Act of Parliament · As enacted
Inland Revenue (Amendment) Act 2002
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s 1Short title
This Act may be cited as the Inland Revenue
(Amendment) Act, No. 10 of 2002.
s 2Amendment of section 3 of Act, No. 38 of 2000
Section 3 of the Inland Revenue Act, No. 38 of 2000
(hereinafter referred to as “the principal enactment”) is hereby amended by the repeal of paragraph (h) of that section, and the substitution, therefor of the following paragraph :—
“(h)
capital gains arising on or before March 31,
2002”.
s 3Amendment of section 7 of the principal enactment
Section 7 of the principal enactment is hereby amended in subsection (1) of that section, by the substitution for the words “arising from–”, of the words and figures
“arising on or before March 31, 2002 from–”.
s 4Amendment of section 8 of the principal enactment
Section 8 of the principal enactment as amended by
Act No. 8 of 2001 is hereby further amended in paragraph (a) of that section as follows :—
in subparagraph (lxxiv) of that paragraph by the substitution for the words “Investment Bank.”, of the words “Investment Bank :”.
by the addition at the end of that paragraph of the following :—
“Provided however that except in the case of a body of persons referred to in subparagraphs (ix), (xi), (xv), (xvii), (xx), (xxi), (xxxix), (li), (liv), (lxiv), (lxv), (lxvi), (lxxii), (lxxiii) and (lxxiv), the exemption from income tax, of the 2—H 015364—11,200 (05/2002)
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profits and income of any other body of persons referred to in this paragraph shall not extend to any such profits and income of that body of persons as consists of dividends or interest, in respect of which tax has been deducted under subsection (1A) of section 61 or section 122A respectively.”.
s 5Amendment of section 10 of the principal enactment
Section 10 of the principal enactment is hereby amended as follows :—
in paragraph (a) of that section, by the substitution for the words “payable to an individual”, of the words
“payable prior to April 1, 2002 to an individual” ;
by the insertion, immediately after paragraph (e) of that section of the following paragraphs :—
“(ee)
the interest accruing to any person on moneys invested in Reconstruction Bonds issued by the Government of Sri Lanka denominated in United States Dollars ; ”.
(eee)
the interest accruing to any person on moneys invested in Sri Lanka Development Bonds denominated in United States Dollars issued by the Central Bank of Sri Lanka on or after
April 1, 2001;”
in paragraph (f) of that section by the substitution for the words “Tax Reserve Certificate ; ”, of the words “Tax Reserve Certificate surrendered prior to
April 1, 2002 ; ” ;
in paragraph (h) of that section, by the substitution for the words “accruing to any financial institution”
of the words “accruing prior to April 1, 2002 to any financial institution”.
s 6Amendment of section 11 of the principal enactment
Section 11 of the principal enactment is hereby amended in paragraph (f) of that section, by the substitution, for the words and figures “18, 19, 20 or 21 of this Act”, of the words and figures “18, 18A, 19, 20, 20A, 21, 21A, or 21B of this Act,”.
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s 7Amendment of section 14 of the principal enactment
Section 14 of the principal enactment is hereby amended in subsection (1) of that section as follows :—
in paragraph (c) of that subsection by the substitution for the words “for the three years of assessment.”, of the words “ for the three years of assessment ; ” ;
by the addition immediately after paragraph (c) of that subsection of the following paragraph :—
“(d)
the aggregate amount of the capital gains of any person for any year of assessment commencing on or after April 1, 2002 arising from any transaction stipulated in section 7.”.
s 8Amendment of section 17 of the principal enactment
Section 17 of the principal enactment is hereby amended in subsection (2) of that section, by the substitution for the words “Order published in the Gazette” of the words
“Order published in the Gazette, prior to April 1, 2002”.
s 9Amendment of section 18 of the principal enactment
Section 18 of the principal enactment is hereby amended by the substitution for the words and figures
“commences business on or after April 1, 2000,” of the words and figures “commences business on or after April 1, 2000
but prior to April 1, 2002”.
s 10Amendment of section 18A of the principal enactment
Section 18A of the principal enactment is hereby amended in subsection (1) of that section, by the substitution for the words and figures “which commences business on or after April 1, 2001,” of the words and figures “which commences business on or after April 1, 2001 but prior to
April 1, 2003”.
s 11Amendment of section 19 of the principal enactment
Section 19 of the principal enactment is hereby amended in subsection (1) of that section, by the substitution for the words and figures “which commences business on or after April 1, 2000,” of the words and figures “which commences business on or after April 1, 2000 but prior to
April 1, 2002”.
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s 12Amendment of section 20 of the principal enactment
Section 20 of the principal enactment is hereby amended in subsection (1) of that section, by the substitution for the words and figures “which commences business on or after April 1, 2000”, of the words and figures “which commences business on or after April 1, 2000 but prior to
April 1, 2002”.
s 13Insertion of new sections 21A and 21B in the principal enactment
The following new sections are hereby inserted immediately after section 21 of the principal enactment and shall have effect as sections 21A and 21B of that enactment :—
21A. (1) The profits and income within the meaning of paragraph (a) of section 3 (other than any profits and income from the sale of capital assets) of any company from any specified undertaking referred to in subsection (2) and carried on by such company on or after
April 1, 2002 shall be exempt from income tax for a period of three years reckoned from the commencement of the year of assessment in which the undertaking commences to carry on commercial operations.
For the purposes of subsection (1)
“specified undertaking” in relation to a company means an undertaking carried on by such company and which is engaged in—
agriculture, agroprocessing, industrial and machine tool manufacturing, information technology and allied services, electronics or the export of non-traditional products ;
any other designated project or in a project in which the investment is in excess of rupees five hundred million, and which conforms to the prescribed guidelines.
“Exemption from income tax of certain agricultural and industrial projects.
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For the purpose of this subsection—
“agriculture” means the cultivation of land with plants of any description and the rearing of fish ;
“export of non-traditional products”
means the export of any goods, other than goods referred to in sub-paragraph (ii) of paragraph (b) of section 52 of this Act.
21B.
Exemption from income tax of certain undertakings for infrastructure development
The profits and income within the meaning of paragraph (a) of section 3 (other than any profits and income from the sale of capital assets) of any company from any specified undertaking referred to in subsection (2) shall be exempt from income tax for a period not less than five years but not more than ten years as may be determined by the Minister by
Order published in the Gazette, if the amount of the investment made by such company in such undertaking is not less than one thousand two hundred and fifty million rupees. Such period shall be reckoned from the commencement of the year of assessment in which the undertaking commences to carry on commercial operations.
For the purposes of subsection (1)
“specified undertaking” in relation to company means an undertaking carried on by such company on or after April 1, 2002 and which is engaged in any such activity relating to infrastructure development as may be determined by the Minister by Order published in the Gazette, having regard to the interests of the national economy.”.
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s 14Insertion of new section 22A in the principal enactment
The following new section is hereby inserted immediately after section 22 of the principal enactment and shall have effect as section 22A of that enactment :—
22A. Notwithstanding anything contained in this Act, the profits and income within the meaning of paragraph (a) of section 3 of any person who makes a declaration under section 2 of the Inland Revenue (Special Provisions)
Act, No. 7 of 2002 shall not be exempted from income tax for any year of assessment commencing on or after April 1, 2003.”.
s 15Amendment of section 23 of the principal enactment
Section 23 of the principal enactment is hereby amended in subsection (1) of that section as follows :—
in sub-paragraph (i) of paragraph (b) of that subsection by the substitution, for the words “or subparagraph (iii)”, of the words “or sub-paragraph (iii) or (vi)”;
by the insertion immediately after sub-paragraph (v) of paragraph (b) of that subsection of the following sub-paragraph :—
“(vi)
any computer hardware acquired by such person on or after April 1, 2002 and arising out of its use in any trade, business, profession or vocation carried on or exercised by him at the rate of one hundred per centum on its cost of acquisition;”;
in paragraph (c) of that subsection by the substitution for all the words from “a sum equal to one tenth” to
“business carried on by him” of the following :—
“(c)
A sum equal to —
one-tenth of any payment made for any year of assessment commencing prior to
April 1, 2002;
“The profits and income of a person making a declaration under section 2 of the
Inland
Revenue
(Special
Provisions)
Act, No. 7 of 2002 shall not be exempted from income tax.
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a sum equal to one-fourth of any payment made in any year of assessment commencing on or after April 1, 2002, by such person as consideration for obtaining a licence, in his favour, of any manufacturing process used by such person in any trade or business carried on by such person;”;
by the insertion, immediately after paragraph (c) of that subsection, of the following paragraph :—
“(cc)
a sum equal to one-fourth of any payment made by such person in any year of assessment commencing on or after April 1, 2002 in the acquisition of any intangible asset such as a patent, copyright or trade mark (other than any goodwill) used by him in any trade or business carried on by him :
Provided that no deduction shall be allowed to any person under this paragraph in respect of any such payment if the total of the sum deducted in the preceding years of assessment is equal to the amount of such payment ; ”;
in paragraph (d) of that subsection , by the substitution for all the words from “such allowance being” to “computer software”, of the following :—
“such allowance being :—
in the case of the year of assessment commencing prior to April 1, 2002, an amount equal to fifty per centum ;
in the case of every year of assessment commencing on or after April 1, 2002, an amount equal to one hundred per centum, of the cost of acquisition of such computer software,”;
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by the repeal of the proviso to paragraph (f) of that subsection and the substitution of the following proviso therefor :—
“Provided that the sum deductible under this sub-paragraph shall, in the case of a company carrying on the business of letting premises for commercial purposes —
for any year of assessment commencing prior to April 1, 2002, not exceed ten per centum ;
for any year of assessment commencing on or after April 1, 2002, insofar as it relates to the repairs of such premises, not exceed twenty-five per centum, of the gross rent receivable by such company for such premises;”;
in paragraph (k) of that subsection by the substitution for the words “the expenditure incurred” of the words and figures “the expenditure incurred in any year of assessment commencing on or after April 1, 2000
but prior to April 1, 2002”;
by the insertion, immediately after paragraph (k) of that subsection of the following paragraph :—
“(kk)
the expenditure including capital expenditure incurred in any year of assessment commencing on or after April 1, 2002 by such person in carrying on any scientific, industrial, agricultural or any other research for the upgrading of any trade or business carried on by such person;”;
in sub-paragraph (iii) of paragraph (t) of that subsection by the substitution for the words
“performance of such trade or business.”, of the following :—
“performance of such trade or business :
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Provided that any expenditure incurred in any year of assessment commencing on or after April 1,
2002 by such person in training shall be deductible, irrespective of the length of the period of training.”.
s 16Amendment of section 24 of the principal enactment
Section 24 of the principal enactment is hereby amended as follows :—
in subsection (1) of that section —
in sub-paragraph (iii) of paragraph (c) of that subsection by the substitution for the words
“in accordance with such paragraph,” of the following :—
“in accordance with such paragraph :
Provided that a deduction may be allowed in respect of any expenditure incurred, by such person in any year of assessment commencing on or after
April 1, 2002 if such expenditure incurred in travelling outside Sri Lanka is directly related to any trade, business, profession or vocation carried on, or exercised by such person. ; ” ;
in sub-paragraph (ii) of paragraph (d) of that subsection, by the substitution for the words
“accordance with the provision of such paragraph;”, of the following :—
“accordance with the provisions of such paragraph :
Provided that a deduction may be allowed in respect of any such expenditure incurred by such person in any year of assessment commencing on or after April 1, 2002, if such expenditure incurred in travelling outside Sri Lanka is directly related to the carrying on of such business;”;
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in paragraph (e) of that subsection by the substitution for the words “exercised by him;” of the following :—
“exercised by him :
Provided that a deduction may be allowed in respect of such entertainment expenses incurred by such person or on his behalf, in any year of assessment commencing on or after April 1, 2002, if the expenses so incurred are directly related to any trade, business, profession or vocation carried on, or exercised by such person;”;
in paragraph (f) of that subsection, by the substitution, for the words “his executive officer”, of the words “his executive officer, in any year of assessment commencing prior to April 1, 2002”;
and
by the addition, immediately after subsection (3)
thereof of the following subsection :—
“(4) In computing the statutory income of any person from any trade, business, profession or vocation carried on or exercised by such person, no deduction shall be allowed under section 23 or section 24 in respect of any expenditure unless the amount of such expenditure is paid within three years from the end of the year of assessment in which such expenditure is incurred.”.
s 17Amendment of section 29 of the principal enactment
Section 29 of the principal enactment is hereby amended as follows :—
by the insertion immediately after subsection (1) of that section of the following subsection :—
“(1A)
The assessable income of a person (other than a company) for any year of assessment commencing on or after April 1, 2002, shall notwithstanding anything contained in
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subsection (1), be his total statutory income for that year other than the —
statutory income from interest on which income tax has been deducted under section 122A; and
statutory income from dividends on which income tax has been deducted under subsection (1A) of section 61, whether received directly form such company which distributes the dividend or through any other company, 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 122A or subsection (1A) of section 61, 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.”;
in subsection (2) of that section —
by the substitution, in paragraph (a) of that subsection for the words “payable by such person”, of the words “payable for that year of assessment being a year of assessment commencing prior to April 1, 2002 by such person.”;
by the insertion, immediately after paragraph (a) of that subsection of the following :—
“(aa) sums paid by such person for any year of assessment commencing on or after
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April 1, 2002 by way of an annuity, ground rent, royalty or interest not deductible under section 23 :
Provided that —
no deduction shall be allowed in respect of any sum paid by way of interest, annuity, ground rent or royalty by a person out of Sri Lanka to another person out of Sri
Lanka ;
where for any year of assessment any such sum paid exceeds the total statutory income for that year, the excess shall be treated for the purposes of this section in the same manner as a loss incurred in a trade during that year;
where any sum is paid by such person by way of an annuity no deduction shall be allowed in respect of such sum unless such annuity is —
paid under an order of court by way of payment of alimony or maintenance ;
paid to his spouse under a duly executed deed of separation;
in return, for full consideration in money or moneys worth.
For the purposes of this paragraph the term “interest” means any interest paid during any year of assessment on any loan obtained from a bank, financial institution or any other institution recognised by the Commissioner-General.”.
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s 18Amendment of section 30 of the principal enactment
Section 30 of the principal enactment is hereby amended in subsection (1) of that section as follows :—
by the repeal of paragraph (a) of that subsection and the substitution of the following paragraph therefor :—
“(a)
and allowance of —
one hundred and forty four thousand rupees, in respect of every year of assessment commencing prior to April 1, 2002; or
two hundred and forty thousand rupees, in respect of every year of assessment commencing on or after April 1, 2002 ; ”;
by the insertion immediately after the first proviso to that subsection of the following :—
“Provided further, that any person who makes a declaration under section 2 of the Inland Revenue (Special
Provisions) Act, No. 7 of 2002, shall not, in ascertaining his taxable income, be entitled to deduct any allowance under paragraph (b) on any investment or expenditure made or incurred relating to any investment made in such declaration.”.
s 19Amendment of section 31 of the principal enactment
Section 31 of the principal enactment is hereby amended as follows :–
in subsection (2) of that section –
in paragraph (h) of that subsection by the substitution for the words “projection on a screen in a cinema.”; of the words “projection on a screen in a cinema ;”;
by the addition, immediately after paragraph (h) of that subsection, of the following paragraphs :–
“(i)
any expenditure incurred, otherwise than out of a loan referred to in paragraph (j)
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on or after April 1 , 2002, by an individual in either the construction or the purchase of a house being in either case the first house constructed or purchased by such individual on or after April 1, 2001 ;
any expenditure incurred, on or after April 1, 2002, by an individual on the repayment of the capital of any approved housing loan either for the construction or the purchase of a house being in either case the first house constructed or purchased by such individual on or after
April 1, 2001.
For the purpose of this paragraph
“approved Housing loan” means any housing loan obtained from the
Government, or any banking institution within the meaning of the Monetary Law
Act, or any Provincial Fund, any local authority or any other institution approved by the Minister in charge of the subject of Housing.”;
in paragraph (a) of subsection (4) of that section –
in sub-paragraph (v) of that paragraph by the substitution for the words “twenty five thousand rupees”, of the words “twenty-five thousand rupees ;”;
by the insertion immediately after sub-paragraph (v) of that subsection of the following sub-paragraph :–
“(vi)
in respect of all qualifying payments referred to in paragraphs (i) and (j) of subsection (2) made by him in that year of assessment, shall not exceed one-third of the assessable income or one hundred thousand rupees which ever is less.”;
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by the addition immediately after subsection (6) of that section of the following subsection :–
“(6A)
The excess of the allowance of any qualifying payment referred to in paragraph (i) of subsection (2) which cannot be deducted from the assessable income in the year of assessment in which such expenditure is incurred may be apportioned over a period of not more than nine years immediately succeeding the year of assessment in which such expenditure was incurred and such apportioned amount shall be deemed to be a qualifying payment made in each such year of assessment.”.
s 20Amendment of section 32 of the principal enactment
Section 32 of the principal enactment is hereby amended as follows :–
in subsection (1) of that section, by the substitution, in paragraph (a) of that subsection, for the words and figures “Part I of the First Schedule”, of the words and figures “Parts I and IA of the First
Schedule”;
in subsection (2) of that section –
by the substitution, for the words and figures,
“Part III of the First Schedule”, of the words and figures “Parts III and IIIA of the First
Schedule”;
in the proviso to that subsection by the substitution for all the words from “such sum”, to the end of that proviso, of the words “such sum shall be chargeable with income tax in the manner provided for in subsection (3) as if the references in that subsection to ‘capital gain’ were references to ‘such sum’;
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in subsection (4) of that section, by the substitution, for the words “a person includes any capital gain”, of the words “a person, for any year of assessment commencing prior to April 1, 2002, includes any capital gain”;
in subsection (5) of that section, by the substitution, for the words “a person includes any capital gain”, of the words and figures“a person, for any year of assessment commencing prior to April 1, 2002, includes any capital gain”; and
in subsection (6) of that section, by the substitution, for the words “a person includes any capital gains”, of the words and figures“a person, for any year of assessment commencing prior to April 1, 2002, includes any capital gain”;.
s 21Insertion of new sections 40A and 40B of the principal enactment
The following new sections are hereby inserted immediately after section 40 of the principal enactment and shall have effect as sections 40A and 40B respectively of that enactment :–
40A. (1) Where the taxable income of any company carrying on the business of a specialized housing bank for any year of assessment commencing on or after April 1,
2002 includes any profits and income within the meaning of paragraph (a) of section 3 from such business such part of such taxable income as consists of such profits and income, shall, notwithstanding anything to the contrary in this
Act, be chargeable with income tax at the rate of twenty per centum.
For the purposes of this section
“specialized housing bank” means a licensed commercial or specialized bank within the meaning of the Banking Act, No. 30 of 1988
which is engaged in lending money only for activities relating to residential housing.
‘Rate of income tax applicable to specialized housing banks.
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40B. (1) The profits and income within the meaning of paragraph (a) of section 3 of any company referred to in section 21B for any year of assessment commencing after the expiry of the period during which the profits and income of such company were exempt from income tax shall, notwithstanding anything contained in this
Act, be chargeable with income tax at the rate of fifteen per centum.
The profits and income within the meaning of paragraph (a) of section 3 of any company referred to in section 21A, shall notwithstanding anything containing in this Act, for –
each of the two years of assessment immediately succeeding the period during which the profits and income of such company were exempt from income tax, be taxed at the rate of ten per centum ;
every year of assessment commencing after the expiry of the period referred to in paragraph (a) –
if such company is a company engaged in agriculture or the export of non-traditional products, be taxed at fifteen per centum ; and
if such company is a company other than a company engaged in agriculture or the export of non-traditional products, be taxed at twenty per centum.’.
s 22Insertion of new section 48A in the principal enactment
The following new section is hereby inserted immediately after section 48 of the principal enactment and shall have effect as section 48A of that enactment :—
48A. Where the taxable income of any person (other than a company) for any year of assessment includes a dividend declared on or
Rate of income tax applicable to certain companies after the expiry of tax exemption.
“Rate of income tax on certain dividends.
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after April 1, 2002 in the form of shares or debentures, the taxable income representing such dividend shall be taxed at the rate of ten per centum.”.
s 23Amendment of section 53 of the principal enactment
Section 53 of the principal enactment amended by
Act, No. 8 of 2001, is hereby further amended in subsection (1) of that section as follows :–
in paragraph (a) of that subsection, by the substitution for the words “to this Act ; and”, of the words “to this Act ;
Provided that where the income tax payable by a company for any year of assessment commencing on or after April 1, 2002 exceeds one million rupees, the amount by which the income tax payable by such company exceeds one million rupees shall not be more than the amount by which the taxable income of such company exceeds five million rupees ; and
in paragraph (b) of that subsection, by the substitution for the words “in that year of assessment”, of the words and figures “in that year of assessment being a year of assessment commencing prior to April 1, 2002 ;”;
by the insertion, immediately after paragraph (b) of that subsection of the following paragraph :–
“(bb)
equal to ten per centum of the aggregate amount of the gross dividends distributed by such company in that year of assessment;
being an year of assessment commencing on or after April 1, 2002 out of the profits on which the taxable income of such company is computed for any year of assessment ;”;
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in paragraph (c) of that subsection by the substitution for the words “that year of assessment”, of the words
“that year of assessment being an year of assessment commencing prior to April 1, 2002 ;”.
s 24Amendment of section 54 of the principal enactment
Section 54 of the principal enactment is hereby amended in subsection (1) of that section, by the substitution for the words “for every year of assessment” of the words
“for every year of assessment commencing prior to April 1,
2002”.
s 25Amendment of section 57 of the principal enactment
Section 57 of the principal enactment is hereby amended in paragraph (a) of subsection (1) of that section by the substitution for the words “specified in the Second
Schedule; and” of the words “specified in the Second Schedule to this Act :
Provided that where the inocme tax payable by such company for any year of assessment on or after April 1,
2002 exceeds one million rupees, the amount by which the income tax payable by such company exceeds one million rupees shall not be more than the amount by which the taxable income of such company exceeds five million rupees.
s 26Amendment of section 60 of the principal enactment
Section 60 of the principal enactment is hereby amended by the substitution for all the words from “which becomes payable to fifteen per centum” of the words :—
“which becomes payable in any year of assessment commencing prior to March 31, 2002 to any non resident person if the relevant dividend consists of the whole or any part of the amount of a dividend not being the whole or any part of a dividend which is exempt from income tax under this Act, distributed by any quoted public company on or before March 31, 2002 and received either directly or through one or more intermediary companies, by such resident company, income tax equivalent to ten per centum.”.
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