Deductions on capital expenditure on agricultural land

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.


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