Section 15(2) as amplified by schedule 2 paragraph a deals with allowing deductions of bad and doubtful debts. To remain unpaid, and in allowing the deduction we are allowing the business to continue in production on grounds that it incurred this bad and doubtful debt as an expense of doing the business. When eventually the business recovers the bad and doubtful debts, we tax them

Income Tax commissioner v P ltd
 The respondent had lent money on security of a mortgage over his farm. After attempting to recover his money through a receivership and failing, it agreed to purchase the farm and transfer it to its subsidiary in discharge of the whole debt. The respondents share in the subsidiary company however sold at less than the original debt and the incurred loss on shares in subsidiary then sought to deduct the loss thereby incurred as a bad debt, which the local committee allowed but the commissioner appealed against.

It was HELD that the commissioners appeal be allowed because there was no longer any debt due to the respondent after date of agreement for transfer of the firm which extinguished the debt. The respondent that any debt still existed which had become bad because none of the guarantors of the business had been called to pay up had not established it. The Respondent bought a capital asset, which upon subsequent sale was now no longer deductible as a revenue loss since this was a capital loss.

Uganda Co. Ltd vs. Commissioner of Income Tax
The appellant operated a business of merchants until 1950. For year of income 1951, had been allowed to deduct 18,526 as bad debts because it continued to receive income from Uganda in 1951, received £ 12,023 and in 1953, recovered a further £1000 which the commissioner now sought to include the two sums in income for purposes of taxation since a reserve for bad debts had already been deducted from the income of the company.
It was  held that the appeal be dismissed because profits from a trade which had ceased to be carried on were still liable to tax and the fact that bad debts already provided for but now recovered did not change their character as gains.  

Robson & Another vs. Income Tax Commissioner
The appellants were advocates practicing in Nairobi who also doubled up as directors for various companies. The first appellant had been instructed to incorporate a company of which he became a director and shareholder based on which positions he guaranteed the company to obtain an overdraft. The company went into liquidation and the first appellant was called upon to pay up the guarantee amounting to Ksh 800,000, which he paid to creditors. In preparing accounts for the partnership, the appellant sought to deduct the sum from their income as bad debts being incurred wholly in the process of production. The commissioner disallowed the pay and they appealed.
It was HELD that the appeal be allowed because the amount was properly deductible and that their deductibility had not been precluded by the Act.

Mandavia vs. Income Tax Commissioner
The appellant received a notice for a return of his income in 1951. He did not object to the notice within the time specified. He furnished the return where he claimed allowance, premiums, and bad debts. The commissioner disallowed both deductions in default of full information in relation to insurance policy and property audited and credited account for bad debts. At the hearing, the appellant sought an adjournment, which was rejected, but he produced an affidavit from an accountant who said he will be away during the hearing but had examined the account. This was rejected and the appeal dismissed.
It was HELD that failure to object in time and furnish particulars requested estopped the appellant from raising any issues of notice on appeal because he had not discharged the onus to discharge the assessment as the accountants affidavit was not sufficient evidence.
Deductions under the 2nd Schedule (Section 15 (2) (d)

These are allowed less than six general parts:
1) Deductions in respect of capital expenses on certain buildings
2) Deductions in respect of capital on machinery
3) Deductions on mining machinery
4) Deductions on agricultural land.
5) Investment deductions/ allowance
6) Deductions for manufacture under bond in EPZ for shipping companies


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