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INLAND REVENUE ORDINANCE

INLAND REVENUE ORDINANCE 78. (Repealed 49 of 1956 s. 59) PART XIII REPAYMENT 79. Tax paid in excess to be refunded (1) If it is proved to the satisfaction of the Commissioner by claim duly made in writing within 6 years of the end of a year of assessment or within 6 months after the date on which the relevant notice of assessment was served, whichever is the later, that any person has paid tax in excess of the amount with which he was properly chargeable for the year, such person shall be entitled to have refunded the amount so paid in excess: (Amended 49 of 1956 s. 60) Provided that nothing in this section shall operate to extend or reduce any time limit for objection, appeal or repayment specified in any other section or to validate any objection or appeal which is otherwise invalid, or to authorize the revision of any assessment or other matter which has become final and conclusive. (Amended 35 of 1965 s. 39) (2) An executor, trustee or receiver shall have the same right to make a claim under the provisions of subsection (1) as the person whom he represents would have had if such person had not been prevented from making such claim by his death, incapacity, bankruptcy or liquidation and shall be entitled to have refunded to him for the benefit of such person or such person's estate any tax paid in excess within the meaning of subsection (1). (Replaced 49 of 1956 s. 60) (3) Where a non-resident person has been assessed in the name of another person under section 20A or 20B and the tax so assessed has been paid by the other person, the other person or the non-resident person, but not both, may make a claim under subsection (1) for a refund of tax overpaid.

In the event of a refund being made to the other person his receipt shall be a valid discharge in respect of the amount of overpaid tax so refunded.

(Replaced 4 of 1989 s. 5) PART XIV PENALTIES AND OFFENCES 80. Penalties for failure to make returns, making incorrect returns, etc.

(1) Any person who without reasonable excuse (a) fails to comply with the requirements of a notice given to him under section 51 (3), 51A (1), 52 (1) or (2), or 64 (2); or (b) fails to attend in answer to a summons issued under section 64 (2) or 68 (6), or having attended fails to answer any questions put to him, being questions which, under section 64 (2) or 68 (6), as the case may be, may be put to him; or (c) fails to comply with the requirements of section 5 (2) (c), 5 (4), 51 (6), (7) or (8), 51C (1), 51D (1), 52 (4), (5), (6) or (7), or 76 (3), shall be guilty of an offence: Penalty a fine of $5,000, and the court may order the person convicted within a time specified in the order to do the act which he has failed to do. (Replaced 35 of 1965 s. 40. Amended 26 of 1969 s. 37; 2 of 1971 s. 46; 43 of 1975 s. 6; 8 of 1983 s. 19; L. N. 411 of 1984; 17 of 1989 s. 18) (1A) (Repealed 43 of 1975 s. 6) (2) Any person who without reasonable excuse- (a) makes an incorrect return by omitting or understating anything in respect of which he is required by this Ordinance to make a return, either on his behalf or on behalf of another person or a partnership; (b) makes an incorrect statement in connection with a claim for any deduction or allowance under this Ordinance; (c) gives any incorrect information in relation to any matter or thing affecting his own liability to tax or the liability of any other person or of a partnership; (d) fails to comply with the requirements of a notice given to him under section 51 (1) or (2A); or (e) fails to comply with section 51 (2), shall be guilty of an offence: Penalty a fine of $5,000 and a further fine of treble the amount of tax which has been undercharged in consequence of such incorrect return, statement or information, or would have been so undercharged if the return, statement or information had been accepted as correct, or which has been undercharged in consequence of the failure to comply with a notice under section 51 (1) or (2A) or a failure to comply with section 51 (2), or which would have been under charged if such failure had not been detected. (Replaced 43 of 1975 s. 6. Amended L. N.

411 of 1984; 43 of 1989 s. 27) (2A) In the case of an offence under subsection (2) (d), the court may order the person convicted to comply with the requirements of the notice given to him under section 51 (1) or (2A) within such time as may be specified in the order. (Added 43 of 1975 s. 6. Amended 43 of 1989 s. 27) (2B) Any person who does not comply with an order of the court under subsection (1) or (2A) or under section 51 (4B) (b) shall be guilty of an offence: Penalty a fine of $ 5,000. (Added 43 of 1975 s. 6) (3) No person shall be liable to any penalty under this section unless the complaint concerning such offence was made in the year of assessment in respect of or during which the offence was committed or within 6 years after the expiration thereof. (Amended 49 of 1956 s. 61) (4) Any person who aids, abets or incites another person to commit an offence under this section shall be deemed to have committed the same offence and to be liable to the same penalty. (Added 49 of 1956 s. 61) (5) The Commissioner may compound any offence under this section and may before judgement stay or compound any proceedings thereunder. (Amended 49 of 1956 s. 61) 80A. (Repealed 17 of 1989 s. 19) 81. Breach of secrecy and other matters to be offences Any person who- (a) acts under this Ordinance without taking an oath of secrecy as required by section 4 (2); or (b) acts contrary to the provisions of section 4 (1) or to an oath taken under section 4 (2); or (c) aids, abets, or incites any other person to act contrary to the provisions of section 4, (Amended 49 of 1956 s. 62) shall be guilty of an offence: Penalty a fine of $50,000. (Amended 43 of 1975 s. 7) 82. Penal provisions relating to fraud, etc.

(1) Any person who wilfully with intent to evade or to assist any other person to evade tax- (a) omits from a return made under this Ordinance any sum which should be included; or (Amended 30 of 1950 Schedule) (b) makes any false statement or entry in any return made under this Ordinance; or (c) makes any false statement in connection with a claim for any deduction or allowance under this Ordinance; or (d) signs any statement or return furnished under this Ordinance without reasonable grounds for believing the same to be true; or (e) gives any false answer whether verbally or in writing to any question or request for information asked or made in accordance with the provisions of this Ordinance; or (f) prepares or maintains or authorizes the preparation or maintenance of any false books of account or other records or falsifies or authorizes the falsification of any books of account or records; or (g) makes use of any fraud, art, or contrivance, whatsoever or authorizes the use of any such fraud, art, or contrivance, shall be guilty of an offence: Penalty on summary conviction a fine of $5,000 and a further fine of treble the amount of tax which has been undercharged in consequence of the offence or which would have been undercharged if the offence has not been detected, and to imprisonment for 6 months, and on indictment a fine of $20,000 and a further fine of treble the amount of tax so undercharged or which would have been so undercharged and to imprisonment for 3 years. (Amended 49 of 1956 s. 63; 40 of 1972 s.

12; L. N. 411 of 1984; 50 of 1991 s. 4) (2) The Commissioner may compound any offence under this section and may before judgement stay or compound any proceedings thereunder.

82A. Additional tax in certain cases (1) Any person who without reasonable excuse- (a) makes an incorrect return by omitting or understating anything in respect of which he is required by this Ordinance to make a return, either on his behalf or on behalf of another person or a partnership; or (b) makes an incorrect statement in connection with a claim for any deduction or allowance under this Ordinance; or (c) gives any incorrect information in relation to any matter or thing affecting his own liability to tax or the liability of any other person or of a partnership; or (d) fails to comply with the requirements of a notice given to him under section 51 (1) or (2A); or (e) fails to comply with section 51 (2), shall, if no prosecution under section 80 (2) or 82 (1) has been instituted in respect of the same facts, be liable to be assessed under this section to additional tax of an amount not exceeding treble the amount of tax which- (i) has been undercharged in consequence of such incorrect return, statement or information, or would have been so undercharged if the return, statement or information had been accepted as correct; or (ii) has been undercharged in consequence of the failure to comply with a notice under section 51 (1) or (2A) or a failure to comply with section 51 (2), or which would have been undercharged if such failure had not been detected. (Amended 43 of 1975 s. 8; 43 of 1989 s. 28) (2) Additional tax shall be payable in addition to any amount of tax payable under an assessment, or an additional assessment under section 60.

(3) An assessment of additional tax may be made only by the Commissioner personally or the deputy commissioner personally.

(4) Before making an assessment of additional tax the Commissioner or the deputy commissioner, as the case may be, shall- (a) cause notice to be given to the person he proposes so to assess which shall- (i) inform such person of the alleged incorrect return, incorrect statement or incorrect information or alleged failure to comply with the requirements of the notice given to him under section 51 (1) or (2A) or the alleged failure to comply with section 51 (2) in respect of which the Commissioner or deputy commissioner intends to assess additional tax under subsection (1); (Replaced 43 of 1975 s. 8. Amended 43 of 1989 s. 28) (ii) Include a statement that such person has the right to submit written representations to him with regard to the proposed assessment on him of additional tax; (iii) specify the date, which shall not be earlier than 21 days from the date of service of the notice, by which representations which such person may wish to make under subparagraph (ii) must be received; (b) consider and take into account any representations which he may receive under paragraph (a) from or on behalf of a person proposed to be assessed for additional tax.

(4A) Notwithstanding subsection (4), if the Commissioner or deputy commissioner is of the opinion that the person he proposes to assess to additional tax under subsection (1) is about to leave Hong Kong, he need not serve a notice under subsection (4) (a), but may assess that person to additional tax under subsection (1). (Added 43 of 1975 s. 8. Amended 7 of 1986 s. 12) (5) Notice of intention to assess additional tax and notice of an assessment to additional tax shall be given in the same manner as is provided in section 58 (2) in respect of a notice of assessment under section 62.

(6) Where a person who is liable to be assessed to additional tax has died, an assessment to additional tax may be made on his executor, and the additional tax shall be recovered as a debt due from and payable out of the deceased person's estate.

(7) A person who has been assessed to additional tax under subsection (1) shall not be liable to be charged on the same facts with an offence under section 80 (2) or 82 (1). (Added 26 of 1969 s. 38) 82B. Appeals against assessment to additional tax to Board of Review (1) Any person who has been assessed to additional tax under section 82A may, within 1 month after notice of assessment is given to him, give notice of appeal to the Board; but no such notice shall be entertained unless it is given in writing to the clerk to the Board and is accompanied by- (a) a copy of the notice of assessment; (b) a statement of the grounds of appeal from the assessment; (c) a copy of the notice of intention to assess additional tax given under section 82A (4), if any such notice was given; and (d) a copy of any written representations made under section 82A (4).

(Replaced 43 of 1975 s. 9) (2) On an appeal against assessment to additional tax, it shall be open to the appellant to argue that- (a) he is not liable to additional tax; (b) the amount of additional tax assessed on him exceeds the amount for which he is liable under section 82A; (c) the amount of additional tax, although not in excess of that for which he is liable under section 82A, is excessive having regard to the circumstances.

(3) Sections 66 (2) and (3), 68, 69 and 70 shall, so far as they are applicable, have effect with respect to appeals against additional tax as if such appeals were against assessments to tax other than additional tax.

(Added 26 of 1969 s. 38) 83. Tax payable notwithstanding proceedings The institution of proceedings for, or the imposition of, a penalty, fine, or term of imprisonment under this Part shall not relieve any person from liability to assessment or payment of any tax for which he is or may be liable.

(Amended 49 of 1956 s. 64) 84. Prosecutions, sanction of Commissioner (1) No prosecution in respect of an offence under section 80 or 82 may be commenced except at the instance of or with the sanction of the Commissioner.

(2) Nothing in this section shall derogate from the powers of the Attorney General in respect of the prosecution of criminal offences. (Added 26 of 1969 s. 39) PART XV GENERAL 85. Power to make rules (1) The Board of Inland Revenue may from time to time make rules generally for carrying out the provisions of this Ordinance and for the ascertainment and determination of any class of income or profits.

(Amended 30 of 1950 Schedule) (2) Without prejudice to the generality of the foregoing power such rules may- (a) prescribe the procedure to be followed on application for refunds and relief; (b) provide for any matter which by this Ordinance is to be or may be prescribed; (c) for the purpose of any of the provisions of this Ordinance, prescribe what is or is deemed to be included in, or excluded from, the expression "machinery or plant" and the expression "implement, utensil or article".

(Added 35 of 1965 s. 41) (3) Such rules may prescribe fines recoverable on summary conviction for any contravention thereof or failure to comply therewith not exceeding in each case a sum of $200.

(4) All such rules made by the Board of Inland Revenue shall be submitted to the Governor, and shall be subject to the approval of the Legislative Council.

86. Board of Inland Revenue to specify forms (1) The Board of Inland Revenue may specify any forms which may be necessary for carrying this Ordinance into effect. (Amended 39 of 1969 s.

10) (2) Where a specimen of any form bears an endorsement, purporting to be signed by the secretary to the Board of Inland Revenue, to the effect that the form is specified by the Board of Inland Revenue, it shall be presumed, until the contrary is proved, that the form is a form specified by the Board of Inland Revenue under subsection (1). (Added 8 of 1983 s.

20) 87. General power of Governor in Council to exempt The Governor in Council may by order exempt any person, office or institution from payment of the whole or any portion of any tax chargeable under this Ordinance. (L. N. 164 of 1989) 87A. Approval of Retirement schemes Upon application in such manner as may be prescribed the Commissioner may, for the purposes of this Ordinance, approve, either as a whole or in part, any retirement scheme which, in his opinion, complies substantially with such requirements as may be prescribed, and may withdraw any approval so given.

(Added 49 of 1956 s. 65. Amended 7 of 1986 s. 12) 88. Exemption of charitable bodies Notwithstanding anything to the contrary in this Ordinance contained there shall be exempt and there shall be deemed always to have been exempt from tax any charitable institution or trust of a public character: Provided that where a trade or business is carried on by any such institution or trust the profits derived from such trade or business shall be exempt and shall be deemed to have been exempt from tax only if such profits are applied solely for charitable purposes and are not expended substantially outside Hong Kong and either- (Amended 7 of 1986 s. 12) (a) the trade or business is exercised in the course of the actual carrying out of the expressed objects of such institution or trust; or (b) the work in connection with the trade or business is mainly carried on by persons for whose benefit such institution or trust is established.

(Added 3 of 1949 s. 18. Amended 30 of 1950 Schedule; 49 of 1956 s. 66; 26 of 1969 s. 40; 65 of 1970 s. 10) 89. Transitional provisions The transitional provisions of Schedule 5 shall have effect in relation to the amendments made by the Inland Revenue (Amendment) (No. 3) Ordinance 1989 (43 of 1989). (Added 43 of 1989 s. 29) SCHEDULE 1 STANDARD RATE [ss. 2 & 5] For the years of assessment 1947/48 to 1949/50 -10%. inclusive (Amended 49 of 1956 s. 67) For the years of assessment 1950/51 to 1965/66 inclusive -12 1/2%.

(Amended 15 of 1966 s. 4) For the years of assessment 1966/67 to 1983/84 inclusive -15%.

(Added 15 of 1966 s. 4. Amended 36 of 1984 s. 7) For the years of assessment 1984/85 to 1986/87 inclusive -17%.

(Added 36 of 1984 s. 7. Amended 28 of 1987 s. 8) For the year of assessment 1987/88 -16 1/2%.

(Added 28 of 1987 s. 8.

Amended 28 of 1988 s. 7) For the year of assessment 1988/89 -15 1/2%.

(Added 28 of 1988 s. 7.

Amended 17 of 1989 s. 20) For the year of assessment 1989/90 and -15% until superseded (Added 17 of 1989 s. 20) SCHEDULE 2 RATES [ss. 13 & 43 (1)] For the years of assessment 1947/48 to 1949/50 inclusive (Amended 49 of 1956 s. 68) SECOND COLUMN THIRD COLUMN (a) Upon the first $5,000 1/4 standard rate (b) Upon the next $5,000 1/4 standard rate (c) -do- 3/4 standard rate (d) -do- The full standard rate (e) -do- 1 1/4 standard rate (f) -do- 1 1/2 standard rate (g) -do- 1 3/4 standard rate (h) Upon the remainder Twice the standard rate Note: -Where a person is liable to the appropriate tax for a part only of any year of assessment the amounts in the second column against items (a) to (g) will be reduced in the proportion which the number of days he is so liable bears to the number of days in that year of assessment.

For the years of assessment 1950/51 to 1965/66 inclusive SECOND COLUMN THIRD COLUMN (a) Upon the first $5,000 1/5 standard rate (b) Upon the next $5,000 2/5 standard rate (c) -do- 3/5 standard rate (d) -do- 4/5 standard rate (e) -do- The full standard rate (f) -do- 1 1/5 standard rate (g) -do- 1 2/5 standard rate (h) -do- 1 3/5 standard rate (i) -do- 1 4/5 standard rate (j) Upon the remainder Twice the standard rate (Added 30 of 1950 Schedule. Amended 37 of 1950 Schedule; 15 of 1966 s. 5) For the years of assessment 1966/67 to 1971/72 inclusive SECOND COLUMN THIRD COLUMN (a) Upon the first $5,000 2 3/4% (b) Upon the next $5,000 5 1/2% (c) -do- 8 1/4% (d) -do- 11% (e) -do- 14% (f) -do- 17% (g) -do- 20% (h) -do- 23% (i) -do- 26% (j) Upon the remainder 30% (Added 15 of 1966 s. 5. Amended 40 of 1972 s. 2) For the year of assessment 1972/73 SECOND COLUMN THIRD COLUMN (a) Upon the first $5,000 2 1/2% (b) Upon the next $5,000 5% (c) -do- 7 1/2 (d) -do- 10% (e) -do- 12 1/2% (f) -do- 15% (g) -do- 17 1/2% (h) -do- 20% (i) -do- 22 1/2% (j) -do- 25% (k) -do- 27 1/2% (l) Upon the remainder 30% (Added 26 of 1972 s. 2. Amended 33 of 1973 s. 5) For the years of assessment 1973/74 to 1977/78 inclusive SECOND COLUMN THIRD COLUMN (a) Upon the first $10,000 5% (b) Upon the next $10,000 10% (c) -do- 15% (d) -do- 20% (e) -do- 25% (f) Upon the remainder 30% (Added 33 of 1973 s. 5. Amended 29 of 1979 s. 3; L. N. 137 of 1981) For the years of assessment 1978/79 to 1984/85 inclusive SECOND COLUMN THIRD COLUMN (a) Upon the first $10,000 5% (b) Upon the next $10,000 10% (c) -do- 15% (d) -do- 20% (e) Upon the remainder 25% (Added 29 of 1979 s. 3. Amended 21 of 1985 s. 3) For the years of assessment 1985/86 to 1976/87 inclusive SECOND COLUMN THIRD COLUMN (a) Upon the first $10,000 5% (b) Upon the next $10,000 10% (c) -do- 15% (d) Upon the nest $10,000 20% (e) Upon the remainder 25% (Added 21 of 1985 s. 3. Amended 28 of 1987 s. 9) For the year of assessment 1987/88 SECOND COLUMN THIRD COLUMN (a) Upon the first $10,000 5% (b) Upon the next $10,000 10% (c) Upon the next $20,000 15% (d) Upon the next $20,000 20% (e) Upon the remainder 25% (Added 28 of 1987 s. 9. Amended 28 of 1988 s. 8) For the years of assessment 1988/89 and 1989/90 SECOND COLUMN THIRD COLUMN (a) Upon the first $10,000 3% (b) Upon the next $10,000 6% (c) -do- 9% (d) -do- 12% (e) -do- 15% (f) -do- 18% (g) -do- 21% (h) Upon the remainder 25% (Added 28 of 1988 s. 8. Amended 30 of 1990 s. 5) For the year of assessment 1990/91 SECOND COLUMN THIRD COLUMN (a) Upon the first $10,000 2 per cent (b) Upon the next $10,000 4 per cent (c) -do- 9 per cent (d) -do- 12 per cent (e) -do- 15 per cent (f) -do- 18 per cent (g) -do- 21 per cent (h) Upon the remainder 25 per cent (Added 30 of 1990 s. 5. Amended 42 of 1991 s. 2) For the year of assessment 1991/92 and each year thereafter SECOND COLUMN THIRD COLUMN (a) Upon the first $20,000 2% (b) Upon the next $20,000 9% (c) Upon the next $20,000 17% (d) Upon the remainder 25% (Added 42 of 1991 s. 2) SCHEDULE 3 PUBLIC UTILITY COMPANIES [s. 16 (2) (b) & (6)] The Hong Kong Electric Company, Limited.

China Light and Power Company, Limited.

The Hong Kong and China Gas Company, Limited.

(Added 2 of 1971 s. 48. Amended 17 of 1989 s. 21) FOURTH SCHEDULE ALLOWANCES [s. 27(3)] For the year of assessment 1989/90 FIRST COLUMN SECOND COLUMN (section) (the prescribed amount or percentage) 1. Section 28 (basic allowance)- (a) subsection (1) (a) $32,000 (b) subsection (1) (b), being the first $7,000 reference to the prescribed amount (c) subsection (1) (b), being the $39,000 references to the prescribed amount in subparagraphs (i) and (ii) (d) subsection (1) (b), being the prescribed percentage 10% 2. Section 29 (married person's allowance)- (a) subsection (3) (a) $66,000 (b) subsection (3) (b), being the first $14,000 reference to the prescribed amount (c) subsection (3) (b), being the $80,000 references to the prescribed amount in subparagraphs (i), (ii) and (iii) (d) subsection (3) (b), being the prescribed percentage 10% 3. Section 30 (dependent parent allowance)- (a) subsection (3) (a) $11,000 (b) subsection (3) (b) $3,000 (c) subsection (4) (a) $1,200 4. Section 31 (child allowance)- (a) subsection (1) (i) $13,000 for the first child (ii) $9,000 for the second child (iii) $3,000 for the third child (iv) $2,000 each for the fourth, fifth and sixth child (v) $1,000 for each subsequent child (b) subsection (5) $34,000 5. Section 32 (1) (single parent allowance) $20,000 (Replaced 43 of 1989 s. 30. Amended 30 of 1990 s. 6) For the year of assessment 1990/91 FIRST COLUMN SECOND COLUMN (section) (the prescribed amount or percentage) 1. Section 28 (basic allowance)- (a) subsection (1) (a) $32,000 (b) subsection (1) (b), being the first $7,000 reference to the prescribed amount (c) subsection (1) (b), being the $39,000 references to the prescribed amount in subparagraphs (i) and (ii) (d) subsection (1) (b), being the prescribed percentage 0% 2. Section 29 (married person's allowance)- (a) subsection (3) (a) $66,000 (b) subsection (3) (b), being the first $14,000 reference to the prescribed amount (c) subsection (3) (b), being the $80,000 references to the prescribed amount in subparagraphs (i), (ii) and (iii) (d) subsection (3) (b), being the prescribed percentage 0% 3. Section 30 (dependent parent allowance)- (a) subsection (3) (a) $12,000 (b) subsection (3) (b) $3,000 (c) subsection (4) (a) $1,200 4. Section 31 (child allowance)- (a) subsection (1) (i) $14,000 for the first child (ii) $10,000 for the second child (iii) $3,000 for the third child (iv) $2,000 each for the fourth, fifth and sixth child (v) $1,000 for each subsequent child (b) subsection (5) $36,000 5. Section 32 (1) (single parent allowance) $20,000 (Added 30 of 1990 s. 6. Amended 42 of 1991 s. 3) For the year of assessment 1991/92 FIRST COLUMN SECOND COLUMN (section) (the prescribed amount or percentage) 1. Section 28 (basic allowance)- (a) subsection (1) (a) $34,000 (b) subsection (1) (b), being the first $7,000 reference to the prescribed amount (c) subsection (1) (b), being the $41,000 references to the prescribed amount in subparagraphs (i) and (ii) (d) subsection (1) (b), being the prescribed percentage 0% 2. Section 29 (married person's allowance)- (a) subsection (3) (a) $68,000 (b) subsection (3) (b), being the first $14,000 reference to the prescribed amount (c) subsection (3) (b) being the $82,000 references to the prescribed amount in subparagraphs (i), (ii) and (iii) (d) subsection (3) (b), being the prescribed percentage 0% 3. Section 30 (dependent parent allowance)- (a) subsection (3) (a) $12,000 (b) subsection (3) (b) $3,000 (c) subsection (4) (a) $1,200 4. Section 31 (child allowance)- (a) subsection (1) (i) $14,000 for the first child (ii) $10,000 for the second child (iii) $3,000 for the third child (iv) $2,000 each for the fourth, fifth and sixth child (v) $1,000 for each subsequent child (b) subsection (5) $36,000 5. Section 32 (1) (single parent allowance) $20,000 (Added 42 of 1991 s. 3. Amended 34 of 1992 s. 4) For the year of assessment 1992/93 and each year thereafter- FIRST COLUMN SECOND COLUMN (section) (the prescribed amount or percentage) 1. Section 28 (basic allowance)- (a) subsection (1) (a) $39,000 (b) subsection (1) (b), being the first $7,000 reference to the prescribed amount (c) subsection (1) (b), being the $46,000 references to the prescribed amount in subparagraphs (i) and (ii) (d) subsection (1) (b), being the prescribed percentage 0% 2. Section 29 (married person's allowance)- (a) subsection (3) (a) $78,000 (b) subsection (3) (b), being the first $14,000 reference to the prescribed amount (c) subsection (3) (b), being the $92,000 references to the prescribed amount in subparagraphs (i), (ii) and (iii) (d) subsection (3) (b), being the prescribed percentage 0% 3. Section 30 (dependent parent allowance)- (a) subsection (3) (a) $13,500 (b) subsection (3) (b) $3,000 (c) subsection (4) (a) $1,200 4. Section 31 (child allowance)- (a) subsection (1) (i) $15,500 for the first child (ii) $11,500 for the second child (iii) $3,000 for the third child (iv) $2,000 each for the fourth, fifth and sixth child (v) $1,000 for each subsequent child (b) subsection (5) $39,000 5. Section 32 (1) (single parent allowance) $23,000 (Added 34 of 1992 s. 4) FIFTH SCHEDULE TRANSITIONAL PROVISIONS RELATING TO THE INLAND RE- VENUE (AMENDMENT) (No. 3) ORDINANCE 1989 [S. 89] 1. In this Schedule- "amending Ordinance" means the Inland Revenue (Amendment) (No. 3) Ordinance 1989 (43 of 1989); "tax" means salaries tax and tax under a personal assessment under part VII; "1989 tax year" means the year of assessment commencing 1 April 1989; and reference to other tax years shall be construed in an analogous manner.

2. No assessment to tax in respect of the 1989 tax year made prior to 1 April 1990 shall be variable after 1 April 1990 by the Commissioner by reason of the amendment to the Ordinance by the amending Ordinance save under and in accordance with this Schedule and, until and unless such variation takes place, the correctness or otherwise of such assessment or anything done by the Commissioner in relation thereto shall be determined by the provisions of this Ordinance as they were at the time that the assessment was made notwithstanding the application of the amending Ordinance to the 1989 tax year.

3. Where the person charged by an assessment to which paragraph 2 relates or his wife (not being a wife living apart from her husband) derives assessable income in respect of the 1989 tax year subsequent to the date of the assessment then, if such income if taken into account prior to the commencement of the amending Ordinance would have increased the amount payable under such assessment, nothing in part XI shall prevent an assessor from making an assessment or additional assessment for the 1989 tax year which gives effect to the provisions of this Ordinance as amended by the amending Ordinance.

4. Where a person has been assessed to tax by such an assessment as is described in paragraph 2 and either he or his wife (not being a wife living apart from her husband) derives assessable income in respect of the 1989 tax year prior to the date of the assessment which was not included in that assessment, then the amending Ordinance shall not apply to that income which shall be assessable to tax as if that Ordinance had not been enacted except that such income may be taken into account in the event of an assessment or additional assessment under paragraph 3.

5. Notwithstanding the repeal of sections 13 (2), 58A and 63C (1A) (the repealed provisions), where any lump sum payment to which proviso (i) to section 11D (b) relates is received on or after 1 April 1989 but before 1 April 1992 and is related back under that proviso to the 1988 tax year or any previous year of assessment on the application of the person entitled to claim, then that person and his or her spouse shall be deemed to have elected to be separately assessed in relation to any tax chargeable on such sum in accordance with section 58A as it applied prior to such repeal and the repealed provisions shall apply accordingly with the effect that, subject to those provisions, the person making the application under that provision shall be solely chargeable to tax upon that sum.

6. Where a person, not being a person to whom section 63C (1A), prior to its repeal by the amending Ordinance then applied, has been assessed to provisional salaries tax for the 1989 tax year in respect of income derived by him and his wife, then the provisional salaries tax paid in pursuance of such assessment shall be applied- (a) firstly in payment of the salaries tax payable by that person for the 1989 tax year; (b) secondly, in payment of the provisional salaries tax payable by that person for the 1990 tax year; (c) thirdly, in payment of the salaries tax payable by his wife for the 1989 tax year; (d) fourthly, in payment of the provisional salaries tax payable by his wife for the 1990 tax year, and any tax paid which cannot be so applied shall be refunded to the person paying it. (Added 43 of 1989 s. 30) SCHEDULE 6 [s. 26A (2) & (3)] PART I INSTRUMENTS 1. A bill of exchange within the meaning of section 3 of the Bills of Exchange Ordinance (Cap. 19).

2. A promissory note within the meaning of section 89 of the Bills of Exchange Ordinance (Cap. 19).

3. Any other instrument which evidences an obligation to pay a stated or determinable amount to bearer or to order, on or before a fixed time, with or without interest, being an instrument by the delivery of which, with or without endorsement, the right to receive that stated or determinable amount, with or without interest, is transferable.

PART II BODIES 1. The Asian Development Bank.

2. The International Bank for Reconstruction and Development.

3. The International Finance Corporation.

4. The European Investment Bank.

(Added 17 of 1992 s. 3) in respect of, any relevant carriage shipped in Hong Kong- (a) in the case of a charter-party which is a flight charter, any sums earned by or accrued to that owner under that charter-party and derived from, attributable to, or in respect of, any outward flight or flights of that aircraft commencing from any aerodrome or airport within Hong Kong; (b) in the case of a charter-party which is a time charter, the sum bearing the same ratio to the aggregate of the sums earned by or accrued to that owner under that charter-party as the total number of flying hours of that aircraft flown in respect of all outward flights of that aircraft commencing from any aerodrome or airport within Hong Kong to the final destinations of those flights bear to the aggregate of the total number of flying hours of that aircraft flown in respect of all flights of that aircraft under that charter-party.

(8) In this section- "aerodrome or airport" includes any helipad; "air waybill" has the same meaning as in the Import and Export Ordinance (Cap. 60), but does not include an air waybill which describes any aerodrome or airport in Hong Kong as the aerodrome or airport of departure or the aerodrome or airport of destination; "aircraft" includes a helicopter; "business as an owner of aircraft" means a business of chartering or operating aircraft, but does not include dealing in aircraft or agency business in connection with air transport; "charter hire" means any sums earned by or accrued to an owner of an aircraft under a charter-party by demise in respect of the operation of the aircraft, but does not include any sums so earned or accrued where that charter-party does not, or does not purport to, extend to the whole of that aircraft; "goods" includes livestock and mails; "goods in transit", in relation to the shipment of goods aboard an aircraft, means goods- (a) specified in an air waybill (issued by or on behalf of an owner of aircraft) or a post office delivery bill; (b) brought to Hong Kong by air solely for the purpose of the onward carriage of those goods; and (c) in respect of which any freight charges for that onward carriage are not paid or payable in Hong Kong; "operation", in relation to an aircraft, includes the use or possession of the aircraft; "owner", in relation to an aircraft, includes a charterer of the aircraft under a charter-party; "passengers" does not include passengers in transit; "passengers in transit", in relation to a flight of an aircraft, means passengers- (a) whose passenger tickets in respect of the flight do not specify Hong Kong as the place of departure or as the place of destination; or (b) who- (i) travel to Hong Kong in any aircraft owned by an owner of aircraft and leave Hong Kong in that or any other aircraft in the same ownership; and (ii) not more than 24 hours after travelling to and arriving at Hong Kong, leave Hong Kong for a destination other than the one from which they had travelled; "permanent establishment" means a branch, management or other place of business, but does not include an agency unless the agent has, and habitually exercises, a general authority to negotiate and conclude contracts on behalf of his principal; "post office delivery bill", in relation to the carriage of mails, means any document (whether referred to as an "AV7 bill" or otherwise) which does not describe Hong Kong, or the General Post Office of Hong Kong, as the office of origin or the office of destination in respect of those mails; "relevant carriage", in relation to an aircraft, means the carriage by air of passengers or goods, or both passengers and goods, as the case may be, but does not include the carriage of goods in transit; "relevant charter hire" means charter hire attributable to a permanent establishment maintained in Hong Kong by a person deemed to be carrying on a business as an owner of aircraft in Hong Kong under this section, but does not include- (a) charter hire in respect of the operation of an aircraft flying between aerodromes or airports within Hong Kong; or (b) charter hire in respect of the operation of an aircraft flying between any aerodrome or airport within Hong Kong and any aerodrome or airport within Macao; "relevant sums" means- (a) any sums derived from, attributable to, or in respect of- (i) any relevant carriage shipped in Hong Kong; (ii) any relevant charter hire; (iii) any charter hire in respect of the operation of an aircraft flying between aerodromes or airports within Hong Kong; (b) one half of any sums derived from, attributable to, or in respect of, any charter hire in respect of the operation of an aircraft flying between any aerodrome or airport within Hong Kong and any aerodrome or airport within Macao; "shipped", in the case of passengers, means embarked; "shipped in Hong Kong", in relation to the shipment of relevant carriage, means shipped aboard an aircraft at any aerodrome or airport within Hong Kong; "total aircraft income", in relation to any basis period, means the worldwide income of a person from the person's business as an owner of aircraft, and indicated as such by that person's accounts for that period; "total aircraft profits", in relation to any basis period, means the worldwide profits of a person from the person's business as an owner of aircraft, and indicated as such by that person's accounts for that period.

(Added 47 of 1992 s. 3) 23E. Alternative computation of "total shipping profits" and "total aircraft profits" Where total shipping profits within the meaning of section 23B (12) or total aircraft profits within the meaning of section 23C (5) or 23D (8), as the case may be, have been computed on a basis which differs materially from that provided for in this Part for the ascertainment of assessable profits in respect of which a person is chargeable to tax, those profits may be adjusted so as to correspond as nearly as may be to the sum that would have been arrived at had they been computed in accordance with the provisions of this Part relating to the ascertainment of assessable profits in respect of which a person is chargeable to tax.

(Added 47 of 1992 s. 3) 24. Clubs, trade associations, etc.

(1) Where a person carries on a club or similar institution which receives from its members not less than half of its gross receipts on revenue account (including entrance fees and subscriptions), such person shall be deemed not to carry on a business; but where less than half of its gross receipts are received from members, the whole of the income from transactions both with members and others (including entrance fees and subscriptions) shall be deemed to be receipts from a business, and such person shall be chargeable in respect of the profits therefrom. (Amended 36 of 1955 s. 23; 49 of 1956 s. 22) (2) Where a person carries on a trade, professional or business association in such circumstances that more than half its receipts by way of subscriptions are from persons who claim or would be entitled to claim that such sums were allowable deductions for the purposes of section 16, such person shall be deemed to carry on a business, and the whole of the income of such association from transactions both with members and others (including entrance fees and subscriptions) shall be deemed to be receipts from business, and such person shall be chargeable in respect of the profits therefrom. (Amended 36 of 1955 s. 34; 2 of 1971 s. 17; 40 of 1972 s. 3) (3) In this section, "members" means those persons entitled to vote at a general meeting of the club, or similar institution, or trade, professional or business association. (Replaced 36 of 1955 s. 34. Amended 40 of 1972 s. 3) 25. Deduction of property tax from profits tax Where property tax is payable for any year of assessment under Part II in respect of any land or buildings owned by a person carrying on a trade, profession or business, any profits tax payable by such person in respect of that year of assessment shall be reduced by a sum not exceeding the amount of such property tax paid by him: Provided that- (a) no reduction shall be allowed unless either the profits derived from such property are part of the profits of the trade, profession or business carried on by such person or the property is occupied or used by him for the purposes of producing profits in respect of which he is chargeable to tax under this Part; (Replaced 11 of 1961 s. 5. Amended 35 of 1965 s. 14) (b) if the amount of property tax paid for a year of assessment exceeds the profits tax payable, the amount so paid in excess shall be refunded in accordance with the provisions of section 79; (Replaced 11 of 1961 s. 5) (c) where property tax for the year of assessment commencing on 1 April 1960, or earlier years, exceeded the profits tax payable for such years the amount of the excess shall be set off against the profits tax payable for the year of assessment commencing on 1 April 1961, after deduction of the property tax paid for that year and any balance left over shall be carried forward and set off in like manner against the profits tax payable for the next succeeding years. (Replaced 11 of 1961 s. 5) (Replaced 3 of 1949 s. 9) 26. Exclusion of certain dividends and profits from the assessable profits of other persons For the purposes of this Part- (a) a dividend from a corporation which is chargeable to tax under this Part shall not be included in the profits in respect of which any other person is chargeable to tax under this Part; and (b) save as otherwise provided no part of the profits or losses of a trade, profession or business carried on by a person who is chargeable to tax under this Part shall be included in ascertaining the profits in respect of which any other person is chargeable to tax under this Part.

(Added 2 of 1971 s. 18) (Replaced 16 of 1951 s. 5. Amended 28 of 1964 s. 10; 2 of 1971 s. 18; 7 of 1975 s. 25; 62 of 1975 s. 2) 26A. Exclusion of certain profits from tax (1) For the purposes of this Part- (a) interest paid or payable on a Tax Reserve Certificate issued by the Commissioner; (b) interest paid or payable on a bond issued under the Loans Ordinance (Cap. 61) or the Loans (Government Bonds) Ordinance (Cap. 64); (Amended 48 of 1991 s. 2) (c) any profit on the sale or other disposal or on the redemption on maturity or presentment of such a bond; (Amended 48 of 1991 s. 2) (d) interest paid or payable on an Exchange Fund debt instrument; (Added 9 of 1990 s. 2. Amended 17 of 1992 s. 2) (e) any profit on the sale or other disposal or on the redemption on maturity or presentment of such an Exchange Fund debt instrument; (Added 9 of 1990 s. 2) (f) interest paid or payable on a Hong Kong dollar denominated multilateral agency debt instrument; and (Added 17 of 1992 s. 2) (g) any profit on the sale or other disposal or on the redemption or maturity or presentment of such a Hong Kong dollar denominated multilateral agency debt instrument; (Added 17 of 1992 s. 2) shall not be included in the profits of any corporation or other person chargeable to tax under this Part. (Amended 9 of 1990 s. 2) (1A) For the purposes of this Part, sums received by or accrued to an authorized mutual fund corporation or trustees of an authorized unit trust by way of- (a) gains or profits arising from the sale or other disposal or on the redemption on maturity or presentment of securities; (b) gains or profits under a foreign exchange contract or futures contract; and (c) interest, shall not be included in the profits of the corporation or trustees (as the case may be). (Replaced 19 of 1991 s. 3) (2) In this section- "authorized" means authorized under section 15 of the Securities Ordinance (Cap. 333); (Added 19 of 1991 s. 3) "computer" means any device for storing, processing or retrieving information; "Exchange Fund" means the fund of that name established under section 3 (1) of the Exchange Fund Ordinance (Cap. 66); "Exchange Fund debt instrument" means any instrument (whether described as an "Exchange Fund Bill" or otherwise) issued under the Exchange Fund Ordinance (Cap. 66) evidencing the deposit of a sum of money in Hong Kong currency with the Monetary Authority for the account of the Exchange Fund, being an instrument which recognizes an obligation to pay a stated amount, with or without interest, and which is transferable in a manner specified by that Authority; (Amended 82 of 1992 s. 9) "foreign exchange" means the exchange of different currencies; (Added 19 of 1991 s. 3) "futures contract" has the same meaning as in section 2 (1) of the Commodities Trading Ordinance (Cap. 250); (Added 19 of 1991 s. 3) "instrument" includes- (a) every written document; (b) any information recorded in the form of an entry in a book of account; and (b) any information which is recorded (whether by means of a computer or otherwise) in a non-legible form but is capable of being reproduced in a legible form; "multilateral agency debt instrument" means an instrument specified in Part I of Schedule 6 issued by a body specified in Part II of that Schedule; (Added 17 of 1992 s. 2) "mutual fund corporation" has the same meaning as in section 2 (1) of the Securities Ordinance (Cap. 333); (Added 19 of 1991 s. 3) "securities" includes- (a) any negotiable receipt or other negotiable certificate or instrument evidencing the deposit of a sum of money, or any rights or interests arising under any such receipt, certificate or instrument; and (b) any bill of exchange within the meaning of section 3 of the Bills of Exchange Ordinance (Cap. 19), but otherwise has the same meaning as in section 2 (1) of the Securities Ordinance (Cap. 333); (Replaced 19 of 1991 s. 3) "unit trust" has the same meaning as in section 2 (1) of the Securities Ordinance (Cap. 333). (Added 9 of 1990 s. 2) (3) The Legislative Council may by resolution amend Schedule 6. (Added 17 of 1992 s. 2) (Replaced 62 of 1975 s. 3) PART V ALLOWANCES 27. Allowances, general provisions (1) This Part prescribes the allowances which shall be granted to persons chargeable to tax under Parts III and VII and the circumstances in which such allowances are grantable.

(2) Every person who claims an allowance under this Part shall make his claim in the specified form and an allowance shall be granted only if the claim contains such particulars and is supported by such proof as the Commissioner may require.

(3) In this Part- "adopted" means adopted in any manner recognized by the laws of Hong Kong; "allowance" means an allowance granted under this Part; "child" means any child of a person chargeable to tax or of his or her spouse or former spouse whether or not born in wedlock and includes the adopted or step child of either or both of them; "person" means a person chargeable to tax under Part III or, as the case may be, Part VII; "prescribed amount" and "prescribed percentage" mean the amount and percentage specified in the second column of the Fourth Schedule in relation to the provisions of this Part specified in the first column of that Schedule.

28. Basic allowance (1) The following allowance ("basic allowance") shall be granted in any year of assessment- (a) an allowance of the prescribed amount; (b) an additional allowance of the prescribed amount, but this allowance shall be reduced by the prescribed percentage of the sum, if any, by which- (i) in the case of a person who is chargeable to salaries tax under Part III, the net assessable income of that person, as reduced under section 12BA by approved charitable donations, exceeds the prescribed amount; and (ii) in the case of a person who has elected to be assessed under Part VII, the total income of that person, as reduced under section 42 (2) and (5), exceeds the prescribed amount referred to in subparagraph (i).

(2) No person may be granted- (a) both a basic allowance and a married person's allowance; or (b) a basic allowance where his or her spouse has claimed a married person's allowance.

29. Married person's allowance (1) An allowance ("married person's allowance") shall be granted under this section in any year of assessment if a person is, at any time during that year, married and- (a) the spouse of that person did not have assessable income in the year of assessment; or (b) that person and his or her spouse have made, in relation to the year of assessment, an election under section 10 (2); or (c) that person has elected to be assessed under Part VII.

(2) Where an election has been made under section 10 (2) a married person's allowance shall be granted to the person chargeable to salaries tax under section 10 (3).

(3) A married person's allowance grantable under this section is- (a) an allowance of the prescribed amount; (b) an additional allowance of the prescribed amount, but this allowance shall be reduced by the prescribed percentage of the amount, if any, by which- (i) in the case of a person who is chargeable to salaries tax under section 10 (3), the aggregate of the net assessable incomes of that person and of his or her spouse as reduced by approved charitable donations provided for under section 12BA, exceeds the prescribed amount; (ii) in the case of a person assessable to salaries tax who is entitled to married person's allowance because he or she has such a wife or husband as is described in subsection (1) (a), the net assessable income as reduced by approved charitable donations provided for under section 12BA, exceeds the prescribed amount; and (iii) in the case of a person who has elected personal assessment under Part VII, the total income (as reduced under section 42 (2) and (5)) of that person and his or her spouse exceeds the prescribed amount.

(4) Where husband and wife are living apart a married person's allowance shall only be granted where the spouse claiming the allowance is maintaining or supporting the other.

(5) Where a married person's allowance is granted in respect of a husband and wife living apart, the husband and wife shall be treated as not living apart for the purposes of Part VII.

(6) Any claim to an allowance to which subsection (4) applies may be revoked by the claimant within the year of assessment in respect of which it was made or within 6 years after the expiration of that year.

30. Dependent parent allowance (1) An allowance ("dependent parent allowance") shall be granted under this section in any year of assessment if the person or his or her spouse, not being a spouse living apart from that person, maintains a parent or a parent of his or her spouse in the year of assessment and that parent at any time in that year was- (a) ordinarily resident in Hong Kong; and (b) aged 60 or more or, being under the age of 60, was eligible to claim an allowance under the Government's Disability Allowance Scheme.

(2) A dependent parent allowance may be granted in respect of each such parent who is so maintained.

(3) A dependent parent allowance grantable under this section is- (a) an allowance of the prescribed amount; (b) an additional allowance of the prescribed amount if a parent in respect of whom the person is eligible to claim an allowance under paragraph (a) for the year of assessment was residing, otherwise than for full valuable consideration, with the person continuously throughout the year of assessment.

(4) For the purposes of this section- (a) a parent shall only be treated as being maintained by a person or his or her spouse if- (i) the parent resides, otherwise than for full valuable consideration, with that person and his or her spouse for a continuous period of not less than 6 months in the year of assessment; or (ii) the person or his or her spouse contributes not less than the prescribed amount in money towards the maintenance of that parent in the year of assessment; (6) "parent of the person or his or her spouse" means- (i) a parent of whose marriage, the person or his or her spouse is the child; (ii) a parent by whom the person or his or her spouse was adopted; (iii) a step parent of the person or of his or her spouse; (iv) the natural father or mother of the person or his or her spouse; or (v) in the case of a deceased spouse a person who would have been the parent of the person's spouse by reason of subparagraphs (i) to (iv) if the spouse had not died.

31. Child allowance (1) An allowance ("child allowance") shall be granted under this section in the prescribed amount in any year of assessment if the person had living and was maintaining at any time during the year of assessment an unmarried child who was- (a) under the age of 18; (b) of or over the age of 18 years but under the age of 25 years and was receiving full time education at a university, college, school or other similar educational establishment; or (c) of or over the age of 18 years and was, by reason of physical or mental disability, incapacitated for work.

(2) Subject to subsection (3), where more than one person is entitled to claim a child allowance under this section in respect of the same child for the same year of assessment, the allowance due shall be apportioned on such basis as the Commissioner may decide having regard to the contributions made by each individual to the maintenance and education of the child during the year of assessment.

(3) In the case of a husband and wife, not being a husband and wife living apart, chargeable to salaries tax under Part III- (a) all child allowances grantable under this section shall be claimed by one spouse; and (b) the claim shall be made by such spouse as the spouses may nominate.

(4) A nomination under subsection (3) (b) made in relation to any year of assessment shall not be revoked save with the consent of the Commissioner whose decision in the matter shall be final and not subject to objection or appeal.

(5) The total of the child allowances granted to a person in respect of his or her children shall not exceed the prescribed amount.

32. Single parent allowance (1) An allowance ("single parent allowance") of the prescribed amount shall be granted if at any time during the year of assessment the person had the sole or predominant care of a child in respect of whom the person was entitled during the year of assessment to be granted a child allowance.

(2) A person shall not be entitled to claim single parent allowance- (a) if at any time during the year of assessment the person was married and not living apart from his or her spouse; (b) by reason only that the person made contributions to the maintenance and education of the child during the year of assessment; or (c) in respect of any 2nd or subsequent child.

(3) Where 2 or more persons are entitled to claim single parent allowance in respect of the same child for the same year of assessment, the allowance due shall be apportioned on such basis as the Commissioner may decide- (a) having regard to the respective periods for which each person had the sole or predominant care of the child during the year of assessment; or (b) if, in the opinion of the Commissioner, those periods are uncertain, on such basis as the Commissioner may decide as being just.

33. Provisions supplementary to sections 30 and 31 (1) Subject to section 31 (2), a dependent parent allowance or a child allowance shall not be given to more than one person in any year of assessment in respect of the same parent or child.

(2) Subject to section 31 (2) and (3), where the Commissioner has reason to believe that 2 or more persons are eligible to claim such an allowance in respect of the same parent or child for the same year of assessment, the Commissioner shall not consider any claim until he is satisfied that the claimants have agreed which of them shall be entitled to claim in that year.

(3) Where a dependent parent allowance or a child allowance has been granted- (a) otherwise than under section 31 (2) to 2 or more persons in respect of the same parent or child; or (b) to both a husband and wife, contrary to section 31 (3); or (c) to a person and, within 6 months or such allowance being granted, another person appears to the Commissioner to be eligible to be granted that allowance in respect of the same parent or child for the same year of assessment, the Commissioner shall invite the persons to whom the allowance has been granted and any other individual who appears to the Commissioner to be eligible to be granted the allowance to agree which of them is to have the allowance (being an agreement consistent with the provisions of this Part) and the Commissioner may in consequence of such agreement, or if the individuals do not so agree within a reasonable time, within the period specified in section 60, raise additional assessments under that section.

(4) The Commissioner shall exercise his powers under this section in such manner as may appear to him to be just having regard to such in formation only as may be in his possession at the time when he exercises those powers.

(Part V added 43 of 1989 s. 10) PART VI DEPRECIATION, ETC.

34. Initial and annual allowances, industrial buildings and structures (1) Where a person incurs capital expenditure on the construction of a building or structure which is to be an industrial building or structure occupied for the purposes of a trade there shall be made to the person who incurred the expenditure for the year of assessment in the basis period for which the expenditure was incurred an allowance to be known as an "initial allowance" equal to one-fifth thereof: (Amended 30 of 1950 Schedule; 35 of 1965 s. 17) Provided that- (a) no initial allowance shall be made for the 8 successive years of assessment commencing on 1 April in each of the years 1957 to 1964; (b) where any initial allowance has been made in relation to capital expenditure on a building or structure under this subsection before such building or structure comes to be used and when it first comes to be used it is not an industrial building or structure, such allowance shall be disallowed and such additional assessments as may be necessary consequent thereon shall be made. (Replaced 35 of 1965 s. 17) (2) (a) Where any person is, at the end of the basis period for any year of assessment, entitled to an interest in a building or structure which is an industrial building or structure and where that interest is the relevant interest in relation to the capital expenditure incurred on the construction of that building or structure an allowance for depreciation by wear and tear, to be known as an "annual allowance", equal to one- twenty-fifth of that expenditure shall be made to him for that year of assessment. (Amended 36 of 1955 s. 41; 35 of 1965 s. 17) (b) Where the interest in a building or structure, which is the relevant interest in relation to any expenditure, is sold while the building or structure is an industrial building or structure the annual allowance, in the years of assessment the basis periods for which end after the time of that sale shall be computed by reference to the residue of expenditure immediately after the sale and shall be the fraction of the said residue the numerator of which is 2, where the building or structure was first used before the commencement of the basis period for the year of assessment commencing on 1 April 1965, and one, where the building or structure was first used on or after the commencement of such basis period, and the denominator of which is the number of years of assessment comprised in the period which- (i) begins with the first year of assessment for which the buyer is entitled to an annual allowance or would be so entitled if the building or structure had at all material times continued to be an industrial building or structure; and (ii) ends with the year of assessment which, where the building or structure was first used before the commencement of the basis period for the year of assessment commencing on 1 April 1965, is the 50th year after the year in which the building or structure was first used, and where the building or structure was first used on or after such basis period, is the 25th year after the year of assessment in which the building or structure was first used, and so on for any subsequent sales. (Replaced 35 of 1965 s. 17) (c) Notwithstanding anything in the preceding provisions of this section, in no case shall the amount of an annual allowance for any year of assessment in respect of any expenditure exceed such as, apart from the writing off falling to be made by reason of the making of that allowance, would be the residue of that expenditure at the end of his basis period for that year of assessment.

35. Balancing allowances and charges, industrial buildings and structures (1) Where any capital expenditure has been incurred on the construction of a building or structure and any of the following events occurs while the building or structure is an industrial building or structure, that is to say- (Amended 30 of 1950 Schedule) (a) the relevant interest in the building or structure is sold; or (b) that interest, being a leasehold interest, comes to an end otherwise than on the person entitled thereto acquiring the interest which is reversionary thereon; or (c) the building or structure is demolished or destroyed or, without being demolished or destroyed, ceases altogether to be used, an allowance or charge, to be known as a "balancing allowance" or a "balancing charge" shall, in the circumstances mentioned in this section, be made to or, as the case may be, on the person entitled to the relevant interest immediately before that event occurs for the year of assessment in his basis period for which that event occurs: Provided that no balancing allowance shall be made to any person where the building or structure is demolished for purposes unconnected with or not in the ordinary course of conduct of the trade or business for the purposes of which the building or structure was used in circumstances qualifying for annual allowances under section 34. (Replaced 35 of 1965 s.

18) (2) Where there are no sale, insurance, salvage or compensation moneys, or where the residue of the expenditure immediately before the event exceeds those moneys, a balancing allowance shall be made and the amount thereof shall be the amount of the said residue or, as the case may be, of the excess thereof over the said moneys.

(3) If the sale, insurance, salvage or compensation moneys exceed the residue, if any, of the expenditure immediately before the event, a balancing charge shall be made and the amount on which it is made shall be an amount equal to the excess or, where the residue is nil, to the said moneys.

(4) Notwithstanding anything in subsection (3), in no case shall the amount on which a balancing charge is made on a person exceed the aggregate of the following amounts, that is to say- (a) the amount of the initial allowance, if any, made to him in respect of the expenditure in question; (b) the amount of the annual allowances, if any, made to him in respect of the expenditure in question.

35A. Special provisions on termination of leasehold interest Where, on the termination of a leasehold interest- (a) a lessee of any building or structure remains in possession thereof with the consent of the lessor without a new lease being granted to him, the leasehold interest shall be deemed for the purposes of this Part to continue so long as he so remains in possession; (b) a new lease is granted to the lessee either by way of regrant or in pursuance of an option available to him under the terms of the first lease, this Part shall have effect as if the second lease were a continuation of the first lease.

(Added 2 of 1971 s. 27) 35B. Buildings and structures bought unused Where capital expenditure is incurred on the construction of a building or structure and, before that building or structure is used, the relevant interest therein is sold- (a) the expenditure actually incurred on the construction thereof shall be left out of account for the purposes of this Part and any initial allowance made under section 34 shall be disallowed and such additional assessments as may be necessary consequent thereon shall be made; but (b) (i) in a case where the person who sells that interest incurred that expenditure and made that sale in the course of a trade which consists, in whole or part, in the construction or development of buildings or structures for the purpose of sale, the person who buys that interest shall be deemed for those purposes to have incurred, on the date when the purchase price becomes payable, capital expenditure on the construction thereof equal to the net price paid by him for that interest; and (ii) in any other case, the person who buys that interest shall be deemed for those purposes to have incurred, on the date when the purchase price becomes payable, capital expenditure on the construction thereof equal to the expenditure actually incurred on the construction of the building or structure or to the net price paid by him for that interest, whichever is the less: (Replaced 29 of 1982 s. 7) Provided that- (a) where in a case to which paragraph (b) (i) applies the relevant interest in the building or structure is sold more than once before the building or structure is used, only the person who buys that interest on the occasion of the last of those sales shall be deemed to have incurred capital expenditure on the construction of the building or structure and that capital expenditure shall be equal to the net price paid on the first sale or the net price paid by him, whichever is the less; (b) where in a case to which paragraph (b) (ii) applies the relevant interest in the building or structure is sold more than once before the building or structure is used, that paragraph shall have effect only in relation to the last of those sales. (Replaced 29 of 1982 s. 7) (Added 2 of 1971 s. 27) 36. Rebuilding allowance for a commercial building or structure Where at the end of the basis period for any year of assessment a person is entitled to an interest in a commercial building or structure and where that interest is the relevant interest in relation to the capital expenditure incurred on the construction of that building or structure, an allowance to be known as a "rebuilding allowance" equal to 2% of the capital expenditure incurred on the construction of such building or structure shall be made to him for that year of assessment.

(Replaced 36 of 1955 s. 42. Amended 26 of 1969 s. 18; 30 of 1990 s. 3) 36A. Application of provisions to machinery or plant (1) Except where otherwise provided, in relation to the initial and annual allowances on machinery or plant- (a) sections 37, 37A, 38 and 39 shall apply to the years of assessment up to and including the year of assessment commencing on 1 April 1979; and (b) section 39B, 39C and 39D shall apply to the year of assessment commencing on 1 April 1980 and to subsequent years of assessment.

(2) Where in relation to any machinery or plant the Commissioner is satisfied that in respect of any year of assessment commencing on or after 1 April 1980 the application of any of the provisions of the sections referred to in subsection (1) (b) is impracticable or inequitable, he may direct that the provisions of the sections referred to in subsection (1) (a) shall apply to the extent and for the duration specified in the direction.

(3) Where under subsection (2) the Commissioner directs that the provisions of section 37 shall apply to any machinery or plant in respect of- (a) the year of assessment commencing on 1 April 1980, the initial allowance shall be equal to 35% of the expenditure referred to in subsection (1) of that section; (b) any year of assessment commencing on or after 1 April 1981, the initial allowance shall be equal to 55% of the expenditure referred to in subsection (1) of that section. (Replaced 29 of 1982 s. 8) (Added 63 of 1980 s. 2) 37. Initial and annual allowances, machinery or plant (1) Where a person carrying on a trade, profession or business incurs capital expenditure on the provision of machinery or plant for the purposes of producing profits chargeable to tax under Part IV then, except where such expenditure is expenditure of a kind described in section 16B(1) (b), there shall be made to him, for the year of assessment in the basis period for which the expenditure is incurred, an allowance, to be known as an "initial allowance". (Amended 30 of 1950 Schedule; 35 of 1965 s. 19; 26 of 1969 s. 19; 23 of 1974 s. 2) (1A) For the purposes of subsection (1), the initial allowance shall be- (a) in respect of a year of assessment up to and including the year of assessment commencing on 1 April 1973, equal to one-fifth of the expenditure referred to in subsection (1); and (b) in respect of the year of assessment commencing on 1 April 1974 and all subsequent years of assessment up to and including the year of assessment commencing on 1 April 1979, equal to one-quarter of such expenditure. (Added 23 of 1974 s. 2. Amended 32 of 1981 s. 4) (2) Where at the end of the basis period for any year of assessment a person owns and has in use machinery or plant for the purposes of producing profits chargeable to tax under Part IV there shall be made to him in respect of that year of assessment an allowance to be known as an "annual allowance" for depreciation by wear and tear of those assets. The allowance shall be calculated at the rates prescribed by the Board of Inland Revenue and shall be computed on the reducing value of the asset, which shall be the cost of the asset reduced by- (a) any initial allowance computed in accordance with the provisions of this section; and (b) by the annual allowances computed under the provisions of this section: Provided that- (a) where the asset was acquired before the basis period in respect of the year of assessment 1947/48 the value at the end of the basis period shall be computed by deducting from the amount paid for the asset by its present owner annual allowances as if this subsection had been in force during the whole period of ownership of the asset excluding any period during which the owner was deprived of the use of the asset by reason of enemy occupation; (b) the Commissioner may in his discretion allow a higher rate than that prescribed by the Board of Inland Revenue. (Amended 16 of 1951 s. 7; 35 of 1965 s. 19; 26 of 1969 s. 19) (2A) For the purposes of subsection (2), in any case where machinery or plant is owned and used by a person for any period immediately before he uses it for the purposes of producing profits chargeable to tax under Part IV, "cost of the asset" means the sum computed by deducting from the actual cost the notional amount of the annual allowances which would have been made under subsection (2) to the owner if since acquiring the asset he had used it for the purpose of producing profits chargeable to tax under Part IV. (Added 26 of 1969 s. 19) (3) Nothing in subsection (2) shall apply in respect of any machinery or plant owned and used by a person for the purposes of his trade or business where such machinery or plant represents scientific research expenditure of a capital nature which pursuant to section 16B (1) (b) has been allowed as a deduction in ascertaining the profits from such trade or business in respect of which such person is chargeable to tax under Part IV for any year of assessment. (Added 35 of 1965 s. 19) (4) If a person succeeds to any trade, profession or business which immediately before the succession- (a) was carried on by another person; and (b) made use of machinery or plant for the purpose of producing profits chargeable to tax under Part IV, and, immediately after the succession, such machinery or plant, without being sold to the successor, is in use in that trade, profession or business for the same purpose, the reduced value of such machinery or plant shall, for the purpose of computing annual allowances under subsection (2), be taken to be the reduced value thereof still unallowed to that other person as at the time of the succession. (Added 2 of 1971 s.

28) (5) Notwithstanding subsection (4), no initial allowance shall be made under this Part by virtue of subsection (4). (Added 2 of 1971 s. 28) 37A. Initial and annual allowances in respect of machinery and plant acquired under hire purchase agreement (1) Where a person carrying on a trade, profession or business incurs capital expenditure under a hire purchase agreement on the provision of machinery or plant for the purposes of producing profits chargeable to tax under Part IV then, except where such expenditure is expenditure of a kind described in section 16B (1) (b), there shall be made to him for each year of assessment in the basis period for which he has made an instalment payment under such agreement, an initial allowance. (Amended 35 of 1965 s.

20; 26 of 1969 s. 20; 23 of 1974 s. 3) (1A) For the purposes of subsection (1), the initial allowance shall be- (a) in respect of a year of assessment up to and including the year of assessment commencing on 1 April 1973, equal to one-fifth of the capital portion only of the instalment payment referred to in subsection (1); (b) in respect of the year of assessment commencing on 1 April 1974 and all subsequent years of assessment up to and including the year of assessment commencing on 1 April 1979, equal to one-quarter of the capital portion only of such payment; (c) in respect of the year of assessment commencing on 1 April 1980 equal to 35% of the capital portion only of such payment; (Replaced 29 of 1982 s. 9) (d) in respect of the year of assessment commencing on 1 April 1981 and all subsequent years of assessment up to and including the year of assessment commencing on 1 April 1988, equal to 55% of the capital portion only of such payment; and (Added 29 of 1982 s. 9. Amended 17 of 1989 s.

8) (e) in respect of any year of assessment commencing on or after 1 April 1989, equal to 60% of the capital portion only of such payment. (Added 17 of 1989 s. 8) (2) Where at the end of the basis period for any year of assessment a person has in use for the purposes of producing profits chargeable to tax under Part IV, machinery or plant acquired by him under a hire purchase agreement there shall be made to him in respect of that year of assessment an annual allowance for depreciation by wear and tear on such machinery or plant. (Amended 26 of 1969 s. 20) (3) An annual allowance under this section shall be calculated at rates prescribed by the Board of Inland Revenue and shall be computed on the reducing value of such machinery or plant which shall be the full cost thereof, excluding any interest which may be included in such cost under the terms of the agreement and reduced by any initial or previous annual allowances computed under this section: (Amended 35 of 1965 s. 20) Provided that the Commissioner may in his discretion allow a higher rate than that prescribed by the Board of Inland Revenue.

(4) Nothing in subsection (2) shall apply in respect of any machinery or plant used by a person for the purposes of his trade or business where such machinery or plant represents scientific research expenditure of a capital nature which pursuant to section 16B (1) (b) has been allowed as a deduction in ascertaining the profits from such trade or business in respect of which such person is chargeable to tax under Part IV for any year of assessment. (Added 35 of 1965 s. 20) (Added 36 of 1955 s. 43) 38. Balancing allowances and charges, machinery or plant (1) Where any of the following events occurs in the case of any machinery or plant in respect of which an initial allowance or an annual allowance has been made for any year of assessment to a person carrying on a trade, profession or business, that is to say, either- (Amended 30 of 1950 Schedule) (a) the machinery or plant is sold, whether while still in use or not; or (b) the machinery or plant is destroyed; or (c) the machinery or plant is put out of use as being worn out or obsolete or otherwise useless or no longer required, and the event in question occurs either whilst the person is carrying on his trade, profession or business or at the time when he ceases so to do, an allowance or charge, to be known as a "balancing allowance" or a "balancing charge", shall in the circumstances mentioned in this section, be made to or, as the case may be, on that person for the year of assessment in his basis period for which that event occurs. (Amended 36 of 1955 s. 44) (2) Where there are no sale, insurance, salvage or compensation moneys or where the amount of the capital expenditure of the person in question on the provision of the plant or machinery still unallowed as at the time of the event exceeds those moneys, a balancing allowance shall be made, and the amount thereof shall be the amount of the expenditure still unallowed as aforesaid or, as the case may be, the excess thereof over the said moneys; but in a case where an annual allowance has been computed on the cost of the asset as determined in accordance with section 37 (2A), the cost of the asset as computed in accordance with that subsection shall be deemed to be the capital expenditure for the purposes of this subsection and in a case where an annual allowance has been computed in accordance with section 37 (4), the reduced value used for the purpose of that subsection shall be deemed to be the capital expenditure for the purposes of this subsection. (Amended 26 of 1969 s. 21; 2 of 1971 s. 29) (3) If the sale, insurance, salvage or compensation moneys exceed the amount, if any, of the said expenditure still unallowed as at the time of the event, a balancing charge shall be made, and the amount on which it is made shall be an amount equal to the excess or, where the said amount still unallowed is nil, to the said moneys.

(4) Where by reason of a person ceasing to carry on his trade, profession or business, machinery or plant in respect of which an initial or an annual allowance has been made is put out of use, such person shall be deemed to have received immediately prior to such cessation, sale moneys for such machinery or plant of such an amount as the Commissioner may consider it would have realized had it been sold in the open market at the time of cessation: Provided that if such person sells such machinery or plant within 12 months of the date of cessation he may claim the adjustment of any balancing allowance or charge which may have been made to or on him as if such sale had taken place immediately prior to the date of cessation and notwithstanding the provisions of section 70 an assessor shall make any necessary correction to any assessment. (Added 36 of 1955 s. 44. Amended 35 of 1965 s. 21) (5) Notwithstanding anything contained in this section, in no case shall the amount on which a balancing charge is made on a person exceed the aggregate of the following amounts, that is to say- (Amended 36 of 1955 s.

44) (a) the amount of the initial allowance, if any, made to him in respect of the expenditure in question; (b) the amount of the annual allowances, if any, made to him in respect of the expenditure in question, including any allowance computed under proviso (b) to section 37 (2) at a rate higher than that prescribed by the Board of Inland Revenue. (Amended 3 of 1949 s. 13) 38A. Determination of cost of individual assets sold together for one price Where assets which qualify for initial or annual allowances under this Part are sold together or with other assets in pursuance of one bargain the Commissioner shall for the purposes of the calculation of the allowances and charges provided for in this Part, and having regard to all the circumstances of the transaction allocate a purchase price to each individual asset.

(Added 36 of 1955 s. 45) 38B. Commissioner's power to determine the true value of an asset on sale Where an asset which qualifies for initial or annual allowances is sold, and- (a) the buyer is a person over whom the seller has control; or (b) the seller is a person over whom the buyer has control; or (c) both the seller and the buyer are persons over both of whom some other person has control; or (d) the sale is between a husband and wife, not being a wife living apart from her husband, (Added 71 of 1983 s. 18) the Commissioner shall, if he is of the opinion that the sale price of such asset does not represent its true market value at the time of such sale, determine such true market value and the amount so determined shall be deemed to be the sale price of such asset for the purpose of calculating the allowances and charges provided for in this Part. (Added 36 of 1955 s. 45) 38C. Special provision as to allowances on a change in partnership Where a change occurs in a partnership of persons carrying on any trade, profession or business and an application made in accordance with the provisions of the proviso to section 22 (3) has been properly received by an assessor the provisions of this Part shall apply as if no such change had occurred except that any annual and rebuilding allowances in respect of assets of the old partnership acquired by the new partnership granted for the year of assessment in which such assets were acquired by the new partnership, shall be apportioned pro rata between the old and the new partnership. (Added 36 of 1955 s. 45. Amended 49 of 1956 s. 27) 39. Replacement of machinery or plant Where machinery or plant in the case of which any of the events mentioned in section 38 (1) has occurred is replaced by the owner thereof and a balancing charge falls to be made on him by reason of that event or, but for the provisions of this section, would have fallen to be made on him by reason thereof, then, if by notice in writing to the Commissioner he so elects, the following provisions shall have effect, that is to say- (Amended 30 of 1950 Schedule) (a) if the amount on which the charge would have been made is greater than the capital expenditure on providing the new machinery or plant- (i) the charge shall be made only on an amount equal to the difference; and (ii) no initial allowance, no balancing allowance and no annual allowance shall be made or allowed in respect of the new machinery or plant or the expenditure on the provision thereof; and (iii) in considering whether any, and, if so, what balancing charge falls to be made in respect of the expenditure on the new machinery or plant, there shall be deemed to have been made in respect of that expenditure an initial allowance equal to the full amount of that expenditure; (b) if the capital expenditure on providing the new machinery or plant is equal to or greater than the amount on which the charge would have been made- (i) the charge shall not be made; and (ii) the amount of any initial allowance in respect of the said expenditure shall be calculated as if the expenditure had been reduced by the amount on which the charge would have been made; and (iii) in considering what annual allowance is to be made in respect of the new machinery or plant, there shall be left out of account a proportion of the machinery or plant equal to the proportion which the amount on which the charge would have been made bears to the amount of the said expenditure; and (iv) in considering whether any and, if so, what balancing allowance or balancing charge falls to be made in respect of the new machinery or plant, the initial allowance in respect thereof shall be deemed to have been increased by an amount equal to the amount on which the charge would have been made.

39A. Reduction of allowances not to affect calculation of subsequent allowances Where, by virtue of section 12 (2), 18F (1) or 19E (1), the amount of any allowance provided for under this Part is reduced, such reduction shall not affect the calculation of subsequent allowances which shall be computed in the first place as if the full amount of the allowance had been granted and shall then where appropriate be apportioned in relation to the extent to which the relevant assets are or have been used in the production of assessable income or assessable profits. (Added 7 of 1975 s. 27) 39B. Initial and annual allowances on machinery or plant under the pooling system (1) Where a person carrying on a trade, profession or business incurs capital expenditure on the provision of machinery or plant for the purposes of producing profits chargeable to tax under Part IV then, except where such expenditure is expenditure of a kind described in section 16B (1) (b), there shall be made to him, for the year of assessment in the basis period for which the expenditure is incurred, an allowance, to be known as an "initial allowance". (Amended 32 of 1981 s. 6) (1A) For the purposes of subsection (1), the initial allowance shall be equal to the following percentages of the expenditure referred to in that subsection- (a) for the year of assessment commencing on 1 April 1980, 35%; (b) for the year of assessment commencing on 1 April 1981 and all subsequent years of assessment up to and including the year of assessment commencing on 1 April 1988, 55%; (Amended 17 of 1989 s. 9) (c) for any year of assessment commencing on or after 1 April 1989, 60%.

(Added 17 of 1989 s. 9) (Replaced 29 of 1982 s. 10) (2) Where during the basis period for any year of assessment or during the basis period for any earlier year of assessment a person owns or has owned and has in use or has had in use any machinery or plant for the purposes of producing profits chargeable to tax under Part IV, there shall be made to him in respect of each class of machinery or plant for that year of assessment an allowance, to be known as an "annual allowance", for depreciation by wear and tear of such machinery or plant. (Amended L. N.

262 of 1985) (3) The annual allowance shall be calculated at the rates of depreciation prescribed by the Board of Inland Revenue and shall be computed on the reducing value of each class of machinery or plant.

(4) Subject to subsections (5), (6) and (7), the reducing value of a class of machinery or plant shall be the aggregate capital expenditure incurred on the provision of the machinery or plant belonging to that class reduced by- (a) the aggregate of any initial allowances computed in accordance with section 37 in respect of any machinery or plant belonging to that class; (b) the aggregate of any annual allowances computed in accordance with section 37 in respect of any machinery or plant belonging to that class; (c) the aggregate of any initial allowances computed in accordance with this section in respect of any machinery or plant belonging to that class; (d) any annual allowance computed in accordance with this section; (e) any sale, insurance, salvage or compensation moneys received in respect of any machinery or plant belonging to that class; and (f) any reducing value of machinery or plant excluded from the total reducing value of a class of machinery or plant under section 39C (3).

(5) Where, prior to the commencement of the Inland Revenue (Amendment) (No. 4) Ordinance 1980 (63 of 1980), any machinery or plant has been the subject of a balancing allowance or balancing charge computed, in accordance with section 38, such machinery or plant shall, for the purposes of subsection (4), be excluded from the class of machinery or plant.

(6) Where any machinery or plant is owned and used by a person for any period immediately before he uses it for the purposes of producing profits chargeable to tax under Part IV, the capital expenditure incurred on the provision of the machinery or plant for the purposes of subsection (4) shall be computed by deducting from the actual cost the notional amount of the annual allowances which would have been made under section 37 to the owner if since acquiring the machinery or plant he had used it for the purpose of producing profits chargeable to tax under Part IV.

(7) If a person succeeds to any trade, profession or business which immediately before the succession- (a) was carried on by another person; and (b) the machinery or plant that was used at any time by that other person for the purpose of producing profits chargeable to tax under Part IV is not sold to the successor, the reducing value of such machinery or plant shall, for the purpose of computing annual allowances under subsection (3), be taken to be the reducing value thereof still unallowed to that other person as at the time of succession.

(8) Notwithstanding subsection (7), no initial allowance shall be made under this Part by virtue of subsection (7).

(9) No annual allowance shall be made where the reductions made under subsection (4) exceed the aggregate capital expenditure incurred on the provision of the class of machinery or plant.

(10) Nothing in subsection (2) shall apply in respect of any machinery or plant owned and used by a person for the purposes of his trade or business where such machinery or plant represents scientific research expenditure of a capital nature which pursuant to section 16B (1) (b) has been allowed as a deduction in ascertaining the profits from such trade or business in respect of which such person is chargeable to tax under Part IV for any year of assessment.

(11) The Commissioner may in his discretion allow a higher rate of depreciation in respect of any class of machinery or plant than that prescribed by the Board of Inland Revenue.

(Added 63 of 1980 s. 3) 39C. Pooling system when not to apply (1) The provisions of this Part which applied immediately prior to the commencement of the Inland Revenue (Amendment) (No. 4) Ordinance 1980 (63 of 1980) shall continue to apply- (a) subject to subsection (2), in respect of machinery or plant to which section 37A applies; (b) in respect of machinery or plant to which section 39A applies.

(2) Where, pursuant to the terms and conditions of a hire purchase agreement, machinery or plant to which section 37A applies passes into the ownership of the person carrying on a trade, profession or business who incurred the capital expenditure under the hire purchase agreement, the reducing value of such machinery or plant computed in accordance with that section shall be included in the class of machinery or plant for the purposes of section 39B for the years of assessment following the year of assessment during the basis period for which the machinery or plant passed into the ownership of that person.

(3) Where any machinery or plant which is included in a class of machinery or plant for the purposes of section 39B and which was used wholly and exclusively in the production of profits chargeable to tax under Part IV is subsequently not so used wholly and exclusively in the production of such profits, the provisions of this Part which applied immediately prior to the commencement of the Inland Revenue (Amendment) (No. 4) Ordinance 1980 (63 of 1980) shall apply to such machinery or plant in respect of the year of assessment during the basis period for which the machinery or plant is subsequently not used wholly and exclusively in the production of profits chargeable to tax under Part IV, and the reducing value of such machinery or plant shall be deemed to be such an amount as the Commissioner may consider it would have realized had it been sold in the open market at the time it ceased to be used wholly and exclusively in the production of such profits, and such reducing value shall be excluded from the total reducing value of that class of machinery or plant.

(4) For the purposes of subsection (2), in the application of section 37A, subsection (2) of that section shall be read as if "during the basis period" was substituted for "at the end of the basis period".

(Added 63 of 1980 s. 3)

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