provides a lot of items
in which they are deductible from any income earned by a Malaysia tax resident. For
example, a tax resident individual can have the privilege and opportunity to enjoy
personal relief, wife relief, child relief, education relief and likes.
As if a tax resident has children, that individual taxpayer can then claim for deduction
for his or her children under Section 48 (3) (a) (i) of the Act. However, only
unmarried child is qualified as the child referred to the section. That means a resident
taxpayer could not successfully claim deduction for his or her children if his or her
children are married.
Even if the married child obtains a decree of nullity of marriage, the child could not
revert to the position of an unmarried child. This is because due to the non-existence
of the definition of unmarried in the Income Tax Act 1967, the meaning of
unmarried here is given its original and primary meaning, namely, never having
been married.
Moreover, a decree of nullity of marriage on several grounds does not give the effect
and opportunity of having again the status of without ever having been married.
However, a decree of nullity of marriage will bring the effect of nullifying the
marriage ab initio if and only if a marriage ends on the ground of impotency. Only
with this, the resident taxpayer could have the opportunity to gain back his or her
benefit of tax relief on child.
As a conclusion, a good understanding on several tax treatments such as the example
above are needed in order to avoid any wrong assessment of personal income tax that
could possibly bring penalty to taxpayers.
13 | P a g e

Bibliography
1. Kwai Fatt, Choong. (2013). Malaysian Taxation - Principles and Practice (19th
edition). InfoWorld.
2. LexisNexis. (2014). Case Law: Director-General of Inland Revenue Retrieved
from

Lexis

Legal

Research

for

Academics:

http://www.lexisnexis.com.proxyvlib.mmu.edu.my/my/academic/
3. LexisNexis. (2014). Case Law: Dodworth (Inspector of Taxes) v Dale .
Retrieved

from

Lexis

Legal

Research

for

Academics:

http://www.lexisnexis.com.proxyvlib.mmu.edu.my/my/academic/
4. Kayla, R. (2008 , Jan 10). Divorce, Annulments, and Case Law. Retrieved
from Yahoo Voices: http://voices.yahoo.com/divorce-annulments-case-law794455.html?cat=41
5. Sharma, A. (2014). Everything you need to know about Non-consummation of
marriage.

Retrieved

from

Preserve

Articles:

http://www.preservearticles.com/2012030224316/everything-you-need-toknow-about-non-consummation-of-marriage.html

14 | P a g e