As enacted

Contents

11. Amendment of section 26 of the principal enactment

Official English translation. Where it differs from the Sinhala or Tamil text, the Act itself says which text prevails.

Section 26 of the principal enactment is hereby amended as follows :—

(1)

in subsection (1) of that section—

(a)

in paragraph (l) of that subsection :—

(i)

by the substitution in sub-paragraph (i)

of that paragraph, for the words and figures “paragraph (c) of subsection (1)

of section (97);”, of the words and figures “paragraph (c) of subsection (1)

of section 97,;”;

(ii)

by the substitution in sub-paragraph (iii) of that paragraph, for the words “tax or levy; and”, of the words “tax or levy;

or”;

(iii)

by the substitution in sub-paragraph (iv)

of that paragraph, for the words and figures “Economic Service Charge Act,

No. 13 of 2006;”, of the words and figures “Economic Service Charge Act,

No. 13 of 2006 ; or”;

(iv)

by the substitution in sub-paragraph (v)

of that paragraph, for the words and figures “Value Added Tax Act, No. 14 of 2002;”, of the words and figures, “Value

Added Tax Act, No. 14 of 2002 ; or”;

(v)

by the substitution in sub-paragraph (vi)

of that paragraph, for the word and figure “item iv”, of the word and figure

“item 4”;

(b)

in paragraph (x) of that subsection, by the substitution in paragraph (B) of sub-paragraph (iv) of that paragraph, for the words “any previous year.”, of the following words :—

“any previous year ; and

(v)

“loan” includes the collection of funds from the issue of any debt instrument.”;

and

(c)

by the addition immediately after paragraph (x) of that subsection, of the following new paragraph :—

“(y)

the excess, if any, of the aggregate amount of the interest payable for any year of assessment by any holding company to any subsidiary company of such holding company, in respect of any loan obtained from such subsidiary company, over such part of the interest so payable as is attributable to such part of such loan as is equal to thrice the aggregate of the issued share capital and reserves of such holding company, at the end of that year of assessment, where such holding company is a manufacturer :

Provided that, where such holding company is not a manufacturer, the provisions of the preceding paragraph shall apply as if for the reference in that paragraph to the words “thrice the aggregate of the issued share capital and reserves”, there were substituted the words “four times the aggregate of the share capital and reserves.

In this paragraph—

(i)

the expressions “subsidiary company”

and

“holding company” shall have the same respective meanings assigned to them in the Companies Act,

No. 7 of 2007;

(ii)

any holding company shall, in relation to any year of assessment, be deemed to be “a manufacturer”, if more than fifty per centum of the turnover for that year of assessment of such holding company, is from the sale of products manufactured by such holding company ;

(iii)

“reserves” do not include reserves created for the purpose of accounting for any surplus from the revaluation of any asset ; and

(iv)

“turnover” in relation to any year of assessment of any holding company, means the total amount receivable, whether actually received or not, from every sale made in that year of assessment of products manufactured by such holding company :—

(A)

after deducting therefrom:—

(i)

any sum included in such total amount, being proceeds from the disposal of any capital asset ;

(ii)

the amount of any bad debt incurred during that year of assessment, being an amount which had been included in the turnover of such holding company for that or any previous year of assessment ;

and

(iii)

any sum included in such total amount, being a sum which represents the value added tax ; and

(B)

after adding thereto any sum received during that year of assessment on account of any bad debt, written off or allowed in any previous year ; and

(v)

“loan” includes the collection of funds from the issue of any debt instrument.”; and

(2)

by the substitution for subsection (4) of that section, of the following subsection:—

“(4) In computing the statutory income for any year of assessment of any person from any trade, business, profession or vocation carried on or exercised by such person, no deduction shall be allowed under section 25 or this section or section 27, in respect of any expenditure or any part thereof, if it appears to the Assessor that the debt or such part thereof attributable to such expenditure or any part thereof, remains unpaid at the time an assessment for that year of assessment is made:

Provided that, if it is proved to the satisfaction of the Assessor within three years from the end of that year of assessment, that such debt or such part thereof has been paid within two years from the end of that year of assessment, the Assessor shall, notwithstanding the provisions of section 171, revise the assessment allowing the deduction of the sum so paid and any tax found to have been paid consequent to such disallowance of such deduction, shall notwithstanding anything to the contrary in any other provision of this Act, be refunded.”.

Read on from s 12