| 9/9/2010 |
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| Board of Special Commissioners - Cases |
| Case No. 24/52 |
Decided: 25 February, 1957 |
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Deduction in respect of breakages to be calculated at 5% of turnover; capital allowances in respect of machinery purchased prior to 1 January, 1948 - article 10(1)(g), now 14(1)(f), Income Tax Act
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Three appellants maintained that they had not been allowed the deductions they had claimed, mainly in respect of (1) breakages and (2) wear and tear of plant and machinery and vehicles.
- Breakages. Appellants contended that the deduction for breakages allowed by the Commissioner should have been calculated as a percentage of the value of the stock of bottles not of turnover. The Commissioner had calculated the deduction at 3% on turnover but later offered to raise it to 5%. Appellants later abandoned their claim that the deduction was to be based on the stock of bottles but requested that the rate be increased to 6% on turnover. The Board, basing itself on foreign opinion and the evidence given by the manager of another factory, held that a deduction amounting to 5% on turnover would be reasonable.
- Plant and machinery. Appellants claimed that the deduction was to be calculated on the market value of the plant and machinery and vehicles as on 1 January, 1948. But the Board held that article 10(1)(g)(iv) provided that "the aggregate of such allowance ... added to the aggregate depreciation which has occurred by reason of wear and tear prior to the date of commencement of this Act, calculated at the prescribed rates, shall in no case exceed the original cost of the property". The only two relevant elements to establish the value of the asset as on 1 January, 1948 were, therefore, the original cost and the depreciation from the date of purchase. Otherwise, the original cost would have been exceeded.
This decision refers to three appeals (22/52, 24/52 and 1/53). By agreement with the three appellants the Board delivered one decision, common to all.
An appeal was entered from this Board decision. The Court (case no. 20) confirmed the Board decision.
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