32. Deductions from total statutory income in arriving at assessable income

of section 65, whether received directly from such company which distributes the dividend or through any other company; and

(Chapter 420) or Treasury Bill issued under Treasury

Bills Ordinance (Chapter 417) or Central Bank

Securities issued under the Monetary Law Act

(Chapter 422), and from the interest on which tax under section 134 has been deducted from a primary dealer, subject to the deductions specified in this section:

Provided however, where such income from interest or dividends from which income tax has been deducted under section 133 or subsection (1)

of section 65, as the case may be, have been received by a person in the course of carrying on any trade or business as a receipt from such trade or business, such income from interest or dividends shall form part of the total statutory income of such person :

Provided further that the interest received or accruing to any primary dealer being a company or otherwise from which tax has been deducted under section 134 on any primary market transaction on any Security or Treasury Bond issued under the

Registered Stocks and Securities Ordinance (Chapter 420), or Treasury Bill issued under the Local

Treasury Bills Ordinance (Chapter 417), or Central

Bank Security issued under the Monetary Law Act

(Chapter 422), shall not be considered as receipts from any trade or business under section 3 for the purpose of computing the statutory income of such company.

Ordinance (Chapter 420), or Treasury Bill issued under the Local Treasury Bills Ordinance (Chapter 417), or Central Bank Security issued under the

Monetary Law Act (Chapter 422), referred to in section 134 as the case may be.

For the purposes of subsection (1) and of this subsection—

“interest income” means the proportionate amount of interest or discount allowed by the issuer of any security or instrument referred to in sub-paragraph (b) of subsection (3) of this section, in proportion to the holding period of such security or other instrument by any holder over the period of maturity of such security or other instrument ;

“primary market transaction” means the purchase of any Security or Treasury Bond issued under the Registered stock and Security Ordinance

(Chapter 420), or Treasury Bill issued under the Local Treasury Bills Ordinance (Chapter 417), or Central Bank Security issued under the Monetary Law Act (Chapter 422), at the time of the original issue of such Security,

Bill or Bond by any primary dealer, subject to any discount or payment of interest by the issuer; and

“secondary market transaction” means the sale of a security or other instruments referred to in sub-paragraph (b) of sub section (2) of this section or re-purchase or reverse re-purchase of such security or other instruments after the original issue of such security or holding of any such security or instrument for a period longer than one day from the date of acquisition, by any primary dealer who has acquired such security or other instruments.

any reward received by such person as an informer under any scheme for the payment of such rewards; or

Chapter XIX ;

Commission or in a Public Corporation from which the income tax has been deducted under section 36.

Provided that–

(if any) of such person in Sri Lanka or that the tax has been deducted under this Act before or at the time such payment is made;

(A)

under an order of court by way of payment of alimony or maintenance;

(B)

to his spouse under a duly executed deed of separation; or

(C)

in return for full consideration in money or money’s worth.

(A)

to any bank licensed under the Banking

Act, No. 30 of 1988 or any finance company registered under the Finance

Company Act, No. 78 of 1988; or

(B)

to any other person recognized by the

Commissioner-General for the purposes of this paragraph :

Provided however, where the Commissioner-General is satisfied that such recipient of interest has declared such interest as income under this Act, such person may be deemed to be a recognized person.

For the purposes of this paragraph the term

“interest” means any interest paid on a loan the proceeds of which are utilized—

Act, including any such loss brought forward from a previous year which had not been deducted under this seciton previously, and any deemed loss under paragraph (ii) of the proviso to paragraph (a), supported by a statment of accounts certified by an approved accountant, up to a maximum limit of thirty five per centum of the excess of the total statutory income for that year over the aggregate of :—

Provided however,

(A)

no loss incurred on the disposal of shares, rights or warrants in a company referred to in section 44 of this Act, shall be a loss deductible under this paragraph;

(B)

no loss can be carried forward beyond the year of assessment in which the death of such person occurred in the case of an individual, or liquidation of such person occurred in the case of a company or other body of persons;

(C)

where any person has been declared or adjudged insolvent by a competent court, no loss incurred prior to the date of bankruptcy or insolvency shall be deducted from income arising subsequent to such declaration of insolvency ;

(D)

no loss can be deducted which is incurred by a company in which there had been a change of ownership otherwise than by way of testate or intestate succession, except against the statutory income of such trade or business of the company as that in which the loss was incurred.

For the purposes of this paragraph, a change of ownership of a company is deemed to have occurred where more than one-third of the issued share capital of the company is held, at any time in the year of assessment for which the claim for deduction is made, either directly or through nominees, by persons who did not hold such share capital, at any time in the year of assessment in which the loss was incurred.