Paragraph 25-Ship owners who incur expenses on the purchase of new or used ship at rates of 40% provided only one shipping investment, deduction is allowed on any one ship
S ltd v income tax ltd
The appellant company bought two ships and incurred capital expenditure in refitting them to suite their business. They sold one ship without using it but used the second ship for which they sought to deduct expenses incurred in re-fitting it. The taxpayer sought to deduct expenditure on the second ship, which the commissioner disallowed. The taxpayer appealed contending that he was entitled to the deduction but the commissioner responded arguing that for this deduction to be allowed the cost to be deducted must be equal to the total expenditure and in this case, the cost of refitting the ship was less than 20% of the total expenditure. The deduction was disallowed. It could only be allowed if used by the purchaser taxpayer and if cost of refitting the ship for the business of the taxpayer exceeds 25% of the total expenditure. Appeal was dismissed.
Paragraph 25C deals with deductions under the 9th schedule.Specialised form and incorporation and expenditure of petroleum companies.
Paragraph 25D deals with assortment of deductions relating to land, timber and growing of specified goods thereon
Section 15(2) paragraphs C, D, F, I, J and L deal with deductions in relation to land.
Paragraph C allows deductions by owner/occupier of farmland for any expenses incurred on activities to prevent soil erosion
Paragraph D allows deduction of expenditure on legal cost and stamp duty for a question of a lease of less than 99 years.
Paragraph s allows deductions for legal cost and other expenses incurred in relation to issuance of security to the public.
Paragraph e: allows deduction of capital expenditure incurred before the commencement of a business if it is to set up that business.
Paragraph f allows deduction of expenditure on structural alterations to premises provided it is necessary to maintain existing rent but not for any extension to or replacement to those structures.
Paragraph I allows deductions of gains of an owner from sell of standing timber which was growing on land at the time of purchase of that land.
Paragraph j allows deductions of gain from sell of standing timber by a person whop purchased right to fell that timber.
Section 15(2) paragraph L allows deductions of expenditure of a capital nature by the owner/tenant of agricultural land if it is expected to affect the clearance.
This allowance was contested in the case of
Kiwege and Mgude farm ltd v commissioner of income tax
The appellants purchased 3 sisal farms /estates on which they expended £13805 in clearing the land and planting sisal while on the other they expended £15584 for clearing and planting sisal.Appelants sought to deduct as expenses monies expended both on the clearing and planting of sisal and on maintaining the sisal farm. The commissioner resisted this deductions arguing that this paragraph only allowed deductions for money expended on clearing and the crop. The appeal was dismissed as the taxpayer was now including cost for maintenance, which was not deductible under this head, which limited deductions for clearing and planting.
Rally estate ltd v commissioner of income tax
The appellant bought 2 sisal estate and 2 additional land adjoining them from Tanganyika government for a 99 year lease and a concentration of £491,000 designated as the full purchase price of which £317,000 was to be paid as premium, while the balance of £174,000 was to be paid in instalments.The appellant sought to deduct £174,000 as outgoings and expenses incurred by them in production of income in terms of sec14 of the East Africa income Tax management Act of 1952 similar to our sec 15.The commission disallowed it. On appeal, the High court dismissed it. The court of appeal dismissed the appeal because amounts of installments of £174,000 were capital expenses and should not be deducted as income expenses
Commissioner of income tax v Jaffa brothers ltd
A deduction of sh 6000 from income of the respondent tax payer was allowed by the High court notwithstanding that it was an inducement by the tax payer as the landlord to its tenants in a protected tenancy to enable them leave the space for the taxpayer to use for its business. Premises avail to the taxpayer for generation of income
Income tax commissioner v cotecha estates
The respondent taxpayer bought a sugar estate but the price was not apportioned between land and sugarcane thereon growing as crops. Two years later, he sought to deduct the price of sugar and the value of growing sugar from its income. The commissioner resisted. The local committee allowed that deduction but spread it a full 100,000 over 4 years against which the commissioners appealed and it was held because purchase of the estate was a capital expense. No amount of growing sugarcane should be deducted as an income expense. Apportionment of 100,000 pounds over 4 years also refused as it was not permitted by law. Deductions were only allowed in the year of income.