Microsoft Corp.’s Pricing Policies Essay

Executive Summary This case study focused on the Microsoft Corporation and charges made by their competitors, the Federal Trade Commission, and the Department of Justice of antitrust violations and a monopoly of the computer operating systems and applications software, software development tools (e.g., programming language software), and hardware peripherals (e.g., Microsoft Mouse) that Microsoft specializes in. It focused on numerous issues that would lead one to believe that Microsoft was in fact monopolizing the entire industry they were in. . In order to adequately discuss and analyze the issues of this case, I have broken this paper up into four separate sections. Section 1 – Key Terms & Concepts: Description of the key terms & concepts that pertain to this case Section 2 – The Case Against Microsoft: Identify the facts and information that support my case against Microsoft Section 3 – The Defense of Microsoft: Identify certain facts and information that support a defense of Microsoft Section 4 – Discussion: What I have learned from the case After reading this case study, I went back to the email that I received from you and went over the questions that you suggested we consider. The first question was: If you were the DOJ how would you build a case against Microsoft or a dominant leader? I will attempt to do this in Section 2 – The Case Against Microsoft. The second question was: If you were Microsoft how might you defend yourself against DOJ claims? I will cover this in Section 3 – The Defense of Microsoft. I will attempt to show why it was very necessary for the DOJ to bring a case of monopoly and antitrust violations against Microsoft. In doing this, I will attempt to put myself into Microsoft’s shoes and defend their claims that they have not created a monopoly. Section 1 1. Key Terms & Concepts The reason I decided to include these terms and concepts was to make it easier for me to write this paper and use certain terms without describing them each time I used them in my paper. Department of Justice, Antitrust Division: The Assistant Attorney General for Antitrust, a presidential appointee, ran the Antitrust Division of the DoJ. When the Division thought the evidence was sufficiently persuasive, it brought criminal charges. The Division also entered into negotiations with businesses to end litigation in exchange for consent decrees in civil cases, or nolo contendere (no contest) please in criminal cases DOJ: Department of Justice: The United States Department of Justice (DOJ) is a Cabinet department in the United States government designed to enforce the law and defend the interests of the United States according to the law and to ensure fair and impartial administration of justice for all Americans (http://en.wikipedia. Org /wiki / United_States_Department_of_Justice) DOS: Disc Operating System FTC – Federal Trade Commission: The FTC enforces federal antitrust and consumer protection laws by investigating complaints against individual companies initiated by consumers, businesses, congressional inquiries, or reports in the media (http://en.wikipedia.org/wiki/Federal_Trade_Commission) ISVs: Independent Software Vendors MS-DOS: Microsoft Operating Systems NDAs: Non-disclosure agreements OEMs: Original Equipment Manufacturers OS: Operating Systems PC: Personal Computer Sherman Anti-Trust Act: it made illegal any form of contract or combination between entities in regards to trade and commerce that would have the effect of restraining trade. And it also put responsibility on government attorneys and district courts to pursue and investigate trusts http://en.wikipedia.org/ wiki/ Sherman _ Antitrust_Act) The Clayton Act of 1914: The Clayton Act was designed to prevent monopoly in the beginning rather than to remedy its effects. To accomplish this goal, Congress authorized antitrust prosecutions whenever business practices â€Å"may†¦substantially lessen competition or tend to create a monopoly in any line of commerce, in any section of the country.† Section Two of the act forbade sellers from discriminating in price – selling goods of like grade and quality to different buyers at different prices – when such differences were neither cost justified nor necessary to â€Å"meet competition.† Section Three limited the use of tying and â€Å"exclusive dealing† contracts. Tying contracts required purchasers or leases to acquire a second, separate product in order to obtain the desired product. Exclusive dealing contracts obliged a purchaser or lessee not to deal in products of competitors Vaporware: is software or hardware which is announced by a developer well in advance of release, but which then fails to emerge, either with or without a protracted development cycle. The term implies deception, or at least a negligent degree of optimism; that is, it implies that the announcer knows that product development is in too early a stage to support responsible statements about its completion date, feature set, or even feasibility (http://en.wikipedia.org/wiki/Vaporware) Section 2 2. The Case Against Microsoft In order to make my case against Microsoft and prove that they are most assuredly in violation of monopoly and anti-trust regulations, I will answer the following questions: 1. Is this a case of monopoly? 2. Is this case a violation of the Sherman Anti-Trust Act? Is this a case of monopoly? When I began considering my approach to this paper, I first thought about situations where I was absolutely sure I had been the â€Å"victim† of a monopoly. In order to do this, I first had to make sure that I fully understood exactly what a monopoly was. The American Heritage ® Dictionary defines a monopoly as â€Å"Exclusive control by one group of the means of producing or selling a commodity or service†. In simpler terms, I have always thought of a monopoly as a big corporation doing its best to â€Å"screw-over† the little guy (A.K.A the customer) by doing its best to make as much money as possible. The first situation that came to mind when I thought of a monopoly was how the Comcast cable company had a virtual strangle-hold on the cable service in my home’s area. Since they had â€Å"exclusive control †¦of the means of producing or selling a commodity or service†, in this case they were the only cable provider in our area, you were forced to settle for Comcast’s service unless you had satellite television or you were willing to settle for the wonderfully fuzzy reception from the antiquated â€Å"rabbit ear† antennas of years past. As a result, we unfortunately had to deal with Comcast’s horrible service and always rising rates. Luckily for us, another competitor came in to the picture when WOW! (Wide Open West Internet-Cable-Phone) set up service in our area. We switched cable providers almost immediately and we couldn’t have been happier. They have provided excellent customer service and their rates are consistently lower  than Comcast’s. As a consumer, we definitely benefited from the increased competition and eventual abolishment of the cable company monopoly in our area. With that out of the way, I was forced to look at whether or not Microsoft had a monopoly in their particular industry. Based on the information in this case, I cannot say that Microsoft has a monopoly on any single entire industry. Do they dominate the majority of endeavors that they choose to participate in? Of course they do. Just look at some of these numbers: As you can see from Table 1, Microsoft dominates the market shares of suite software in the United States. The only problem with these numbers is the fact that they are limited in their time range. In my experience, three years is a long enough time to make an approximate forecast for future happenings, from a financial standpoint. However, that is from a transportation and supply-chain perspective where the main variable happens to be the customer’s shipping fluctuations. In a volatile and constantly evolving market such as software development, these numbers could sway tremendously with the introduction of a new and sought after product or changes in consumer wants and desires. Table 2 shows the financial numbers of Microsoft and three of their competitors: This also tells a lot about Microsoft’s market dominance, but this time from a financial standpoint. Two things that stand out to me in this table are the fact that Microsoft has almost twice as much net revenue than their nearest competitor (Microsoft has 4,649 and Novell has 1,998). The second thing that jumped out to me is the fact that all of the competitors show an increase in net revenue from 1984 to 1994. Based on the growth of Microsoft’s competitors (which there are more than one), I feel confident in saying that Microsoft does not have a monopoly in their industry. They do not meet the standard set forth by the simple definition in the dictionary of â€Å"Exclusive control by one group of the means of producing or selling a commodity or service†. As you can clearly see from the tables, Microsoft  does not have exclusive control of the means of producing or selling a commodity or service. However, Microsoft does in fact hold a monopoly on many other counts, one of which is that Microsoft Windows, the Microsoft OS, is installed on most personal computers that can be purchased from Dell, Hewlett Packard, Compaq, and the like. Because this OS comes pre-installed, we as the consumers do not have much of a choice and there is not much of an alternative for us to go with unless we want to switch to an Apple Macintosh OS. Although Microsoft isn’t a natural monopoly in the classically defined or economic sense that I’ve identified above, it is a natural monopoly in the land of cyberspace. Microsoft is the path of least resistance for government, consumers, and programmers alike. Microsoft may have many faults, but they make a lot of things easier too. Most of us are willing to accept a monopoly such as Microsoft has for increased convenience and usability. Microsoft is a one-product company, no matter how it may sometimes appear. Their success is fundamentally due to the success of Windows. It rose to power with one product, and it resides there because of the success of that product. Unfortunately for us, this is not only the best product on the market, it is the only true alternative for us to use. In my book, regardless of the textbook definition, this constitutes a monopoly by Microsoft. Is this a case a violation of the Sherman Anti-Trust Act? As I stated in Section 1, the Sherman Anti-Trust Act makes â€Å"illegal any form of contract or combination between entities in regards to trade and commerce that would have the effect of restraining trade†. Based on this case and the readings from week #7, there is proof that Microsoft did violate the Sherman Anti-Trust Act, particularly Sections 1 and 2 of the Act. Section One prohibited contracts, combinations and conspiracies â€Å"in restraint of trade† while Section Two outlawed monopolies and attempts to monopolize. Microsoft violated the Sherman Anti-Trust Act by illegally using its market power to restrain trade in the high tech industry. A filing from the DOJ on December 19, 1999 stated that â€Å"Microsoft engaged in illegal conduct in five separate ways: * by tying browser sales to sales of the operating system; * by using its market power to illegally maintain a monopoly; * by attempting to monopolize the browser market; * by imposing exclusive dealing arrangements between itself and Internet service providers and/or developers; and * by imposing first boot-up and screen restrictions on computer makers.† http://news.com.com/2100-1001-233992.html The DOJ filing in December of 1999 shows exactly why Microsoft was in violation of the Sherman Anti-Trust Act. Some of the things that Microsoft has done that clearly violate the act include, but are certainly not limited to: Microsoft customers upgrading their copies of Microsoft Office at the Microsoft website, but using the competition’s web browser, are greeted with a message insisting on the use of MSIE for the â€Å"full edition† of the update. On November 18, 1998 the digital greeting card company Blue Mountain Arts discovered that beta versions of Microsoft’s Outlook Express (which comes free with Internet Explorer) were automatically filing Blue Mountain’s e-mail greeting cards into the â€Å"junk† folder rather than the â€Å"inbox.† Shortly afterwards, Blue Mountain Arts discovered that Microsoft’s WebTV service was blocking their e-mail greeting cards as well. When the courts ordered Microsoft to ship Windows without an integrated Internet Explorer, the company â€Å"complied† by offering a non-functional version of the OS, claiming that the browser was now so completely  integrated into Windows to remove it was tantamount to â€Å"breaking† the operating system. -All three of these examples were taken from the following website: http://www.vcnet. com /bms/departments/dirtytricks.shtml To summarize, I’ve identified the following facts: Microsoft does have a monopoly in their industry Microsoft did violate Acts 1 and 2 of the Sherman Anti-trust Act It is convenient for Microsoft to say that their success is solely based on them being able to produce good products. Although they do devote extraordinary resources to improving their technologies, they also work diligently to stifle growth and in-roads from their competition. Section 3 3. The Defense of Microsoft – I am not going to spend a great deal of time attempting to defend Microsoft. They have spent millions and millions of dollars working tirelessly to do it themselves. Furthermore, I firmly believe that they have established a monopoly and that this monopoly serves to futher one parties interests: Microsoft’s. However, I did some research online and came up with the following paragraph from an article titled â€Å"The Microsoft Antitrust Suit† written by Peter Tracey. In it, he wrote â€Å"The persecution of Microsoft is an assault on the free market, and on the intelligence of the American people. It is the result of long-held envy by Microsoft’s competitors, including Netscape and Oracle. It is in violation of the constitution, being both ex post facto and vague (Getman). The governments persecution of Microsoft should be stopped, moreover, the antitrust legislation that has exposed business to unfair and unreasonable practices should be repealed.† (http://www.levelthreesolutions.com/ peter/msantitrust.html) In Microsoft’s opinion, the government should not get involved in determining what means a company uses to produce their products. They feel that they have been able to succeed through hard work, tenancity, and superior products. Although it may be â€Å"unfortunate† for their competitiors, Microsoft feels that â€Å"if you can’t stand the heat, stay out of the kitchen.† In essence, Microsoft makes the most money doing what they do by taking solid ideas from other people, such as the Disc Operating System, and making them better. Microsoft doesn’t monopolize the industry. They simply work harder, take risks, and capitalize where other companies have floundered. Section 4 4. Discussion – Before I discuss this particular case study, I must tell you that I have always been a big fan of Microsoft and Bill Gates. I have enjoyed the relatively cheap cost of Microsoft’s software such as Microsoft Excel and Word. I have also felt that with each successive upgrade of these products I have only been able to improve my performance both at work and school. I also thought it was impressive that Bill Gates could take his ideas, push forward with his undefeatable will, and become one of the richest people in the entire world. However, this case study and the analysis that I’ve done with it has really opened my eyes to the â€Å"seamy† side of Microsoft and Bill Gates. I was so moved by this case that I even went and downloaded one of Microsoft’s few internet browser competitors, Netscape, to compare it’s product with Internet Explorer. When my wife asked me what my paper was I about I told her it was about Microsoft and whether or not they were a monopoly in the industry. Her very quick and wry response said it so perfectly: â€Å"Duh, of course they are. Even I know that.† I think this says it all so succinctly. Do I think Microsoft needs to be disbanded or separated in to two different operating companies? Not really. Like I said before, I enjoy Microsoft’s products and I use them constantly. In fact, I am writing  this paper using one of Microsoft’s products, Microsoft Word. I just honestly think that fair competition and a level playing field for Microsoft’s competitors would only benefit the consumer in the long run. More people with new insights will be given the chance to expand the technology already in place. Too many companies are skittish about taking on Microsoft because of the monopoly and the fear of being annihilated. Finally, I have learned that cases of anti-trust and monopoly are not always as clear cut as one may think. I always thought that Microsoft had a clear monopoly and that there was nothing any of us could ever do to remedy it. I also really didn’t care as long as they continued to improve Windows and the accompanying Office Suite. I can see now that competition in all economic arenas, whether it is cable television or fast-food or computer software, is important, no vital, for lower prices and increased technological growth.

Public Ruling

INLAND REVENUE BOARD MALAYSIA INCOME FROM LETTING OF REAL PROPERTY PUBLIC RULING NO. 4/2011 Translation from the original Bahasa Malaysia text DATE OF ISSUE: 10 MARCH 2011 INCOME FROM LETTING OF REAL PROPERTY Public Ruling No. 4/2011 Date of Issue: 10 March 2011 INLAND REVENUE BOARD MALAYSIA CONTENTS 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 11. 14.Introduction Related provisions Interpretation Letting of real property as a business source Letting of real property as a non-business source Commencement date of letting of property All real properties grouped as a single source Expense relating to income of letting of real property Rental income received in advance Capital allowance Industrial building allowance Replacement cost of furnishings Letting of part of building used in the business Effective Date Page 1 1 1 1-4 4-5 5-7 7 – 13 13 – 19 19 – 22 22 – 25 26 26 26 26DIRECTOR GENERAL'S PUBLIC RULING A Public Ruling as provided for under section 138A of the In come Tax Act 1967 is issued for the purpose of providing guidance for the public and officers of the Inland Revenue Board Malaysia. It sets out the interpretation of the Director General of Inland Revenue in respect of the particular tax law, and the policy and procedure that are to be applied. A Public Ruling may be withdrawn, either wholly or in part, by notice of withdrawal or by publication of a new ruling which is inconsistent with it.Director General of Inland Revenue, Inland Revenue Board Malaysia. INCOME FROM LETTING OF REAL PROPERTY Public Ruling No. 4/2011 Date of Issue: 10 March 2011 INLAND REVENUE BOARD MALAYSIA 1. This Ruling explains: (a) (b) Letting of real property as a business source under paragraph 4(a) of the Income Tax Act 1967 (ITA); and Letting of real property as a non-business source under paragraph 4(d) of the ITA. 2. The provisions of the ITA related to this Ruling are paragraphs 4(a) and 4(d), subsections 33(1) and 39(1). The words used in this Ruling hav e the following meaning: 3. â€Å"Arm's length basis† refers to the circumstances, decisions or outcomes that would have been arrived at if unrelated or unconnected persons were to deal with each other wholly independently and out of reach of personal influence . â€Å"Real property† includes any land and any interest, option or other right in or over such land and includes any building on land. â€Å"Person† includes a company, a co-operative society, a partnership, a club, an association, a Hindu joint family, a trust, an estate under administration and an individual, but excludes a unit trust. Letting of real property† means granting the use of a real property or occupation of a real property under an agreement or a term of contract and includes the letting out of part of the real property that is owned or rented. â€Å"Management corporation† means a management corporation established under the Strata Titles Act 1985 (Act 318), the Land (Subsidi ary Title) Enactment 1972 (Sabah No. 9 of 1972) or the Strata Titles Ordinance 1995 (Laws of Sarawak, Chapter 18). Rent† or â€Å"rental income† or â€Å"income from letting† includes any amount received for the use or occupation of any real property or part thereof including premiums and other receipt in connection with the use or occupation of the real property. â€Å"Related company† means the situation where one company holds not less than 20% of the ordinary shares or preference shares of the other. 3. 3. 2 3. 3 3. 4 3. 5 3. 6 3. 7 4. Letting of real property as a business source 4. 1 Letting of real property is deemed as a business source and the income received from it is charged to tax under paragraph 4(a) of the ITA ifIssue: B Page 1 of 26 INCOME FROM LETTING OF REAL PROPERTY Public Ruling No. 4/2011 Date of Issue: 10 March 2011 INLAND REVENUE BOARD MALAYSIA maintenance services or support services are provided in relation to the real property. 4. 2 Maintenance services or support services should be comprehensively and actively provided. 4. 2. 1 Maintenance services or support services comprehensively provided means services which include: (a) doing generally all things necessary (eg. leaning services or repairs) for the maintenance and management of the real property such as the structural elements of the building, stairways, fire escapes, entrances and exits, lobbies, corridors, lifts/escalators, compounds, drains, water tanks, sewers, pipes, wires, cables or other fixtures and fittings; and doing generally all things necessary for the maintenance and management of the exterior parts of the real property such as playing fields, recreational areas, driveways, car parks, open spaces, landscape areas, walls and fences, exterior lighting or other external fixtures and fittings; or b) If a person only provides security services or other facilities, that person is not providing maintenance services or support services comprehens ively. 4. 2. 2 Services actively provided means the person who owns or lets out the real property: (a) (b) provides himself; or hires another person or another firm to provide the maintenance services or support services as mentioned under paragraph 4. 2. 1 of this Ruling. Example 1: Suai Sdn Bhd owns three blocks of condominium consisting of 324 units and lets out those units to tenants.Suai Sdn Bhd provides maintenance services of lift, cleaning services, security services, centralized air conditioner and maintenance services of playing fields and car parks. The letting of the condominium units is treated as a business source of Suai Sdn Bhd since maintenance services and support services are comprehensively and actively provided by Suai Sdn Bhd. Issue: B Page 2 of 26 INCOME FROM LETTING OF REAL PROPERTY Public Ruling No. 4/2011 Date of Issue: 10 March 2011 INLAND REVENUE BOARD MALAYSIA Example 2: Wahida owns a 4-storey building consisting of 32 units that can be used as offices a nd shop lots.All the units are let out to several tenants. Wahida hires Ali Enterprise to provide maintenance services of the structure of the building, maintenance of lift and cleaning services of the building and area outside the building. The letting of the units in the building is treated as a business source of Wahida since maintenance services and support services are comprehensively and actively provided by Wahida. Example 3: Yes Property Sdn Bhd rents one block of office building consisting of 42 units from Zura Sdn Bhd. All the units are let out to a few tenants.Yes Property Sdn Bhd provides cleaning services of the building and area outside the building, centralized air conditioner, maintenance of car park and security services. The letting of the office units is treated as a business source of Yes Property Sdn Bhd since maintenance services and support services are comprehensively and actively provided by Yes Property Sdn Bhd. 4. 3 As long as maintenance services or suppo rt services are comprehensively and actively provided in relation to the real property which is let out, the letting is a business source under paragraph 4(a) of the ITA even though the letting is between related parties.However, if rental charged to the tenant is not at arm’s length basis, the Inland Revenue Board Malaysia would adjust the rental payment accordingly. For the purpose of this Ruling, â€Å"related parties† in relation to: (a) (b) (c) individuals, mean both individuals are related; companies, mean both companies are related companies; a company and an individual, mean one of the parties is in a position to influence or be influenced by the other party, or to control or be controlled by the other party. . 4 Special treatment for letting of a building to an approved Multimedia Super Corridor (MSC) status company Under the Income Tax (Industrial Building Allowance) (Approved Multimedia Super Corridor (MSC) Status Company) Rules 2006 [P. U. (A) 202/2006], ef fective from the year of assessment 2006, the letting of building in the Issue: B Page 3 of 26 INCOME FROM LETTING OF REAL PROPERTY Public Ruling No. 4/2011 Date of Issue: 10 March 2011 INLAND REVENUE BOARD MALAYSIACyberjaya Flagship Zone to an approved MSC status company is regarded as carrying on a business and the income received from it is charged to tax under paragraph 4(a) of the ITA. The building let out: has to be a new building that provides a world-class physical and information infrastructure as determined by the Multimedia Development Corporation Sdn Bhd; must not have been occupied by any company prior to the year of assessment 2006; and does not include building for the purpose of living accommodation. 5. Letting of real property as a non-business source 5. The letting of real property is treated as a non-business source and income received from it is charged to tax under paragraph 4(d) of the ITA if a person lets out the real property without providing maintenance ser vices or support services comprehensively and actively. Example 4: Unggas Property Sdn Bhd lets out one block of office building to a company. Unggas Property Sdn Bhd only provides security services. The letting of the office building is treated as non-business source since Unggas Property only provides security services.Unggas Property Sdn Bhd does not provide maintenance services or support services comprehensively. Example 5: Azran Sdn Bhd lets out a 5-storey building to Aloy Sdn Bhd without providing any maintenance services or support services. The letting of the building is a non-business source since there are no maintenance services or support services provided by Azran Sdn Bhd. Income received from the letting is charged to tax as rental income under paragraph 4(d) of the ITA. Example 6: Facts are the same as in example 3 but maintenance services and support services are provided by Zura Property Sdn Bhd.The letting of the office units is treated as a non-business source of Yes Property Sdn Bhd since maintenance services and support services are not provided by Yes Property Sdn Bhd but are provided by Zura Sdn Bhd. Issue: B Page 4 of 26 INCOME FROM LETTING OF REAL PROPERTY Public Ruling No. 4/2011 Date of Issue: 10 March 2011 INLAND REVENUE BOARD MALAYSIA 5. 2 The letting of real property is also treated as a non-business source if a person lets out the real property and maintenance services or support services are passively derived from the ownership of the real property.Income received from the letting of the real property is charged to tax as rental income under paragraph 4(d) of the ITA. Example 7: Azrie owns 2 units of apartment and lets out those units to 2 tenants. The tenants are entitled to use the swimming pool, tennis court and other facilities that are provided in the apartment. All the facilities are provided and maintained by the management corporation of the apartment. Azrie only pays maintenance fees to the management corporation of th e apartment. Services enjoyed by the tenants are merely an extension of Azrie’s right as proprietor of the apartment units and are not actively provided by Azrie.Therefore, the letting of the apartment units is a non-business source and the income received from it is charged to tax as rental income under paragraph 4(d) of the ITA. 6. Commencement date of letting of real property 6. 1 The date of commencement of letting of real property treated as a source of rental income under paragraph 4(d) of the ITA is on the date the real property is rented out for the first time. Example 8: Nora buys one unit of apartment on 1. 10. 2009. She renovates and advertises the letting of the apartment on 1. 1. 2010. The apartment is only let out on 1. . 2010. The letting of the apartment commences on 1. 7. 2010 i. e on the date it is rented out for the first time. 6. 2 The date of commencement of letting of real property treated as a business source under paragraph 4(a) of the ITA is on the da te the real property is made available for letting. A real property is made available for letting when the real property is ready to be occupied by tenants and steps to let out the real property have been taken such as advertising the real property for letting or appointing a real property agent to facilitate the letting.Example 9: Muhibbah Sdn Bhd purchases a 12-storey office building on 1. 1. 2010. The company advertises the letting of that building on 1. 4. 2010. The Company provides maintenance services of lift, cleaning services of the building and Issue: B Page 5 of 26 INCOME FROM LETTING OF REAL PROPERTY Public Ruling No. 4/2011 Date of Issue: 10 March 2011 INLAND REVENUE BOARD MALAYSIA area outside the building, maintenance services of car park for that building and centralized air conditioner. The building is made available for letting on 1. 6. 2010 after renovation is completed. The building is only let out on 1. 8. 010. The company closes its account on 31 December every year. The letting of the building commences on 1. 6. 2010 i. e on the date the building is made available for letting. Example 10: Facts are the same as in example 9 but the building is only let out on 1. 1. 2011. The letting of the building commences on 1. 6. 2010 that is on the date the building is available for letting. Therefore expenses incurred in the production of rental income for the year of assessment 2010 are allowable and can be carried forward to the year of assessment 2011 (assuming that the company only has this rental business income).However advertisement expenses incurred on 1. 4. 2010 are not allowable since the expenses are incurred to obtain the first tenant. Example 11: Syazril Property Sdn Bhd owns a complex consisting of an office building in Block A and a shopping centre in Block B. The company provides comprehensively and actively maintenance services and support services in relation to the complex. The company advertises the letting of that complex on 1. 6 . 2010. The office building in Block A is made available for letting and is let out on the same date i. 1. 7. 2010. Whereas the shopping centre in Block B is made available for letting on 1. 1. 2011 but is only let out on 1. 2. 2011. The company closes its account on 31 December every year. The letting of the office building commences on 1. 7. 2010. Whereas the letting of the shopping complex commences on 1. 1. 2011 i. e on the date it is made available for letting. Example 12: Kengo Sdn Bhd purchases a 10-storey office building in Kuala Lumpur, a shopping complex in Johor Bahru and 5 units of shop house in Kota Bharu in the year 2010.Both buildings in Kuala Lumpur and Johor Bahru are let out and maintenance services and support services are comprehensively and actively provided in relation to those buildings. Whereas the shop houses are let out without maintenance services and support services. The date of advertisement, the date the real properties are made available for letting a nd the real properties are let out are as follows: Issue: B Page 6 of 26 INCOME FROM LETTING OF REAL PROPERTY Public Ruling No. 4/2011 Date of Issue: 10 March 2011 Advertisement date 1. . 2010 1. 8. 2010 1. 9. 2010 Date available for letting 1. 9. 2010 1. 11. 2010 1. 11. 2010 Date of letting 1. 12. 2010 1. 1. 2011 1. 2. 2011 INLAND REVENUE BOARD MALAYSIA Real property Building in Kuala Lumpur Building in Johor Bahru Shop houses in Kota Bharu The commencement date of letting of the building is as follows: Real properties Rental business [paragraph 4(a)] Building in Kuala Lumpur Building in Johor Bahru Rental [paragraph 4(d)] Shop houses in Kota Bharu 7. All real properties grouped as a single source 7. Several real properties which are let out can be grouped as one source whether as a business source under paragraph 4(a) of the ITA or a nonbusiness source under paragraph 4(d) of the ITA. If a person lets out several real properties in a year of assessment and the letting of (a) (b) a ll real properties is a business source, all the real properties can be grouped as one business source under paragraph 4(a) of the ITA. all real properties is a non-business source, all the real properties can be grouped as one non-business source under paragraph 4(d) of the ITA. ome of the real properties is a business source and some is a nonbusiness source, income from both sources shall be assessed separately. The income from the business source and the nonbusiness source is assessed under paragraphs 4(a) and 4(d) of the ITA respectively. 1. 2. 2011 1. 9. 2010 1. 11. 2010 Date of commencement of letting (c) Issue: B Page 7 of 26 INCOME FROM LETTING OF REAL PROPERTY Public Ruling No. 4/2011 Date of Issue: 10 March 2011 INLAND REVENUE BOARD MALAYSIA Example 13: AJ Sdn Bhd owns a 4-storey building in Damansara and a 6-storey building in Bangsar.Both buildings are let out since 2008 and the letting of the buildings is treated as a business source under paragraph 4(a) of the ITA. The gross income, allowable expenses and capital allowances on the furniture in each building for the year of assessment 2010 are as follows: Real property Gross income (RM) 60,000 10,000 70,000 Allowable expenses (RM) 14,000 12,000 26,000 Capital allowances (furniture) (RM) 7,000 3,000 10,000 Building in Damansara Building in Bangsar Total The letting of both real properties is a business source.Therefore, both real properties can be grouped as one business source under paragraph 4(a) of the ITA. The statutory income of AJ Sdn Bhd from the business of letting of real property for the year of assessment 2010 is calculated as follows: (RM) Gross income from rental Less: Allowable expenses Adjusted income Less: Capital allowances (furniture) Statutory income from rental Example 14: Margaret owns several real properties which are let out since 2008 and the letting of the real properties is a non-business source under paragraph 4(d) of the ITA.The gross income and allowable expenses for ea ch real property for the year of assessment 2010 are as follows: 70,000 26,000 44,000 10,000 34,000 Issue: B Page 8 of 26 INCOME FROM LETTING OF REAL PROPERTY Public Ruling No. 4/2011 Date of Issue: 10 March 2011 Gross income (RM) 12,000 9,000 24,000 1,500 46,500 Allowable expenses (RM) 3,000 11,000 8,000 1,800 23,800 INLAND REVENUE BOARD MALAYSIA Real property Terrace house Apartment Shop house Vacant land TotalStatutory income of Margaret from the letting of real property for the year of assessment 2010 is calculated as follows: (RM) Gross income from rental Less: Allowable expenses Statutory income from rental Example 15: Theodore Lim buys an office building and a business building in Taman Anggerik, Ampang in August 2009. The purchases of both buildings are financed by a bank loan. The office building is rented out commencing from 1. 1. 2010 whereas the business building is only rented out on 1. 2. 2011. Income from the letting of both buildings is assessed as a business source under paragraph 4(a) of the ITA.The gross income and interest expense on loan for each building for the years of assessment 2010 and 2011 are as follows: Gross income (RM) Year of assessment 2010 Office building Business building 120,000 Year of assessment 2011 120,000 165,000 Interest expense (RM) Year of assessment 2010 45,000 55,000 Year of assessment 2011 40,000 50,000 46,500 23,800 22,700 Real property Issue: B Page 9 of 26 INCOME FROM LETTING OF REAL PROPERTY Public Ruling No. 4/2011 Date of Issue: 10 March 2011 INLAND REVENUE BOARD MALAYSIAIn the year of assessment 2010, the business building has not commenced as a source because no income has been generated yet. As such, the business building and office building cannot be aggregated as one source. Interest expense in relation to the business building amounting to RM55,000 is not allowed a deduction against the gross income from the letting of office building. The statutory income from rent for the year of assessment 2010 is computed as follows: (RM) Gross income from rental [paragraph 4(a)] Less: Interest expense Statutory income from rental 120,000 45,000 75,000Note: If rental income from office building and business building is assessed as a non-business source under paragraph 4(d) of the ITA, the same tax treatment applies. In the year of assessment 2011, the business building can be grouped with the office building as one source as the business building constitutes a source once it has generated income. Although the business building is only rented out on 1. 2. 2011, the whole interest expense amounting to RM50,000 is allowed a deduction since the rental business source for the year of assessment 2011 exists from 1. . 2011. The statutory income from rent for the year of assessment 2011 is computed as follows: (RM) Gross income from rental (paragraph 4(a)) Less: Interest expense Statutory income from rental 285,000 90,000 195,000 Note: If rental income from office building and business building is a ssessed as a non-business source under paragraph 4(d) of the ITA, interest expenses in respect of the business building has to be adjusted according to the period the building is let out. Therefore interest expense in respect of the period from 1. 1. 011 to 31. 1. 2011 is not allowable. Example 16: Facts are the same as in example 13 with an additional information i. e AJ Sdn Bhd owns and lets out a residential house and one unit of apartment. The Issue: B Page 10 of 26 INCOME FROM LETTING OF REAL PROPERTY Public Ruling No. 4/2011 Date of Issue: 10 March 2011 INLAND REVENUE BOARD MALAYSIA letting of the residential house and the apartment unit is a non-business source since maintenance services or support services are not provided. The company is not an investment holding company.The gross income, allowable expenses and capital allowances on the furniture in each building for the year of assessment 2010 are as follows: Real property – paragraph 4(a) source Gross income (RM) 6 0,000 10,000 70,000 Gross income (RM) 8,000 6,000 14,000 Allowable expenses (RM) 14,000 12,000 26,000 Allowable expenses (RM) 11,000 4,000 15,000 Capital allowances (furniture) (RM) 7,000 3,000 10,000 Capital allowances (RM) – Building in Damansara Building in Bangsar Total Real property – paragraph 4(d) source Residential house Apartment Total The letting of buildings in Damansara and Bangsar is a business source.Therefore, those buildings can be grouped as one business source under paragraph 4(a) of the ITA. Whereas the letting of residential house and apartment is a non-business source and can be grouped as one non-business source under paragraph 4(d) of the ITA. The total income of AJ Sdn Bhd for the year of assessment 2010 is computed as follows: (RM) (i) Statutory income from rental – paragraph 4(a) [70,000 – 26,000 – 10,000] (ii) Statutory income from rental – paragraph 4(d) [14,000 – 15,000] Aggregate income/Total income Issue : B Nil 34,000 Page 11 of 26 34,000INCOME FROM LETTING OF REAL PROPERTY Public Ruling No. 4/2011 Date of Issue: 10 March 2011 INLAND REVENUE BOARD MALAYSIA The adjusted loss from non-business source amounting to RM1,000 cannot be deducted against statutory income from business of letting and is not allowed to be carried forward to subsequent years of assessment. 7. 2 If a person has a business source of letting of real property under paragraph 4(a) of the ITA and a business source from other businesses in the same year of assessment, the business source of letting of real property has to be separated from the other business sources.Example 17: Syarikat MJ Sdn Bhd (SMSB) is carrying on a business of hardware wholesaler. SMSB owns a 4-storey building which is let out and provides maintenance services and support services comprehensively and actively. SMSB also owns a terrace house which is let out without providing maintenance services and support services. Income from letting of the 4storey building qualifies to be assessed as a business source (paragraph 4(a) of the ITA) whereas rental income from the terrace house is assessed as a non-business source (paragraph 4(d) of the ITA) for the year of assessment 2010.The gross income, allowable expenses and capital allowances on plant and machinery for each source of income of SMSB for the year of assessment 2010 are as follows: Source of income Adjusted income (RM) Adjusted loss (RM) Capital allowances (plant and machinery) (RM) Business of wholesale Letting of 4-storey building (paragraph 4(a) of the ITA) Letting of terrace house (paragraph 4(d) of the ITA) 100,000 – 10,000 15,000 5,000 – 3,000 – Issue: B Page 12 of 26 INCOME FROM LETTING OF REAL PROPERTY Public Ruling No. 4/2011 Date of Issue: 10 March 2011 INLAND REVENUE BOARD MALAYSIAThe total income of SMSB for the year of assessment 2010 is computed as follows: (RM) (RM) (i) Business of wholesale (paragraph 4(a) of the ITA) Adjusted income Less: Capital allowances (plant and machinery) Statutory income (ii) Letting of real property (paragraph 4(a) of the ITA) Adjusted loss Capital allowances (plant and machinery) Statutory income (iii) Letting of real property (paragraph 4(d) of the ITA) Adjusted loss Statutory income Aggregate income Less: Current year loss Total income (3,000) Nil 85,000 10,000 75,000 (10,000) 5,000 Nil 100,000 15,000 85,000Capital Allowances of RM5,000 in relation to the letting of real property under paragraph 4(a) of the ITA which cannot be absorbed in the year of assessment 2010 is carried forward to subsequent years of assessment. Adjusted loss from the letting of real property under paragraph 4(d) of the ITA amounting to RM3,000 cannot be deducted against the aggregate income and cannot be carried forward to subsequent years of assessment. 8. Expense relating to income of letting of real property 8. An expense wholly and exclusively incurred in the production of income under subsection 33(1) of the ITA and which does not fall under subsection 39(1) of the ITA is allowed as a deduction from income of business of letting of real property charged to tax under paragraph 4(a) of the ITA. Issue: B Page 13 of 26 INCOME FROM LETTING OF REAL PROPERTY Public Ruling No. 4/2011 Date of Issue: 10 March 2011 INLAND REVENUE BOARD MALAYSIA 8. 2Expense which is allowed a deduction from income of letting of real property charged to tax under paragraph 4(d) of the ITA is the direct expense that is wholly and exclusively incurred in the production of income under subsection 33(1) of the ITA. Examples of direct expenses which are deductible from gross income of letting of real property are as follows: (a) Assessment and quit rent Annual assessment paid to the local authority and quit rent paid to the land office. b) Interest on loan Interest paid on loan taken to finance the purchase of real property which is rented out. (c) Fire insurance premium Fire insurance premium paid in relation to fire insurance policy taken on the real property which is rented out. (d) Expense on rent collection Rent collection fee and legal expense incurred to enforce rent collection. (e) Expense on rent renewal Expense incurred to renew tenancy or to change tenant. (f) Expense on repair Expense on ordinary repair to maintain the real property in its existing state. 8. Initial expense Initial expense is not allowed a deduction from income of letting of real property assessed under paragraph 4(a) or paragraph 4(d) of the ITA since that expense is incurred to create a source of rental income and not incurred in the production of rental income. Examples of such expense are cost to obtain the first tenant such as advertising cost, legal cost to prepare rental agreement, stamp duty and commission for real property agent. Example 18: Sarah Property Sdn Bhd buys an office building on 1. 9. 2009 to be let out.The company incurs RM600 to advertise the letting of the building on 1. 1. 2010 and legal cost amounting to RM1,800 paid to Reganathan & Co on 12. 2. 2010 for preparing rental agreement. The building is let out commencing from Issue: B Page 14 of 26 INCOME FROM LETTING OF REAL PROPERTY Public Ruling No. 4/2011 Date of Issue: 10 March 2011 INLAND REVENUE BOARD MALAYSIA 1. 3. 2010 without providing maintenance services or support services. The letting of the office building is a non-business source and the rental income is taxable under paragraph 4(d) of the ITA.The advertising cost amounting to RM600 and the legal cost of RM1,800 are not allowed a deduction from income of letting of office building for the year of assessment 2010 as the expenses are incurred to obtain the first tenant. Example 19: Facts are the same as in example 18 except the building is made available for letting on 1. 2. 2010 and Sarah Property Sdn Bhd provides maintenance services of lift, security services, cleaning services and maintenance of centralized air conditioner.The letting of the office bui lding is a business source and the rental income is taxable under paragraph 4(a) of the ITA. The advertising cost amounting to RM600 and the legal cost of RM1,800 are not allowed a deduction from income of letting of office building for the year of assessment 2010 as the expenses are incurred to obtain the first tenant. 8. 4 Expenses during a period the real property is not rented out 8. 4. 1 Expenses incurred in relation to a real property during a period it is not rented out are not allowable in calculating the adjusted income from the letting of the real property.However, if the period the real property is not rented out occurs after it has been let out and it is clear that it is ready to be let out, then expenses during that period are allowable subject to subsections 33(1) and 39(1) of the ITA. Example 20: Farhan lets out a double-storey terrace house on 1. 1. 2010 for RM1,000 a month. On 1. 9. 2010 the tenant moves out and the house is let out to another tenant on 1. 12. 2010 for the same amount of rental. Assessment for a year is RM500 while quit rent is RM50 a year.The letting of the house is a non-business source and the rental income is taxable under paragraph 4(d) of the ITA. The adjusted income from rent for the year of assessment 2010 is computed as follows: (RM) Rental income (gross) Period of 1. 1. 2010 – 31. 8. 2010 (8 x RM1,000) Period of 1. 12. 2010 – 31. 12. 2010 8,000 1,000 9,000 (RM) Issue: B Page 15 of 26 INCOME FROM LETTING OF REAL PROPERTY Public Ruling No. 4/2011 Date of Issue: 10 March 2011 INLAND REVENUE BOARD MALAYSIA Less: Assessment Quit rent Adjusted income from rent 00 50 550 8,450 As a concession, assessment and quit rent expenses are allowable in full even though the house is not rented out for the period of 1. 9. 2010 to 30. 11. 2010. 8. 4. 2 If the letting ceases temporarily due to the following circumstances: (a) (b) (c) (d) repair or renovation of the building; absence of tenants for a period of 2 years after termination of tenancy; legal injuction or other official sanction; or other circumstances beyond the control of the person who lets out the real property; xpenses for the period the real property is not let out are allowable provided that the real property is maintained in good condition and is ready to be let out. Example 21: Sinar Ria Sdn Bhd owns a 4-storey building which is let out to Deena Holding Bhd since 2008. The letting of the real property is treated as a business source. Sinar Ria Sdn Bhd closes its account on 31 December every year. On 31. 12. 2010, the letting of the building ends. The company makes an effort to obtain a new tenant but only manages to let out the building to another company on 1. 4. 013 (absence of tenants for a period of 27 months). Expenses during the absence of tenants deductible. Therefore the expenses for 31. 12. 2012 are allowable. However the 1. 1. 2013 to 31. 3. 2013 are not allowed a exceeds the specified period of 2 years. for a period of 2 years are the period of 1. 1. 2011 to expenses for the period of deduction since that period Issue: B Page 16 of 26 INCOME FROM LETTING OF REAL PROPERTY Public Ruling No. 4/2011 Date of Issue: 10 March 2011 INLAND REVENUE BOARD MALAYSIA Example 22: Syarafina owns 2 houses which are let out since 2009.The rental income is assessed as a non-business source under paragraph 4(d) of the ITA. The gross income and allowable expenses for each real property for the years of assessment 2010 and 2011 are as follows: Gross income (RM) Assessment , quit rent and interest expense (RM) Year of assessment 2010 3,550 2,500 Year of assessment 2011 3,550 2,500 Real property Year of assessment 2010 House I House II 1 Year of assessment 2011 12,000 -1 12,000 9,600 House II was not rented out as the local authorities had given an instruction to vacate the house from 1. 1. 2011 to 31. 12. 011 so that the hill slopes could be monitored after a landslide had occurred at a nearby area. The house was rented out again on 1. 1. 2012. The statutory income from rent for the year of assessment 2010 is computed as follows: (RM) Rental income (paragraph 4(d)) Less: Allowable expenses Statutory income from rental 21,600 6,050 15,550 The statutory income from rent for the year of assessment 2011 is computed as follows: (RM) Rental income (paragraph 4(d)) Less: Allowable expenses Statutory income from rental Issue: B 12,000 6,050 5,950 Page 17 of 26 INCOME FROM LETTING OF REAL PROPERTY Public Ruling No. /2011 Date of Issue: 10 March 2011 INLAND REVENUE BOARD MALAYSIA 8. 5 Expenses before real property is let out Expenses in respect of a period before the real property is let out is not deductible and have to be adjusted proportionately. Example 23: Michael lets out a shop house commencing from 1. 5. 2010 for RM2,500 a month. He pays annual assessment amounting to RM1,200, annual quit rent amounting to RM120 and fire insurance premium of RM600 for year 2010. The letting of the shop house is a non -business source and the rental income is taxable under paragraph 4(d) of the ITA.The adjusted income from rent for the year of assessment 2010 is computed as follows: (RM) Rental income (gross) Period of 1. 5. 2010 – 31. 12. 2010 (8 x RM2,500) Less: Expenses for period of 1. 5. 2010 – 31. 12. 2010 Assessment (8/12 x RM1,200) Quit rent (8/12 x RM120) Fire insurance premium (8/12 x RM600) Adjusted income from rent 8. 6 Restriction on interest expense If a person takes a loan for business purposes and to finance the purchase of real property that is let out, interest expense allowable against the business source has to be restricted under subsection 33(2) of the ITA.Interest expense on loan to finance the purchase of real property that is let out is deductible from rental income. Example 24: Azalea Property Sdn Bhd, a property development company closes its account on 31 December every year. On 9. 6. 2009 the company takes a loan of RM2 million from a bank for business p urposes and to finance the purchase of a bungalow costing RM450,000. The company claims an interest expense of RM120,000 in the profit and loss account for the year assessment 800 80 400 1,280 18,720 20,000 Issue: B Page 18 of 26INCOME FROM LETTING OF REAL PROPERTY Public Ruling No. 4/2011 Date of Issue: 10 March 2011 INLAND REVENUE BOARD MALAYSIA 2010. The bungalow is let out commencing from 1. 1. 2010 and income from letting of the bungalow is taxable under paragraph 4(d) of the ITA. Interest restriction is computed as follow: RM450,000 ——————- x RM 120,000 RM2,000,000 = RM27,000 The amount of RM27,000 is added back in arriving at the adjusted income from business of the company. However the company can claim interest expense of RM27,000 against income from the letting of the bungalow.Note: Since the cost of the bungalow does not exceed RM500,000, interest restriction under subsection 33(2) of the ITA is calculated based on the end-of-year balance in the balance sheets. 9. Rental income received in advance 9. 1 9. 2 Rental received in advance is treated as gross income for the basis period in which it is received. Where rental income received in advance is assessed in the basis period in which it is received, any expense incurred in relation to that rental income after that basis period is allowable in the basis period in which the income is assessed.Therefore amendment has to be done to the assessment for the year of assessment concerned. Example 25: Kelvin Ong lets out a double-storey terrace house for the period of 1. 1. 2010 to 31. 12. 2012. Rental for the three years amounting to RM36,000 is received in the year 2010. Expenses incurred on that house are as follows: Year ended Income/expenses 31. 12. 2010 (RM) Rental income Expenses 36,000 4,000 31. 12. 2011 (RM) 5,000 31. 12. 2012 (RM) 3,000 Issue: B Page 19 of 26 INCOME FROM LETTING OF REAL PROPERTY Public Ruling No. 4/2011 Date of Issue: 10 March 2011 INLAND R EVENUE BOARD MALAYSIAThe adjusted income from rent for the year of assessment 2010 is computed as follows: Year of Assessment 2010 (RM) Rental income Less: Expenses Adjusted income Less: Expenses for a period ending 31. 12. 2011 Amended adjusted income Less: Expenses for a period ending 31. 12. 2012 Amended adjusted income 36,000 4,000 32,000 5,000 27,000 3,000 24,000 Expenses incurred in 2011 and 2012 are allowable against the rental income which is assessed in the year of assessment 2010. Therefore the assessment for the year of assessment 2010 has to be amended when the expenses are incurred in 2011 and 2012. . 3 In the case where there is more than one real property and rental income from one or several real properties is received in advance, expenses related to that source is deductible from other rental income in the basis period in which the expenses are incurred. This treatment is only applicable to rental income from real properties which are assessed as one source. Example 26: Fortune Sdn Bhd lets out 2 buildings commencing from 1. 1. 2010. The company receives rental for 3 years amounting to RM300,000 in 2010 in relation to the first building.The second building is let out for RM10,000 a month. The letting of both buildings is treated as a rental source under paragraph 4(d) of the ITA. Income received and the allowable expenses for the building are as follows: Issue: B Page 20 of 26 INCOME FROM LETTING OF REAL PROPERTY Public Ruling No. 4/2011 Date of Issue: 10 March 2011 INLAND REVENUE BOARD MALAYSIA Year ended First building Income (RM) Expenses (RM) 20,000 15,000 18,000 Second building Income (RM) 120,000 120,000 120,000 Expenses (RM) 30,000 30,000 30,000 31. 12. 2010 31. 12. 011 31. 12. 2012 300,000 – The adjusted income from rental for the years of assessment 2010 to 2012 is computed as follows: Year of assessment 2010 (RM) Rental income Less: Expenses Adjusted Income 420,000 50,000 370,000 2011 (RM) 120,000 45,000 75,000 2012 (RM) 120,0 00 48,000 72,000 Example 27: Facts are the same as in example 26 but the letting of the first building is treated as a business source under paragraph 4(a) of the ITA whereas the letting of the second building is treated as non-business source under paragraph 4(d) of the ITA.The adjusted income from rental for the years of assessment 2010 to 2012 is computed as follows: Issue: B Page 21 of 26 INCOME FROM LETTING OF REAL PROPERTY Public Ruling No. 4/2011 Date of Issue: 10 March 2011 INLAND REVENUE BOARD MALAYSIA Rental source under paragraph 4(a) of the ITA Year of assessment 2010 (RM) Rental income Less: Expenses Adjusted income Less: Expenses for a period ending 31. 12. 2011 Amended adjusted income Less: Expenses for a period ending 31. 12. 2012 Amended adjusted income 300,000 20,000 280,000 15,000 265,000 18,000 247,000Expenses incurred in the years of assessment 2011 and 2012 are allowed a deduction from rental income which is assessed in the year of assessment 2010. Therefore th e assessment for the year of assessment 2010 has to be amended when the expenses are incurred in 2011 and 2012. Rental source under paragraph 4(d) of the ITA Year of assessment 2010 (RM) Rental income Less: Expenses Adjusted income 120,000 30,000 90,000 2011 (RM) 120,000 30,000 90,000 2012 (RM) 120,000 30,000 90,000 10. Capital allowances 10. If the letting of real property is treated as a business source, capital allowances can be claimed on capital expenditure incurred on plant and machinery. The provisions in Schedule 3 of the ITA relating to capital allowances shall apply to the business of letting of real property. Issue: B Page 22 of 26 INCOME FROM LETTING OF REAL PROPERTY Public Ruling No. 4/2011 Date of Issue: 10 March 2011 INLAND REVENUE BOARD MALAYSIA 10. 2 If the letting of real property is treated as a business source and the letting of real property ceases temporarily due to the circumstances mentioned in paragraph 8. . 2 of this Ruling, capital allowances can still be claimed in respect of the period the real property is not let out provided the real property is maintained in good condition and is made available for letting. Example 28: Saravanan Sdn Bhd let out a shop lots building since 2008. The letting is treated as business source. On 1. 4. 2010 the building is repaired and cannot be occupied until 31. 5. 2010. The building is only let out again on 1. 6. 2010. Capital allowances claimed for the year of assessment 2010 is RM30,000. Even though the letting of shop lot building ceases from 1. . 2010 to 31. 5. 2010, the whole amount of capital allowances of RM30,000 can be claimed in the year of assessment 2010 since the letting ceases temporarily due to the repair of the building. Example 29: Harris Property Sdn Bhd owns a 5-storey building which is let out to Fetty Holding Bhd since 2007. The letting of the real property is treated as business source. Harris Property Sdn Bhd closes its account on 31 December every year. On 1. 3. 2010, the tena ncy of the building ceases and Fetty Holding Bhd does not renew the tenancy. The building is left vacant until 31. 2. 2011 despite the efforts of the company to find a new tenant (including advertising the letting in several newspapers). Harris Property Sdn Bhd only manages to let out the building to another company on 1. 1. 2012 (absence of tenants for a period of 22 months). Capital allowances have been claimed since 2007. Even though the letting of building ceases from 1. 3. 2010 to 31. 12. 2011, capital allowances can be claimed in the years of assessment 2010 and 2011 since the letting ceases temporarily due to the absence of tenants for a period of less than 2 years.Example 30: Facts are the same as in example 29 except that the building is not let out until 31. 3. 2012. Harris Property Sdn Bhd only manages to let out the building to another company on 1. 4. 2012 (absence of tenants for a period of 25 months). Harris Property Sdn Bhd is eligible to claim capital allowances for the years of assessment 2010 and 2011. Harris Property Sdn Bhd is also eligible to claim capital allowance for the year of assessment 2012 if the letting of the building is treated as a business source for that year of assessment.Issue: B Page 23 of 26 INCOME FROM LETTING OF REAL PROPERTY Public Ruling No. 4/2011 Date of Issue: 10 March 2011 INLAND REVENUE BOARD MALAYSIA 10. 3 If there is a change in tax treatment of the letting of a real property from a business source under paragraph 4(a) of the ITA to a non-business source under paragraph 4(d) of the ITA in the basis period for a year of assessment, the person who lets out the real property has two sources of income from the same real property in that basis period, i. a business source under paragraph 4(a) of the ITA and a non-business source under paragraph 4(d) of the ITA. If as a result of the change: 10. 3. 1 a company becomes an investment holding company (IHC), the rental income (business source) would be assessed as incom e under paragraph 4(d) of the ITA. Therefore, the company is not entitled to claim for capital allowances on plant and machinery since they are not used for the purpose of a business at the end of the basis period for that year of assessment. 0. 3. 2 a company does not become an IHC, the company still derives rental income under paragraph 4(a) and 4(d) of the ITA in respect of the real property. Even though the company is not an IHC, the company would not be entitled to claim for capital allowances on plant and machinery since they are not used for the purpose of a business at the end of the basis period for that year of assessment. Note: The determination of whether a company is an IHC or not is explained in the Public Ruling No. /2011 (Investment Holding Company). 10. 4 If a company has a business source and a rental source (not necessary to determine whether an IHC or not since its main activity is not the holding of investments) and there is a change in tax treatment of the lett ing of a real property from a business source under paragraph 4(a) of the ITA to a nonbusiness source under paragraph 4(d) of the ITA in the basis period for a year of assessment, the company still derives rental income under paragraph 4(a) and 4(d) of the ITA.The company would not be entitled to claim for capital allowances on plant and machinery since they are not used for the purpose of a business at the end of the basis period for that year of assessment. Note: In the case where capital allowances cannot be claimed, the residual expenditure of the plant and machinery will be reduced by notional allowances for that year of assessment and subsequent years of assessment. Example 31: Menara Sdn Bhd owns an office building consisting of 20 units and lets out all the units fully furnished since 2006.The letting is treated as a business source since maintenance services and support services are comprehensively and actively provided by Menara Sdn Bhd. Capital allowance have been claimed on the furnitures in the office building. Issue: B Page 24 of 26 INCOME FROM LETTING OF REAL PROPERTY Public Ruling No. 4/2011 Date of Issue: 10 March 2011 INLAND REVENUE BOARD MALAYSIA However from June 2010, Menara Sdn Bhd did not provide maintenance services and support services.Menara Sdn Bhd closes its account on 31 December every year. Menara Sdn Bhd is not entitled to claim capital allowances on the furnitures in the office building for the year of assessment 2010 since the furnitures are not used for the purpose of a business at the end of the basis period for that year of assessment. Notional allowances will be deducted to arrive at the residual expenditure of the furnitures for the year of assessment 2010 and subsequent years of assessment. 0. 5 If more than one real property is let out and there is a change in tax treatment of any of the real properties from a business source under paragraph 4(a) of the ITA to a non-business source under paragraph 4(d) of the ITA in the basis period for a year of assessment, capital allowances can be claimed on plant and machinery for the real property which remains as a business source under paragraph 4(a) of the ITA.If there is a change in tax treatment of the letting of a real property from a non-business source under paragraph 4(d) of the ITA to a business source under paragraph 4(a) of the ITA in the basis period for a year of assessment, the person who lets out the real property has two sources of income from the same real property in that basis period, i. e a non-business source under paragraph 4(d) of the ITA and a business source under paragraph 4(a) of the ITA.Capital allowances can be claimed on plant and machinery in the real property since they are used for the purpose of a business at the end of the basis period for that year of assessment. For the purpose of computing capital allowances, the qualifying expenditure for the plant and machinery is the market value on the first day they are used in the b usiness. Example 32: Teguh Sdn Bhd closes its account on 31 December every year and its main activity is the holding of investments. The company owns and lets out a fullyfurnished 10-storey office building.The letting is treated as a rental source under paragraph 4(d) of the ITA. From 1. 3. 2010 the company provides maintenance services and support services comprehensively and actively. The company is not an IHC in the year of assessment 2010 since the income from holding of investment is less than 80% of its gross income. Teguh Sdn Bhd is entitled to claim capital allowances on the furnitures in the office building for the year of assessment 2010 since they are used for the purpose of a business at the end of the basis period for that year of assessment.For the purpose of computing capital allowances for the year of assessment 2010, the qualifying expenditure for the furnitures is the market value on 1. 3. 2010. No initial allowance will be given. Issue: B Page 25 of 26 10. 6 INCOM E FROM LETTING OF REAL PROPERTY Public Ruling No. 4/2011 Date of Issue: 10 March 2011 INLAND REVENUE BOARD MALAYSIA 11. Industrial building allowance 11. 1 If a person owns a building lets out the building and the building is in used as an industrial building, industrial building allowance can be claimed by the owner of the building even though the letting is a non-business source.If the letting of real property is given a special treatment as explained in paragraph 4. 4 of this Ruling, the owner of the building is eligible to claim industrial building allowances on the qualifying building expenditure incurred. 11. 2 12. Replacement cost of furnishings If the letting of a furnished real property is treated as non-business source, cost of replacing furnishings such as furniture and air conditioner can be claimed as a deduction from gross income from that letting. 13.Letting of part of building used in the business If a building, whether owned or rented, is used for business purposes and part of the building is let out, the rent arising from the letting is treated as part of income from the existing business source. 14. Effective date This Ruling is effective for the year of assessment 2011 and subsequent years of assessment. This Ruling supersedes Public Ruling No. 1/2004 issued on 30 June 2004. Director General of Inland Revenue, Inland Revenue Board Malaysia. Issue: B Page 26 of 26

Analysis of the Old Love Tradition Illustrated In Poems by Chaucer

Analysis of the Old Love Tradition Illustrated In Poems by Chaucer Courtly Love in Chaucer’s poetry Chaucer’s literature was spread across many different spheres of interest throughout his life, often focussing on society and religion. An observer of his own social group, he wrote satirical interpretations of those surrounding him, subverting the traditional writing styles of Beowulf (900AD-1100AD), Sir Gawain and the Green Knight (14th century) and even Petrarch (1304-1374), into something that was almost similar to social commentary. Chaucer’s relationship with the courtly love tradition is interesting to examine because of its fluctuating nature; his attitude to courtly love in his earlier writing is very different to the presentation of courtly love in The Canterbury Tales . The woman presented in A Complaint to his Lady is very different for instance to the woman of The Miller’s Tale (who arguably is not so much a heroine of courtly love) in that she is very distant, and rebuts his advances, whilst Alison in The Miller’s Tale is open to the men†™s proposals to gain her affections. Therefore one can assume Chaucer’s intentions in writing the poem are ambiguous at best; it is challenging to decide whether Chaucer uses a satirical presentation of courtly love, or whether he is genuinely adhering to the concept of both courtly love and the chivalric tradition. The tradition of courtly love is based around five elements, which define the relationship between the two participants. The love was primarily a relationship between aristocratic men and women, and was often adulterous. The relationship would be conducted in secret and would often involve the ritualistic exchange of gifts. The final defining element of the affair was the flouting of rigid courtly marriage, which was often only formed for political and financial reasons. Glorification of this kind of extramarital affair was found in songs of gallant knights and their fair ladies, and led to the spread of this kind of relationship in the fourteenth, fifteenth and sixteenth centuries. The poem itself represents the prescribed courtly love heroine; however its adherence to the protocol of the tradition is variable. The portrait of the traditional courtly love heroine can be found in Prologue of The Canterbury Tales In the description of the prioress, we are told her ‘nose was elegant, her eyes glass-grey; Her mouth was very small, but soft and red, Her forehead, certainly, was fair of spread†¦Ã¢â‚¬â„¢. This represents her noble features, and her eyes are a metaphor for her treatment of her lover; the courtly love heroine rarely acknowledged the advances of her lover and instead, gives only the merest hint that she shares his feelings. The ‘glassy’ nature of the heroine’s eyes shows a degree of superficiality in the relationship between the man and woman; perhaps even an emptiness of character, even a lack of personality where the heroine becomes a mechanism for the man to project his idealistic feelings upon. A Complaint to his Lady is a poem written from a man directly to a woman whom he clearly adores, detailing his struggle for her affections, and how she is causing him a considerable amount of torment. For example the line ‘so desepaired I am from alle bliss,’ shows an almost self-pitying lamentation that continues until the beginning of part III. The third part of the poem sees the narrator confessing that ‘I can but love hir best, my swete fo;’ which symbolises a sweetness previously absent, a sweetness connected to his love for her, which changes the tone of the poem. The poem takes the form of a monologue; whilst he appears to be talking to his lady, it becomes obvious that she is not there, or is at least unresponsive, and therefore one can presume he is alone. The main element of the poem is distance and suffering, created by this woman, regardless of his devotion to her. Chaucer here represents love as a kind of poison, shown by his statement ‘Th us am I slayn with Loves fyry dart!’, and subsequently leaving the protagonist unable to understand her treatment of him; ‘love hath taught me no more of his art’. The perspective of the protagonist changes as the poem progresses, beginning with establishing the circumstances in which he is in love with her, and then moving on to describe the manner in which she treats him. The quotation ‘The more I love, the more she doth me smerte’ represents the paradoxical effect of the courtly love; the woman will appear to grow more distant. At the beginning of part III, the protagonist describes his woman as ‘Faire Rewtheless’; this is revealing about her mannerisms and ‘Rewtheless’ represents a cold attitude, is very similar to the eyes of the prioress which are described as ‘eyes glass-grey’. The fourth section of the poem is the longest, and represents the efforts of the protagonist to glean some kind of response from his woman. He compares his own shortcomings with her ‘gentileness and debonairtee’, and almost sarcastically states that he is not worthy of her service. Chaucer states tha t ‘Thogh that I be unconnyng and unmete, to serve, as I coude best, ay your hynesse,’ says that even though he is uncouth and unkempt, he would serve the woman as best as he could. This over exaggerated display of emotion implies that the poem could be satirical; however because there is no comparative character, or change of theme, one cannot be sure of Chaucer’s intention regarding the poem. It is interesting that he refers to the lady as a queen, therefore of higher status than himself reinforcing the idea that she has become almost demigod-like, given it is likely that they would have belonged to the same social strata. Part of the attraction of courtly love was the extravagance and exaggeration of action; for women of this period, they would have been repressed for most of their lives, constantly adhering to rules enforced by the crown, or perhaps their own family, and this affair was a rebellion against normality for them, almost a liberating experience. Th e final stanza of the poem, the protagonist proposes an ultimatum of sorts; to grant him some kind of pity, (i.e. respond in some way to his advances), otherwise nothing, no bliss, nor hope will dwell in his troubled heart. From a modern day point of view, the poem becomes repetitive, and the concept appears false; however at the time of writing, this level of extravagance was not uncommon and therefore from a historical perspective, the poem is likely to be a good example of typical courtly love poetry, such as that of Petrarch and Boccaccio. The presentation of the heroine in this poem is comparable with other courtly love heroines in Chaucer’s tales, in particular Alison, from the Miller’s Tale, Pertelote, The Nun’s Priests Tale, The Prioress, The Prologue and Criseyde, Troilus and Criseyde. Criseyde is very similar to the Prioress in many ways; however is assertive in her role as a courtly love heroine, playing an active part in the poem, demonstrated by book III, verse 115. She states ‘Alas, I would have though, whoever told, such tales of me, my sweetheart would not hold, Me false so easily’, showing perhaps a more effective, realistic heroine than the woman in A Complaint to his Lady. In contrast, courtly heroes often use hyperbole to attempt to convey the depth of the affection they feel towards their women, for example when Chaucer’s protagonist says ‘But I, my lyf and deeth, to yow obeye’ (My life and death, to you obey). This essentially states that she has total control over his heart; a fairly typical declaration within courtly love poetry; Boccaccio used many similar assertions in his novel Elegia di Madonna Fiammetta . The courtly love hero is often of a noble disposition, as demonstrated by book I, verse 27 of Troilus and Criseyde. The knightly element of courtly love can be exemplified by earlier literature, such as the description of King Arthur in Sir Gawain and the Green Knight, written in the fourteenth century, around the same time as A Complaint to his Lady. The nobleness of the courtly gentleman is described in Lines 85-88 of Sir Gawain and the Green Knight, when the author describes Arthur himself, as ‘Bot Arthure wolde not ete til al were served, He was so joly of his joyfness and sumquat childgered, His lif liked hym light, he lovied the lass’ (Line 85-88). Paraphrased, the above means â€Å"But Arthur would not eat until all were served. He was so youthfully gay and somewhat boyish, he liked an active life .† The general sense of courtly love therefore is a noble relationship outside convention, between a lady and gentleman; the woman is typically more distant while the man ritualistically tries to ‘woo’ her, using any means necessary, and in the case of A Complaint to his Lady, suffers immensely due to the depth of his love for her. Throughout A Complaint to his Lady, the protagonist changes his opinion concerning who is to be blamed for his affliction; in the first two stanzas, he blames himself for becoming so attached, but then unsatisfied with this, blames the emotion of love itself for his sadness. Eventually however he reaches the conclusion that it is her ruthlessness, described as ‘thogh ye never wil upon me rewe, I moste yow love and been ever as trewe’, that causes him so much pain. Chaucer here portrays a hero who will eagerly fall in ‘love’ with a woman, however will be unable to control his own emotions. This degree of instability coupled with obvious exaggeration of his feelings causes us to question whether he is a satirical figure, but also if the nature of this love is genuine as opposed to merely a whim. His status as a courtly love hero is also questionable, because he is portrayed as an ineffectual character as opposed to a gallant, noble member of the court. Assuming there are five main elements of courtly love, many of those should be found in the poem. The most prominent element of courtly love in the poem is the aspect of aristocracy, presented by the protagonist’s placement of himself in servitude to the woman. On numerous occasions he places himself below her, begging her not to ‘from your service dryve’. There is very little in the way of ritualism in the poem to suggest that the couple share gifts or even any kind of relationship at all; Chaucer uses language in such a way that it infers she barely is aware of his existence. This presents the reader with a quandary especially regarding the purpose of the poem. Secrecy of their affair is not alluded to at any point in the poem; this perhaps represents the ambiguity of what has thus far occurred between them, and perhaps therefore it does not follow the tradition in that the relationship (if it can be defined as such) is not adulterous, as far as we can tell. In order to establish this, it may be useful to examine Chaucer’s own life, and his personal situation at this point . In 1368, Chaucer was married to Philippa Roet, a lady in waiting to the Queen, and was an esquire to the house of Edward III. He had also had a son, named Thomas, born in 1367. This information is useful in terms of a biographical perspective on the poem. Chaucer was still a young man at the point of writing A Complaint to his Lady (aged 24) and it is conceivable that the poem was written on a personal basis, detailing some kind of affair he himself was having at the time. This knowledge is useful, because therefore if the poem is autobiographical, the lady he is speaking of is obviously not his wife, thus fulfilling the extramarital nature of a courtly love relationship as presented in the poem. Without any biographical knowledge however there is no mention of any other relationship, which causes the reader to question the very essence of ‘fine love’ in that we can find very little evidence for it from the poem alone. There are however some isolated elements of the trad ition found in the poem, however whether they culminate in a traditional courtly love ritual poem is dubious. The structure of the poem is revealing in terms of the intention behind its writing; the changing forms, and inconsistency present the reader with an almost unfinished poem, sufficiently unrefined to justify this assertion. There are three main changes of form; parts I and II are written in rhyme royal. Part II however does not strictly adhere to the concept of rhyme royal and contains elements of terza rima. Part III sees the complete transition from rhyme royal to terza rima; iambic tercets make the poem sound more rhythmic than it had been previously. After part III however the form of the poem turns into decasyllabic lines, with stanzas being largely ten lines long, with the exception of stanzas eight and nine, which are nine and eight lines long respectively. The final part of the poem is the least rigidly formatted, and has an irregular rhyme scheme. One of the main rhyme patterns of the final section is AABAABCDDC, however not all stanzas follows this pattern. This inconsisten cy therefore is important in ascertaining the writer’s literary capability, almost the level of sophistication his work had reached at the time he’d written the poem. If one were only to examine the structural cohesion of the poem, then one could conclude he was still very much a developing poet. The rhyme scheme of parts I-III is fairly regular because it adheres to two poetic forms, rhyme royal and terza rima . The use of rhyme royal was a fairly common pattern to use during this period, and often was used in less sophisticated rhyming poetry of the time. Chaucer’s use of terza rima however allows the reader insight into the influence of the courtly love tradition on the poem in that in order to use the form, Chaucer would have had to be exposed to it, in its original format by its patrons, at some point during his missions to Europe. In Italy at this point, Petrarch and Boccaccio especially were writing poetry that was very heavily focussed on the tradition of courtly love, experimenting with terza rima; exposure to this may have prompted Chaucer to write A Complaint to his Lady, and to view the poem as an experiment would add credibility to the idea that Chaucer was still developing as a poet, and therefore his ideas were still unrefined, thus explaining the poemâ €™s content. Why Chaucer did not choose to finish the poem in this manner is unknown. There was usually no prescribed rhyme scheme used in the courtly love tradition, except the obvious assumption that it should rhyme. From the composition of the poem one can assume that Chaucer’s influences were mixed; his travels to Italy influenced his work, as demonstrated by the use of terza rima and the protocols he follows when addressing his lady. Another influence of folklore becomes apparent through the emotions he claims to feel regarding her, and the influence of the knightly tales as demonstrated by the noble tone of ‘For neither pitee, mercy, neither grace’. The structure of this poem in comparison with later works shows more of an experimental motivation; for instance, in The Miller’s Tale the structure is simple; rhyming couplets and one long, extended stanza. This structure therefore adds far more focus to the plot as opposed to the intricacies of rhyme. The Canterbury Tales were also intended for an audience, to be performed verbally; wheth er A Complaint to his Lady was intended for public consumption may affect whether the tradition of courtly love actually forms the basis of the poem, because usually, poems written for personal courtship would not be shared with the wider public. The lack of aural consideration in the poem creates the impression that the poem was not supposed to be performed for the general public, even though the concept of ‘fine love’ was very popular in folklore of the time. The Canterbury Tales were however written to be performed verbally; several paintings of Chaucer performing his poetry exist, including â€Å"Chaucer at the Court of Edward III† . Graphological interpretation of the poem is difficult because by modern standards, it is fragmented and inconsistent; however, there are some features of the poem that define certain elements. For example, Chaucer frequently uses commas, which adds to the internal monologue effect he uses, causing the reader to feel as though we are entering conversation with him. This presents a paradox in terms of stylistic quality because the reader almost feels intrusive, whilst being ‘spoken’ to at the same time. ‘This hevy lif I lede, lo, For your sake’ for example is paradoxical because Chaucer is apparently addressing his lady, and yet appears to be addressing the reader in a simplistic sense because of the use of the second person, personal pronoun of ‘you’. There are also several questions used in the poem, which again engages the reader, making it more accessible to an audience. An example of this is ‘Allas, whan shal that harde wit amende?†™ which is a kind of ponderous question. It includes no specific address however invites the reader to respond in some way. In terms of language and lexical choices, the poem is far easier to comprehend than when considering grammar. Broadly, the poem uses three semantic fields; that evolving around the tradition of courtly love, beauty and other such finery, one of religion based ideas, and one of servitude and self deprecation. These are of course very broad spectrums. The field of courtly love is the central theme of the poem, as demonstrated the assertion of ‘gentilnesse and your debonairtee?’ The language used is obviously connected to the overriding theme of the poem. The use of religious imagery is perhaps more interesting; it represents a deep rooted relationship with the social values of the period and perhaps the element of Christianity that was undoubtedly present in the courtly love tradition. The demigod-like presentation of the woman only serves to enhance the enchanting aura that appears to surround the woman in Chaucer’s poem, and because of the depth of religious focus at the time, this was a very powerful feeling to manipulate within poetry itself. The comparison however with the godlike features of the woman, such as his idealisation of her, as in â€Å"Myn hertes lady and hool my lyves queen†, with the position of servitude he finds himself in is bizarre because from a historical point of view, a man is wholly authoritative over a woman. In modern literature, the woman is often seen rejecting the idealisation of the opposite sex due to love, and instead is becoming more internally directed by her own thoughts and emotions. The semantic field of servitude is one common across much of the courtly love poetry experienced; Petrarch, for example regularly wrote so that the role of the man and the woman were reversed; servitude moved from the role of the woman to that of the man, thus subverting tradition and therefore making the concept almost strange to read, if one is in the contextual mindset as the poem demands. The significance of connotation is surprisingly small in this poem because Chaucer was not a great user of metaphor, especially in his earlier poetry; the emergence of figurative language emerged during the age of prescriptivism, from around 1450, some years after his death. Chaucer does use figurative language in some of The Canterbury Tales, however in terms of The Nun’s Priests Tale, the idea of anthropomorphism is more prevalent than metaphor per se. Chaucer’s meaning is very much found at face value; there are wider implications of what he says, however there is little linguistic subtext, in comparison for example with William Shakespeare. There is however much more contextual connotation, in his exploration of the woman and her role in his life, and the religious connections this has. Overall, the poem follows many aspects of the tradition of courtly love, however investigations into form and Chaucer’s personal life may be more revealing about the motivations of the poem; whether the poem was intended for public consumption is unclear, however since the poem appears to be intensely personal, it seems unlikely. Contextually however, rambling tombs of poems dedicated to one’s ‘true love’ were not uncommon; exaggerated gestures of undying love were commonplace particularly in the aristocratic circles in which Chaucer placed himself, and therefore he may have been persuaded to write in this manner by a variety of ‘peer pressure’. The differences between the tradition of courtly love and the poem will be further explored in Part Two, as well as Chaucer’s personal life which may have influenced the degree to which the poem adheres to tradition, and how far it diverges in comparison with The Canterbury Tales.

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