QUESTION 4

NORDIANA BINTI MOHAMAD TAJUDIN 2011431366

NORLIAYANAAMIRAH BINTI HASHIM2011289102

NUR HIDAYAHTUL NABIHAH BINTI MANAS2011440904

NUR MEDINA HIDAYAH BINTI MUAZAM SHAH2011420206

Tuck Lee discovered that the house that he had agreed to buy had been

transferred to Wing Kee

The Income Tax Department has sent Dupo a show cause letter for failure

to submit its returns for 2012.

SeaAir has threatened the company with legal action for failure to pay for

the aeroplane that had been chartered by Bee Lee.

Jan 2011-Bee Lee formed a company, Dupo•to develop piece of land into luxury homes, Serene

Garden• the directors and shareholders of the company

were him, his wife and three children

taken deposits from several buyers, including Tuck Lee

Bee Lee had instructed the accountants• to alter the figures in the company’s • submitted as the company’s returns

• lodged online with the Income Tax department before 15th May 2013

September 2012 -Bee Lee’s wife and children lost

April 2013-Bee Lee chartered an aeroplane in the company’s name from SeaAir

General Rule:Principle of Separate Legal Entity

Section 16(5) of the Companies Act 1965

once a company is duly incorporated, it is a independent separate legal entity and distinct from its individual members or

directors.

•the ability to sue and be sued•enjoy perpetual succession

• hold property•limit the liability of its members

Salomon v A. Salomon & Co. Ltd

Abdul Aziz bin Atan & Ors v Ladang Rengo Malay

Estate Sdn Bhd

Exeception:Lifting the Veil of Incorporation

the actual people who run the company or officers will be made liable for the company’s

obligations

Judicial Decisions under the

Common Law

Statutes(Companies Act, Income Tax Act etc)

Circumstances

First Issue

Liability of Dupo towards Tuck Lee for the transfer of house in

Serene Gardens to Wing Kee by Bee Lee

Exception:Directing mind and will of a company

Directing mind and will of a company can be reflected from the act of its agents

Sunrise Sdn Bhd v First Profile Sdn Bhd-Court didn’t lifted the veil of incorporation

as the agents who have the managerial powers are treated as being the company

itself

Tesco Supermarkets Ltd v Nattrass-not mere employees, must have

managerial powers like the director

Yue Sang Cheong Sdn Bhd v PP-Secretary

Brambles Holding Sdn Bhd v Carey-Operation Manager

Application

As in the case of Sunrise Sdn Bhd, Bee Lee as the director of Dupo

has the managerial powers to act on behalf of the company

Conclusion

Dupo liable towards Tuck Lee when Bee Lee, the director of Dupo transferred the house to

Wing Kee

The liability of Dupo towards the Income Tax Department for the

failure to submit its 2012 returns

Second Issue

Exception:Members personally liable for the purported acts of

company

Income Tax Act 1967:Section 140(1) and (6)

Power of the Director General to ignored the transaction made by a person in avoiding the payment of tax

Section 140(5)Mandatory for the Director General to give notice of

assessment to the company

Section 77(1A)It’s a duty of all companies to submit it’s annual return to the Director General within six months of closing account

period- 30 September to 30 June

Section 121(1)Punishment: Fine max RM2000 or imprisonment not less

than 6 months

Paramount (M) Sdn Bhd v Pesuruhjaya Khas Cukai

Pendapatan & Anor

Sabah Berjaya Sdn Bhd v Ketua Pengarah Jabatan

Hasil Dalam Negeri

Application

By virtue of Section 122 Bee Lee would be

personally liable and may be punished with maximum

fine of RM10,000 and penalty to pay double of

the actual tax that the company should pay

However, according to the case of Paramount

(M) Sdn Bhd, the Income Tax Department has only

send the show cause letter for the failure to

submit the 2012 annual report

Conclusion

the show cause letter served by the Income Tax Department to Dupo was invalid.

the Income Tax Department cannot take an

action against Dupo.

Third Issue

Liability of Dupo to SeaAir for the failure of Bee Lee to pay for the aeroplane that he had chartered

Exception:Minimum number of membership

Section 36 of the Companies Act 1965:

where a membership of a company falls below the

minimum of two, any person who knowingly carries on business for more than six

months will be personally liable for all the debts of the

company, incurred after the six months.

Wong Kim Fatt V Leong & Co. Sdn Bhd

Application

By virtue of Section 36:

September 2012 April 2013 (More than 6 months)

Bee Lee is the only director and shareholder of Dupo and he carried out the company’s business for more than 6 months

Conclusion

Bee Lee personally liable

SeaAir cannot request for the payment of the aeroplane from Dupo