Allowed under paragraph 22 where expenses on construction of farm works on agricultural land for husbandry would be allowed deductions.
Income Tax Commissioner vs. Kagera Saw Mills
The plaintiffs cultivated sugarcane on their land where they had a sugar mill and refinery factory. They incurred expenses on construction of an irrigation system but sought a deduction on the basis of the construction of farm works on agricultural land which was a 20% deduction. The commissioner disallowed the deduction but allowed one at 12 and a half % on the basis of machinery, the High Court held that irrigation system housed diesel engine fixed pump a series of movable pipes connected to a sprinkler network could be savored into two:
-machinery (diesel engine)
-farmworks (pipes, sprinklers)
Such that 12.5%would be on the machinery and 20% on farmworks. The commissioner appealed to the court of appeal and the plaintiffs conceded that pump was machinery but sought to have a capital expenses deduction on the purchase, installation and alteration of machinery in the sugar mill. The commissioners disallowed that on grounds that the TP was engaged solely in the trade of husbandry and agricultural land and not into trades of growing and refining sugarcane as contended by TP.
HELD: The commissioners appeal be dismissed coz pipes and sprinklers were farmworks and not an integral part of machinery. As the TP carried on to separate trades of growing and refining sugarcane, he was entitled to deductions on machinery as applied.