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Jolly Life Club Limited $(\text{'}$the Club'$)$ operates in Hong Kong to provide facilities for its

members to enjoy healthy life. The Club owns a property in Mongkok and another

property in Tuen Mun. The Tuen Mun property is used for the Club facilities and a

restaurant. Only members are admitted to the Club facilities. The canteen is open to

members and non$-$members. The property in Mongkok is leased to outsiders. The income

and expenditure accounts for the years ended $31$ March $2020$ and $31$ March $2021$ are as

below:

Receipts

Member subscriptions

Donation

Sales of organic food items

Receipts from restaurant

Members

Non$-$members

Rental receipts

Less: Expenditures

Restaurant expenses

Cost of sales of organic food

items

Administration expenses

Rates $-$ Mongkok property

Rates $-$ Tuen Mun property

Sundry expenses

Surplus

Notes:

$(1)$ All members are individual persons who have voting rights at annual general meetings.

$(2)$ During the year ended $31$ March $2021,$ the Club launched a campaign to promote and

sell the organic food items. The food items were sold to the Club's member only.

$(3)$ The one$-$off donation of $$50,000$ was received from a fitness center which promoted

healthy work$-$life balance.

Required:

$($a$)$ Explain the tax position and calculate the tax liabilities of Jolly Life Club Limited

for the years of assessment $2019/20$ and $2020/21.$ Ignore provisional tax, tax

reduction or tax waiver in your calculations. Assume the Club would not be qualified

for the two$-$tiered profits tax rates.

$($b$)$ If Jolly Life Club Limited is a trade association with the objectives of promoting the

awareness of the profession, and assuring the standards required of Jolly Life style

consultants who provide advice to people on healthier lifestyle choices in nutrition

and stress management, explain the tests which are to be used to determine whether

the trade association is subject to Hong Kong profits tax.

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