Deductions in respect of capital expenditure on mining activities

Allowed under Section 17  and is  available for mining business where expenditure  is incurred on the search, discovery and testing of minerals and acquisition of rights over deposition, provision of machine and construction of  buildings necessary for mining and other  incidental expenses.  The rate of deduction is 40% expressed in the year of starting and a 10% of expenses in subsequent years.

Commissioner of Income Tax vs. Buhemba Mines Ltd
The company had incurred and paid costs worth Ksh 96,940 and successfully resisting a petition for winding up. The company then sought to deduct legal costs from the total income that they were costs for a mining company but the regional commissioner of Income. Tax from Tanganyika disallowed the deduction. The company successfully appealed but the commissioner made a further appeal
ISSUE: Whether legal costs were expenses incurred wholly and exclusively in production and income of the company in terms of Section 14 of the Income Tax Management Act
HELD: These costs were not expenses wholly and exclusively incurred in production and deduction was not allowed.  


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