PART V.

Initial Allowances: Income Tax, Sur-tax and Corporation Profits Tax.

23. —(1) Where, on or after the 6th day of April, 1956, a person carrying on a trade the profits or gains of which are (otherwise than consequent upon an election under Rule 5 of the Rules applicable to Schedule B of the Income Tax Act, 1918) chargeable under Case I of Schedule D of the Income Tax Act, 1918, incurs capital expenditure on the provision, for the purposes of the trade, of new machinery or new plant, other than vehicles suitable for the conveyance by road of persons or goods or the haulage by road of other vehicles, there shall be made to him, for the year of assessment in the basis period for which the expenditure is incurred, an allowance (in this Part of this Act referred to as an initial allowance) equal to one-fifth of the expenditure, and such allowance shall be made as a deduction in charging the profits or gains of the trade.

(2) Any expenditure incurred on or after the 6th day of April, 1956, for the purposes of a trade by a person about to carry it on shall be treated for the purposes of subsection (1) of this section as if it had been incurred by that person on the first day on which he does carry it on.

(3) For the purpose of this section capital expenditure shall not include any expenditure which is allowed to be deducted in computing, for the purposes of income tax, the profits or gains of a trade carried on by the person incurring the expenditure.

(4) For the purposes of this Part of this Act, the day on which any expenditure is incurred shall be taken to be the day when the sum in question becomes payable.

(5) Any claim by a person for an allowance under this section in charging the profits or gains of his trade shall be included in the annual statement required to be delivered under the Income Tax Acts of the profits or gains thereof and shall be accompanied by a certificate signed by the claimant, which shall be deemed to form part of the claim, stating that the expenditure was incurred on new machinery or new plant and giving such particulars as show that the allowance falls to be made.

(6) In this section, “new” means unused and not secondhand, provided that a ship shall be deemed to be new even if it has been used or is secondhand.

24. —(1) Where, in charging the profits or gains of a trade, a deduction is to be allowed to any person under paragraph (1) of Rule 6 of the Rules applicable to Cases I and II of Schedule D of the Income Tax Act, 1918, as representing the diminished value by reason of wear and tear during the year of assessment of any machinery or plant, the value at the commencement of the year of such machinery or plant shall be taken to be the actual cost to that person of such machinery or plant reduced by the total of any deductions allowed under the said Rule 6 and any initial allowances made under this Part of this Act for previous years of assessment.

(2) Paragraph (2) of Rule 6 of the Rules applicable to Cases I and II of Schedule D of the Income Tax Act, 1918, as amended by section 2 of the Finance Act, 1944 (No. 18 of 1944), paragraphs (3) and (5) of the said Rule 6, Rule 7 of the said Rules and section 4 of the Finance Act, 1937 (No. 18 of 1937), shall apply in relation to an initial allowance as they apply in relation to deductions allowable in respect of wear and tear of machinery or plant.

(3) In paragraph (6) of Rule 6 of the Rules applicable to Cases I and II of Schedule D of the Income Tax Act, 1918, the expression “the deductions allowed on that account for any previous years to the person by whom the trade is carried on”, and the expression “the deductions” where that expression occurs before the word “exceed”, shall each be construed as including a reference to any initial allowance made, in relation to the machinery or plant, to the person by whom the trade is carried on.

25. —(1) In this Part of this Act, “basis period” has the meaning assigned to it by the following provisions of this section.

(2) In the case of a person to whom an allowance falls to be made under this Part of this Act, his basis period for any year of assessment shall be the period on the profits or gains of which income tax for that year falls to be finally computed under Case I of Schedule D of the Income Tax Act, 1918, in respect of the trade in question or, where, by virtue of any Act, the profits or gains of any other period are to be taken to be the profits or gains of the said period, that other period:

Provided that, in the case of any trade—

(a) where two basis periods overlap, the period common to both shall be deemed for the purposes of this subsection to fall in the first basis period only;

(b) where there is an interval between the end of the basis period for one year of assessment and the basis period for the next year of assessment, then, unless the second-mentioned year of assessment is the year of the permanent discontinuance of the trade, the interval shall be deemed to be part of the second basis period; and

(c) where there is an interval between the end of the basis period for the year of assessment preceding that in which the trade is permanently discontinued and the basis period for the year in which it is permanently discontinued, the interval shall be deemed to form part of the first basis period.

(3) (a) Any reference in the proviso to subsection (2) of this section to the permanent discontinuance of a trade shall be construed as including a reference to the occurring of any event which, under any of the provisions of the Income Tax Acts, is to be treated as equivalent to the permanent discontinuance of a trade.

(b) Any reference in the said proviso to the overlapping of two periods shall be construed as including a reference to the coincidence of two periods or to the inclusion of one period in another, and references to the period common to both of two periods shall be construed accordingly.

26. —The preceding provisions of this Part of this Act shall, with any necessary adaptations, apply in relation to capital expenditure incurred on or after the 6th day of April, 1956, by a person assessable under Rule 8 of the Rules applicable to Schedule B of the Income Tax Act, 1918, or under Case II of Schedule D of that Act.

27. —Where this Part of this Act provides for an initial allowance to be made to a company for the purposes of income tax, in respect of any expenditure, the amount of the allowance shall be deducted in computing the profits of that company for the purposes of corporation profits tax for the accounting period in which the expenditure is incurred.

28. —This Part of this Act shall, so far as it relates to income tax (including sur-tax), be read and construed together with the Income Tax Acts and shall, so far as it relates to corporation profits tax, be read and construed together with Part V of the Finance Act, 1920, as amended or extended by subsequent enactments.