Finance Act, 1969
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Taxation of rents and other receipts. |
22.—The following section is hereby substituted for section 81 of the Income Tax Act, 1967 : | |
“81.—(1) Without prejudice to any other provisions of the Income Tax Acts, the profits or gains arising from— | ||
(a) any rent in respect of any premises, and | ||
(b) any receipts in respect of any easement, | ||
shall, subject to and in accordance with the provisions of the Income Tax Acts, be deemed for all purposes of those Acts to be annual profits or gains within Schedule D and the person entitled to such profits or gains (hereafter in this Chapter referred to as the person chargeable) shall be chargeable in respect thereof under Case V (inserted by the Finance Act, 1969) of that Schedule: | ||
Provided that the said rents or receipts do not include any payments to which section 93 applies. | ||
(2) Profits or gains chargeable under Case V of Schedule D shall, for all the purposes of ascertaining liability to income tax, be deemed to issue from a single source and the provisions of subsection (3) shall apply accordingly. | ||
(3) (a) Tax under Case V of Schedule D shall, subject to the provisions of this subsection, be computed— | ||
(i) as respects the year of assessment in which the profits or gains first arise, on the full amount of the profits or gains arising within that year, and | ||
(ii) as respects subsequent years of assessment, on the full amount of the profits or gains arising within the year preceding the year of assessment: | ||
Provided that— | ||
(I) where the profits or gains first arose on some day in the year preceding the year of assessment other than the 6th day of April, the computation shall be made on the profits or gains of the year of assessment; | ||
(II) where the profits or gains first arose on the 6th day of April in the year preceding the year of assessment, or on some day in the year next before the year preceding the year of assessment other than the 6th day of April, the person chargeable shall be entitled, on making a claim at any time within twelve months after the end of the year of assessment, to be charged on the amount of the profits or gains of that year, and, if the tax charged has been paid, any amount overpaid shall be repaid; and | ||
(III) where in computing the profits or gains on which tax is finally charged for any year of assessment any part of a premium or other sum chargeable by virtue of section 83 and in respect of which no election has been or could have been made under subsection (6) of that section, has been taken into account, the amount so taken into account shall be disregarded in computing the amount of the profits or gains on which tax is charged for any subsequent year. | ||
(b) If in any year of assessment the person chargeable ceases to possess the whole of such single source of profits or gains as is mentioned in subsection (2), section 58 (5) shall, subject to the necessary modifications, apply in any such case as if the cesser of the possession of such single source were the discontinuance of a trade. | ||
(c) The reference in paragraph (b) to a person ceasing to possess the whole of a single source of profits or gains shall be construed as referring to a cesser occurring by reason of the person dying while in possession of such single source of profits or gains as well as to a cesser occurring in the lifetime of such person and for the purposes of paragraph (b) such death shall be deemed to cause a cesser and such cesser shall be deemed to take place on the day of such death. | ||
(4) Subject to the subsequent provisions of this Chapter, the amount of the profits or gains arising in any year shall, for the purposes of Case V of Schedule D, be computed as follows: | ||
(a) the amount of any rent shall be taken to be the gross amount thereof before any deduction for income tax; | ||
(b) subject to section 82, the amount of the profits or gains arising in any year shall be the aggregate of the surpluses computed in accordance with paragraph (c), reduced by the aggregate of the deficiencies as likewise computed; | ||
(c) the amount of the surplus or deficiency in respect of each rent or in respect of the total receipts from easements shall be computed by making from the rent or total receipts from easements, as the case may be, to which the person chargeable becomes entitled in any year, the deductions authorised by the next following subsection. | ||
(5) The deductions authorised by this subsection are deductions by reference to any or all of the following matters: | ||
(a) the amount of any rent payable by the person chargeable in respect of the premises or in respect of a portion thereof; | ||
(b) any sums borne by the person chargeable— | ||
(i) in the case of a rent under a lease, in accordance with the conditions of the lease, and | ||
(ii) in any other case, relating to and constituting an expense of the transaction or transactions under which the rents or receipts were received, | ||
in respect of county rate, municipal rate or other rate, whether such sums are by law chargeable upon him or upon some other person; | ||
(c) the cost to the person chargeable of any services rendered or goods provided by him, otherwise than by way of maintenance or repairs, being services or goods which— | ||
(i) in the case of a rent under a lease, he is legally bound under the lease to render or provide but in respect of which he receives no separate consideration, and | ||
(ii) in any other case, relate to and constitute an expense of the transaction or transactions under which the rents or receipts were received not being an expense of a capital nature; | ||
(d) the cost of maintenance, repairs, insurance and management of the premises borne by the person chargeable and relating to and constituting an expense of the transaction or transactions under which the rents or receipts were received, not being an expense of a capital nature; | ||
(e) interest on borrowed money employed in the purchase, improvement or repair of the premises. | ||
(6) (a) The amount of the deductions authorised by subsection (5) shall be the amount which would fall to be deducted in computing profits or gains under the provisions applicable to Case I of Schedule D if the receipt of rent were deemed to be a trade carried on— | ||
(i) in the case of a rent under a lease, during the currency of the lease, and | ||
(ii) in the case of a rent not under a lease, during the period during which the person chargeable was entitled to the rent, | ||
by the person chargeable and the premises comprised in the lease or to which the rent relates were deemed to be occupied for the purpose of that trade. | ||
(b) For the purpose of this subsection the currency of a lease shall be deemed to include a period immediately following its termination, during which the lessor immediately before the termination was not in occupation of the premises or any part thereof, but was entitled to possession thereof, if at the end of that period the premises have become subject to another lease granted by him. | ||
(7) (a) Where the person chargeable is entitled in respect of any premises (hereafter in this subsection referred to as the said premises) to a rent or to receipts from any easement and a sum by reference to which a deduction is authorised to be made by subsection (5) is payable by him in respect of premises which comprise the whole or a part of the said premises and other premises, the inspector shall make, according to the best of his knowledge and judgment, any appropriate apportionment of the said sum in determining the amount of any deduction under that subsection. | ||
(b) Where the person chargeable retains possession of a part of any premises and that part is used in common by persons respectively occupying other parts of the premises, the provisions of paragraph (a) shall apply as if a payment made in respect of the part used in common had been made in respect of those other parts. | ||
(8) Any amount or part of an amount shall not be deducted under subsection (5) if it has otherwise been allowed as a deduction in computing the income of any person for the purposes of income tax. | ||
(9) Notwithstanding anything in section 190, relief shall not be given under that section by reason only of the fact that a rent falling due on or before the 5th day of April, 1969, and from which income tax was deducted on payment thereof was taken into account in computing the profits or gains on which tax is chargeable under Case V of Schedule D for the year 1969-70. | ||
(10) If any person who was assessed and charged to tax for the year 1969-70 in respect of profits or gains chargeable under Case V of Schedule D proves that the amount of the assessment in respect of the said profits or gains was greater by more than 20 per cent, than the actual amount of those profits or gains arising to him in the said year he shall be entitled on making a claim on or before the 30th day of September, 1970, to have the assessment for the year 1969-70 reduced to the amount of the actual profits or gains of the year and if the tax charged has been paid any amount overpaid shall be repaid.”. |