Cap. 123 Art. 24Balancing statement, balancing allowance and charge.

(1) Where, under the provisions of article 14(1)(f) and (j), any deduction has been allowed in any year of assessment in ascertaining the total income of any person and any of the following events occurs in the year immediately preceding the year of assessment in the case of any property in respect of which any deduction has been allowed as aforesaid, that is to say, either the property or any part thereof -

(a) is sold or otherwise transferred under an onerous title, whether still in use or not; or

(b) is destroyed; or

(c) is put out of use as being worn out or obsolete or otherwise useless or no longer required, and the event in question occurs before the source of income in respect of which the deduction has been allowed has ceased to exist or to belong to the said person, he shall, in the year of assessment, render to the Commissioner, at the same time as he renders his return of income under article 10 of the Income Tax Management Act, a statement (hereinafter referred to as a "balancing statement"), in respect of the property in question showing the following items, that is to say:

(i) the amount of the capital expenditure on the provision thereof; and

(ii) the total depreciation which has occurred by reason of wear and tear since the date of the acquisition of such property, taking into account the aggregate amount of all deductions previously allowed under the provisions of article 14(1)(f) and (j) and of any deductions or charges previously allowed or made under sub-article (2)(a) or (b);

(iii) the amount of all sale, insurance, salvage or compensation monies in respect thereof and, where the property has been transferred by exchange, the value thereof, or, if put out of use, the disposal value thereof.

(2) In ascertaining the total income of a person who is required under sub-article (1) to render a balancing statement to the Commissioner, a deduction (hereinafter referred to as a "balancing allowance") shall be allowed or, as the case may be, an addition (hereinafter referred to as a "balancing charge") shall be made and such balancing allowance or balancing charge shall be calculated by reference to the balancing statement or statements rendered by the person in respect of the year immediately preceding the year of assessment, as follows:

(a) the amount of a balancing allowance shall be the amount by which the amount of item (i) of the balancing statement exceeds the sum of the amounts of item (ii) and item (iii) of that statement; or

(b) the amount of the balancing charge shall be the amount by which the sum of the amounts of item (ii) and item

(iii) of the balancing statement exceeds the amount of item (i) of that statement:

Provided that -

(i) the balancing charge shall in no case exceed the aggregate amount of any deductions previously allowed under the provisions of article 14(1)(f) and (j) and included in item (ii) of the balancing statement;

(ii) where the property in respect of which a balancing allowance falls to be allowed or a balancing charge falls to be made was used only partly in the production of the income, only so much of the balancing allowance that would otherwise have been allowed, or of the balancing charge that would otherwise have been made shall be allowed or made as may be appropriate having regard to the extent of use for the said purpose.

(3) Where property, in the case of which any of the events mentioned in sub-article (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 sub-article, 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:

(a) if the amount of the balancing charge which would have been made is greater than the capital expenditure on providing the new property -

(i) the balancing charge shall be an amount equal to the difference; and

(ii) no balancing allowance under sub-article (2) and no deduction under article 14(1)(f) and (j) shall be made or allowed in respect of such new property or the capital 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 capital expenditure on providing such new property, the aggregate amount of all deductions, previously allowed in respect of such property under the provisions of this article and of article 14(1)(f) and (j), shall be deemed to be equal to the full amount of such expenditure;

(b) if the capital expenditure on providing the new property is equal to, or greater than the amount of the balancing charge that would have been made -

(i) the balancing charge shall not be made; and

(ii) the amount of any deductions in respect of the said expenditure under the provisions of article 14(1)(f) and (j) shall be calculated as if the capital expenditure on providing such new property had been reduced by the amount of the balancing charge which would have been made; and

(iii) in considering whether any, and, if so, what balancing allowance or balancing charge falls to be made in respect of the capital expenditure on providing such new property, the aggregate amount of all deductions, previously allowed in respect of such property under the provisions of this article and under article 14(1)(f) and (j), shall be deemed to have been increased by an amount equal to the amount of the balancing charge that would have been made: Provided that where the new property is only partly employed in the production of the income, only so much of the capital expenditure incurred in providing the property shall be taken into account for the purposes of this sub-article as may be appropriate having regard to the extent to which such property is wholly and exclusively employed in the production of the income.

(4) Where any person has delivered a balancing statement, the Commissioner may -

(a) accept the statement and make a balancing allowance or balancing charge accordingly; or

(b) refuse to accept the statement and, to the best of his judgment, determine the amount of the balancing allowance or balancing charge and make a balancing allowance or balancing charge accordingly.

(5) Where a person has not delivered a balancing statement and the Commissioner is of the opinion that a balancing charge would fall to be made upon such person in respect of any such property, then the Commissioner may, according to the best of his judgment, determine the amount of such balancing charge and assess him accordingly.

(6) Nothing in sub-article (4) and (5) contained shall prevent the decision of the Commissioner in the exercise of the power conferred upon him by those sub-articles from being questioned in an appeal in accordance with the provisions of articles 35 and 37 of the Income Tax Management Act.

(7) For the purpose of this article -

(a) the expression "property" means plant and machinery, and premises being an industrial building or structure owned and employed by any person in the production of his income;

(b) the capital expenditure on providing any property shall be the amount which, in the opinion of the Commissioner, such property would have cost if bought in the open market at the time it was provided;

(c) the price in respect of any property sold or the value of any property otherwise transferred under an onerous title shall be the amount which, in the opinion of the Commissioner, such property would have fetched if sold or otherwise transferred under an onerous title on the open market at the time it was sold or transferred;

(d) the disposal value in respect of any property which is put out of use shall be the amount which, in the opinion of the Commissioner, such property would have fetched if sold or otherwise transferred under an onerous title in the open market at the time it was put out of use.

(8) Where in any year of assessment full effect cannot be given to any balancing allowance owing to there being no profits or gains chargeable for that year from the source of income in respect of which such allowance is claimed or owing to the profits or gains chargeable from that source being less than the allowances, then so long as the source of income in respect of which the allowance falls to be made continues to exist and to belong to the person entitled to the said allowance, the balance of such allowance shall be added to, and be deemed to from part of, the allowance, if any, for the next succeeding year of assessment, and if no such allowance falls to be made for that year, shall be deemed to constitute the allowance for that year, and so on for subsequent years of assessment.