Advanced Taxation

1. ADVANCED TAXATION
Date & Time; 3rd June 2021 at 3.30Pm
Target Group; Members of the Internal Audit Department
Venue; Meeting Room 3
1

2. OUTLINE OF PRESENTATION
Composition of Income Tax
Sources of Income
Assessable, Taxable Income
Introduction to Business, Trade
Method of Accounting
Business Income
2

3. OUTLINE OF PRESENTATION CONT.….,
Deductions
Capital Allowance
Loss on Realization of Business Assets and Liabilities
Business or Investment Losses
Reversal of Amount Including Bad Debts
Calculation of Assessable Income from Business
3

4. DESIRED OUTCOME
Refresh the Knowledge/Understanding of Taxation.
Develop Internal Auditing Skills of the Team.
Getting Maximum Results with Minimum Efforts.
Create a Learning Culture within the IA Department.
Contribute Towards Career Development Efforts of the Organization.
Motivate the Team Members in Achieving the Annual Audit Plan.
4

5. IMPOSITION OF INCOME TAX
Chargeability -[Charging Provision (Sec. 2(1)]
Income tax shall be payable for
Each “year of assessment”
By a “person” who
has “taxable income” for that year; or
a person who receives a “final withholding payment” during
that year
5

6. DEFINITION
“Person” means an individual or entity and includes a body
of persons corporate or un-incorporate, an executor, non-
governmental organization and charitable institution.
6

7. SOURCES OF INCOME
 Employment income ( Sec. 5)
 Business income (Sec. 6)
 Investment income ( Sec 7)
 Other income (Sec 8)
7

8. ASSESSABLE INCOME (SEC.4)
For a resident person
The income from employment, business, investment or
other source “wherever the source arises”
For a non-resident person
The income from the employment, business,
investment or other source to the extent that the
“income arises in or is derived from a source in Sri
Lanka”
8

9. INCOME TAX PAYABLE SEC.2(2)
Tax on taxable income xxx
Tax on final withholding payment xxx
Total Income Tax payable xxxx
9

10. INCOME TAX BASE (SEC. 3 TO
19)
Assessable income from “Employment” xxxx
Assessable income from “Business” xxxx
Assessable income from “Investment” xxxx
Assessable income from “Other sources” xxxx
xxxx
Less: Qualifying payments and reliefs Sec. 52 (xxx)
Taxable income (Sec. 03) xxxxx
10

11. TAX CALCULATION (SEC.2(3))
Taxable income @ tax rates as per First Schedule
xxxx
Less:
Any foreign tax credit (Sec . 80) (xxx)
Any other tax credit allowed under the Act (xxx)
Tax payable
xxxx
11

12. TAX ON FINAL WITHHOLDING PAYMENTS
[SEC.2(4)]
Final withholding payments @ tax rates as per First Schedule
xxxx
Final withholding payments (Sec. 88)
Relieve a withholdee’s tax liability [Sec 88(2)]
- Tax withheld from a final withholding payment by
withholding agent
- Liability of the withholder if no deduction is made [Sec 88(3)]
- Liability of the withholdee if no deduction is made by the
withholder [Sec 86(4)]
12

13. INTRODUCTION
“Business” has been defined to include:
A trade, profession, vocation or isolated arrangement with a
business character however short the duration of the
arrangement; and
A past, present or prospective business.
13
Inland Revenue Act No. 24 of 2017

14. TRADE
Factors to be considered reference to trade
1. What is sold – Eg. Purchase of commercial quantities of product
that cannot be used personally.
2. Length of ownership – If asset is held for a short period of time, it
suggests trade rather than an investment.
3. Repetition – Repetition of transactions suggest a trade.
4. Supplementary work – Trade often process of works turn assets
into saleable products.
5. Motivation activity – Trade require assets or conclude contracts
with the intention of a making a profit.
6. Motivation for sale – Trades typically sell assets for the same
reason they acquire, them, in order to make a profit.
14

15. CHANGES IN THE YEAR OF ASSESSMENT –
SECTION 20
Accounting Period:-
For year of Assessment
Change in Accounting Period:-
With approval of the CGIR if think fit
If fails to comply with a term and condition attached to
approval, may revoke an approval
15

16. METHOD OF ACCOUNTING – SECTION 21
Inclusion and deduction shall be made according to general
accepted accounting principle.
Individual shall account for income tax purpose on cash basis in
calculating individual’s income from an employment or investment.
Individual or entity conducting business shall account for income
tax basis an accrual basis.
Other sources shall account either a cash or accrual basis
whichever properly computes the person’s income.
16

17. METHOD OF ACCOUNTING CONT…
With approval of the CGIR method of accounting can be changed
if CGIR shall be satisfied that the new method is necessary to
properly compute the person’s income.
Where method of accounting changes, adjustment shall be made
in the year of assessment following the changes so that no item is
omitted or taken into account more than once.
17

18. CASH BASIS ACCOUNTING – SECTION 22
Under the cash basis accounting-
a. Derives an amount when payment is received by or made
available,
and
a. Incurs an expense or other amount when it is paid.
18

19. ACCRUAL BASIS ACCOUNTING –
SECTION 23
Under the accrued basis accounting:-
a. Derives an amount when it is receivable by the person,
and
a. Incurs an expense or other amount when it is payable.
19

20. ACCRUAL BASIS ACCOUNTING CONT…
An amount shall be receivable by,
When the person become entitled to received it, even if the
time for discharge of the entitlement is postponed or the
entitlement is payable by instalments.
20

21. ACCRUAL BASIS ACCOUNTING CONT…
An amount shall be treated as payable-
a. When all the event that determine liability have occurred
b. The amount of the liability can be determined with reasonable
accuracy
c. But not before economic performance with respect to the
amount occurs.
21

22. ACCRUAL BASIS ACCOUNTING CONT…
Economic performance occurs:-
a. With respect to the acquisition of services or assets, at the
time the services or assets are provided;
b. With respect to the use of an asset, at the time the asset is
used; and
c. In any other case, at the time the person makes payment in
full satisfaction of the liability.
22

23. ACCRUAL BASIS ACCOUNTING CONT…
Economic performance occurs:-
a. With respect to the acquisition of services or assets, at the
time the services or assets are provided;
b. With respect to the use of an asset, at the time the asset is
used; and
c. In any other case, at the time the person makes payment in
full satisfaction of the liability.
23

24. BUSINESS INCOME
The following amounts shall be included in calculating the
gains and profits of a person from conducting a business .
a. Service fees;
b. Consideration received in respect of trading stock;
c. Gains from the realization of capital assets and
liabilities of the business as calculated
d. Amounts required to be included by the 2nd or 4th
Schedule on the realization of the person’s depreciable
assets of the business;
24

25. BUSINESS INCOME
The following amounts shall be included in calculating the
gains and profits of a person from conducting a business .
a. Service fees;
“Service fee” means a payment to the extent to which,
based on market values, it is reasonably attributable to
services rendered by a business of a person, but
excludes interest, rent or a royalty.
Section 195
25

26. BUSINESS INCOME
b. Consideration received in respect of trading stock;
“Trading stock” means assets owned by a person
that are sold or intended to be sold in the ordinary
course of a business of the person, work in progress
on such assets, inventories of materials to be
incorporated into such assets and consumable stores;
Section 195
26

27. BUSINESS INCOME
c. Gains from the realization of capital assets and
liabilities of the business as calculated
“Capital asset”–
(a) means each of the following assets:
(i) land or buildings;
(ii) a membership interest in a company,
partnership or trust;
(iii) a security or other financial asset;
(iv) an option, right or other interest in an asset
referred to in the foregoing
paragraphs; but
(b) excludes trading stock or a depreciable asset;
Section
195
27

28. BUSINESS INCOME
d. Amounts required to be included by the 2nd or 4th
Schedule on the realization of the person’s
depreciable assets of the business;
“Depreciable asset” –
a. means an asset to the extent to which it is employed in
the production of income from a business and which is
likely to lose value because of wear and tear, or the
passing of time; but
a. excludes goodwill, an interest in land, a membership
interest in an entity and trading stock;
28

29. BUSINESS INCOME CONTD.
e. Amounts derived as consideration for accepting a restriction
on the capacity to conduct the business;
f. Gifts received by the person in respect of the business;
g. Amounts derived that are effectively connected with the
business and that would otherwise be included in
calculating the person's income from an investment; and
h. Other amounts required to be included under this Act.
29

30. BUSINESS INCOME CONTD.
The following amounts should be excluded when
calculating a person’s gains and profits from business.
a. Exempt amounts and final withholding payments;
and
a. Amounts that are included in calculating the person's
income from an employment.
30

31. DEDUCTIONS
Deductions will be discussed relevant to the all source of income,
generally deduction of the Act falls in to three main categories
 General deductions (Section 10)
 Main deduction (Section 11)
 Specific deductions (Section 12-19)
31

32. GENERAL DEDUCTIONS – SECTION 10
1. (a) No deduction shall be made in calculating a
person’s income from employment [Sec.10(1)(a)]
(b) Certain specific deductions are not allowable
in calculating a person’s income [Sec.10(1)(b)]
2. A deduction for a payment shall not be allowed
until the tax, if required, withheld has been paid to
the Commissioner General.
32

33. GENERAL DEDUCTIONS CONT…
3. No deduction shall be allowed except as
expressly permitted by the Act.
4. Where more than one deduction applies, the
most specific deduction shall be applied even if
that results in the denial(Rejection) of a deduction.
33

34. GENERAL DEDUCTIONS - SECTION10
The following expenses shall not be deducted in
computing a person’s income [S.10(1)(b)] [specific
deductions ]
Domestic expenses -Section.197.
34

35. (1) Where an individual incurs expenditure in respect of
himself, the expenditure shall be domestic expenditure
to the extent that it is incurred-
In maintaining the individual, including in providing
shelter as well as meals, refreshment, entertainment or
other leisure activities;
In the individual commuting (travelling) from home;
In acquiring clothing, including shoes, for the individual,
other than clothing that is not suitable for wearing
outside of work;
35
Domestic expenses - Section 197

36. In paying any personal debts, including credit card debts,
of the individual.
In educating the individual, other than education that is
directly relevant to a business conducted by the individual
and that does not lead to a degree or diploma; or
36
Domestic expenses cont…

37. (2) Where another person incurs expenditure in making a
payment to or providing any other benefit for an
individual the expenditure shall be domestic expenditure
except to the the extent that-
The payment or benefit shall be included in calculating the
income of individual;
The individual provides consideration of an equal market
value for the payment or benefit;
The amount of expenditure is so small as to make it
unreasonable or administratively impracticable to account
for it; 37
Domestic expenses -

38. (3) Expenditure referred to in subsection 1 and 2 include
interest incurred with respect to money borrowed that is
used in a manner referred to in those subsection.
38
Domestic Expenses

39. GENERAL DEDUCTIONS
Tax payable under this Act or other taxes and levies
specified by the Commissioner General of Inland
Revenue (CGIR).
Interest, penalties and fines payable in relation to breach
of any written law.
Expenditure in deriving exempt amounts or final WHT
payments
39

40. GENERAL DEDUCTIONS CONT…
Retirement contributions, unless those are included in
calculating the income of an employee or consist of a
contribution by an employer to approved funds by the CGIR
(pension, provident or savings funds or provident or savings
society)
Dividends of a Company
An amount transferred to a reserve or provision for
expenditure or losses not yet incurred, but expected to be
incurred in a future year of assessment
40

41. GENERAL DEDUCTIONS
Outlays or expenses for entertainment
“entertainment” means the provision to any person of food,
beverages, tobacco, accommodation,
amusement(Enjoyment), recreation or hospitality of any
kind”.
Section195
Amounts incurred on lotteries, betting or gambling, other than
amounts incurred from conducting a business of lotteries,
betting or gambling
41

42. MAIN DEDUCTION - SECTION11
In calculating income from business or investment, the
following are deductible
(a) Expenses to the extent they are incurred during the
year; and
(b) Incurred in the production of income.
No deduction shall be allowed for an expense of capital
nature.
“Expenses of a capital nature” includes an expenses that
secures a benefit capable of lasting longer than 12 months
42

43. SPECIFIC DEDUCTION
Interest Expenses- Section 12
Allowance for trading stocks - Section 13
Repairs and improvements – Section 14
R & D expenses and agricultural start up expenses -
Section 15
Capital allowances and balancing allowances - Section
16
Losses on realization of business assets and liabilities -
Section 17
Deductible amount of financial cost - Section 18 43

44. INTEREST EXPENSES – SECTION 12
The interest incurred by a person during the year under
debt obligation of the person shell be deemed to be
incurred in the production of income to the extend that-
a) The borrowed money was used to acquire an asset that
is used during the year in the production of income; or
b) The debt obligation was incurred in the production of
income
44

45. ALLOWANCE FOR TRADING STOCK –
SECTION 13
“Trading stock” means assets owned by a person that are
sold or intended to be sold in the ordinary course of a
business of the person, work in progress on such assets,
inventories of materials to be incorporated into such assets
and consumable stores
Section195
The definition of “capital asset" and “depreciable asset"
excludes Trading stock. However it depends on facts of the
case.
Calculation of trading stock as sub section 2 of section 13
45

46. ALLOWANCE FOR TRADING STOCK
The allowance shall be calculated as –
Opening value of trading stock of the business for the Y/A
= ******
Plus: Expenses incurred during the on trading stock of the
business = ****
******
Less: Closing value of trading stock of the business for the year.
= ( ***)
Allowance for trading stock =
******
46

47. ALLOWANCE FOR TRADING STOCK
Closing valve of trading stock shall be lower of –
a. The cost of the trading stock at the end of the year
b. The market value of the trading stock at the end of the
year
According to this comparison, cost of the trading stock
shall be reset
47

48. REPAIRS AND IMPROVEMENTS – SECTION
14
Expenses for the repair or improvement of depreciable
assets shall be deducted irrespective of whether they
are of a capital nature or not
48

49. DEFINITION
“Depreciable asset” –
a. means an asset to the extent to which it
is employed in the production of income
from a business and which is likely to
lose value because of wear and tear, or
the passing of time; but
a. excludes goodwill, an interest in land, a
membership interest in an entity and
trading stock;
Section 195
49

50. Limitation for DEDUCTION
Assets categorized under
Buildings, structures and similar depreciable assets
(Class 4) - 5%
for all other cases
- 20%
of the WDV of the asset at the end of
previous year.
Excess expense for which a deduction is not allowed shall
be added to the depreciation basis of the asset.
50

51. RESEARCH AND DEVELOPMENT EXPENSES AND
AGRICULTURAL START UP EXPENSES –
SECTION 15
Research and Development expenses and Agricultural
start up expenses meeting the requirements of
subsection (1) of section 11 may be deducted irrespective
of whether they are of a capital nature or not.
51

52. (a) opening up any land for cultivation or for animal
husbandry;
(b) cultivating land referred to in paragraph (a) with plants;
(c) the purchase of livestock or poultry to be reared on land
referred to in paragraph (a); or
(d) maintaining tanks or ponds or the clearing or preparation of
any inland waters for the rearing of fish and the purchase
of fish to be reared in such tank, pond or inland waters, as
the case may be;
52
Definition
“Agricultural start up expenses” means expenses incurred by
the person in –

53. (a) Carrying on any scientific, industrial, agricultural or any other
research for the upgrading of the person’s business
through any institution in Sri Lanka (or for any innovation or
research relating to high value agricultural products, by the
person or through any research institution in Sri Lanka); or
(b) The process of developing the person’s business and
improving business products or process,
which shall be beneficial to Sri Lanka, but shall exclude expenses
incurred that are otherwise included in the cost of an asset under
this Act.
53
Definition
“Agricultural start up expenses” means expenses incurred by the
person in –

54. CAPITAL ALLOWANCE AND BALANCING
ALLOWANCE - Section 16
A person is entitled to claim capital allowances
if such person is the owner of the depreciable asset; and
uses them at the end of a year of assessment in the production
of the person’s income from a business;

55. CAPITAL ALLOWANCE
Shall be calculated
- According to the straight line method
- According to the second, fourth or sixth schedules
Full capital allowances will be granted for the year of
acquisition
Capital allowance will not be granted for the year of disposal
Shall not be deferred to a later year of assessment
55

56. No Capital Allowance Shall be granted in respect of a road vehicle
other than
- a commercial vehicle,
- a bus or minibus,
- a goods vehicle;
- or a heavy general purpose or specialised truck or trailer;
Definition of “Commercial Vehicle” mean,
- a road vehicle designed to carry loads of more than half a ton or more
than 13 passengers; or
- a vehicle used in a transportation or vehicle rental business.
56
Capital Allowance

57. Clas
s
Depreciable Assets Number of Years
1 computers and data handling equipment together with
peripheral devices
5
2 buses and minibuses, goods vehicles; construction and
earthmoving equipment, heavy general purpose or
specialised trucks, trailers and trailer-mounted containers;
plant and machinery used in manufacturing
5
3 railroad cars, locomotives, and equipment; vessels, barges,
tugs, and similar water transportation equipment; aircraft;
specialised public utility plant, equipment, and machinery;
office furniture, fixtures, and equipment; any depreciable
asset not included in another class
5
4 buildings, structures and similar works of a permanent
nature
20
5 intangible assets, excluding goodwill The actual useful life of
the intangible asset, or
where the intangible
asset has an indefinite
useful life, 20.
57

58. CALCULATION OF CAPITAL ALLOWANCE
Formula for calculating capital allowance
A/B
A - The depreciation basis of asset at the end of
the year of assessment
B - Number of years (provided in the fourth schedule)
58

59. ALLOWANCE DEPRECIATION BASIS OF
DEPRECIABLE ASSET
The depreciation basis of the asset at the end of the previous
year of assessment and (could be the cost or WDV)
Amounts added to the depreciation basis of the asset during the
year of assessment including the excess expense of repair and
improvements referred to in section 14 for which a deduction
shall not be allowed as a result of the limitation.
59

60. AN ASSESSABLE CHARGED IS INCLUDED
OR BALANCING ALLOWANCE IS
GRANTED
Where a depreciable asset of a person is realised, when
calculating the person’s income;
(a) an assessable charge is included (profit) or
(b) a balancing allowance is granted (loss)
60

61. BALANCING ALLOWANCES (LOSS)
Balancing allowances are –
made in respect of depreciable assets
(a) (i) realised during a year of assessment; and
(ii) in respect of which capital allowances have
been granted in that year or an earlier year; and
(b) Calculated in accordance with the provisions of the
second, fourth or sixth schedule to this act.
61

62. CAPITAL ALLOWANCE FOR LEASING ASSETS
Where an asset is leased under the finance lease, the lessor
shall be treated as transferring ownership of the asset to the
lessee.
Accordingly, the lessee is entitled to deduct capital
allowance in relation to the assets obtained under finance
leasing.
Substance Vs. From
- No. 10 of 2016 – From
- No.24 of 2017 - Substance
62

63. INVESTMENT INCENTIVE AS SECOND
SCHEDULE
A person who invests in Sri Lanka (other than the expansion of
an existing business) during a year of assessment shall be
granted enhanced capital allowances, in addition to the capital
allowances computed under the Fourth Schedule.
63

64. ENHANCED CAPITAL ALLOWANCE AS SECOND
SCHEDULE
Condition Limitation Capital
allowance %
1. Used in a part of Sri Lanka
other than the Northern
Province
On depreciable assets other than
intangible assets -
USD 3 million -USD 100 million
100%
2. Used in a part of Sri Lanka
other than the Northern
Province
On depreciable assets other than
intangible assets - exceeds USD
100 million
150%
3. Used in the Northern
Province
On depreciable assets other than
intangible assets - exceeds USD 3
million
200%
4. State-owned company that
are used in a part of Sri Lanka
On assets or shares - exceeds
USD 250 million
150%
64

65. CONDITION FOR CLAIMING THE ENHANCED
CAPITAL ALLOWANCE
Capital allowances arising above paragraphs of above table with
respect to a particular year of assessment cannot be accumulated
with another paragraph and shall be taken in that year and shall be
deferred to a later year of assessment.
65

66. TEMPORARY CONCESSION AS SIXTH
SCHEDULE
A person who invests in Sri Lanka (other than expansion of
existing business) on depreciable assets mentioned in the
following table during a year of assessment shall be granted
enhanced capital allowances computed in accordance with this
paragraph, in addition to the capital allowances computed under
the Forth Schedule.
66

67. ENHANCED CAPITAL ALLOWANCE AS SIXTH
SCHEDULE
Condition Limitation
Depreciable assets
Capital
allowance
%
1. in a part of Sri Lanka
other than the Northern
Province
Class 1 and class 4 assets
and plant or machinery that
are used to improve
business processes or
productivity and fixed to
the business premises.
up to USD
03 million
100%
2. in the Northern Province 200%
67

68. TEMPORARY CONCESSION AS SIXTH
SCHEDULE
CONDITIONS
Claiming of capital allowances cannot be deferred to a
later year of assessment.
Deduction of capital allowances under this Schedule
shall expire three years after it becomes effective.
68

69. LOSSES ON REALIZATION OF BUSINESS
ASSETS AND LIABILITIES – Section 17
In calculating the person’s income from business, loss from the realization of asset
and liabilities shall be deducted.
Assets
 Capital assets of a business used in the production of income from business.
Liability
 Debt obligation incurred in borrowing money – money used or asset purchased
 Other liability - the liability was incurred in the production of income from the
business.
69

70. DEFINITION
70
“Capital asset”–
(a) means each of the following assets:
(i) land or buildings;
(ii) a membership interest in a company, partnership or
trust;
(iii) a security or other financial asset;
(iv) an option, right or other interest in an asset
referred to in the foregoing
paragraphs; but
(b) excludes trading stock or a depreciable asset;
Section 195

71. DEDUCTIBLE AMOUNT OF FINANCIAL COST
– SECTION 18
The amount of financial costs deducted in calculating an entity’s
income for a year of assessment shall not exceed the amount of
financial costs attributable to financial instruments within the limit.
This rule does not apply to Financial Institutions from conducting a
business or investment and individuals (entity excludes individual).
71

72. “Financial instrument” means
(a) (i) a debt claim or debt obligation;
(ii) a derivative instrument;
(iii) a foreign currency instrument; and
(iv) any other instrument prescribed by regulations or, in the absence
of regulations, treated as a financial instrument by generally accepted
accounting principles; but
(b) except to the extent as may be prescribed by regulations, excludes a
membership interest in an entity.
Section 198
72
Definition

73. LIMITATION FOR FINANCIAL COST
Formula:
A x B
Where:
‘A’ - total of the issued share capital and reserves of
the entity
‘B’ - (a) in the case of a manufacturing entity, the
number 3; (b) in the case of an entity other
than a manufacturing entity, the number 4.
73

74. LIMITATION FOR FINANCIAL COST
For Manufacturing Entities
Allowable Finance Cost attributable to financial instruments =
(Total Cost of Financial Instruments) X [(Total of the issued Share Capital and
reserves) X 3]
For Other Entities
Allowable Finance Cost attributable to financial instruments =
(Total Cost of Financial Instruments) X [(Total of the issued Share Capital and
reserves) X 4]
74

75. BUSINESS OR INVESTMENT LOSSES
– SECTION 19
In calculating the income of a person from a business following
shall be deducted:–
(a) an unrelieved loss of the person for the year from any other
business; and
(b) an unrelieved loss of the person for any of the previous six
years of assessment from the business or any other
business.
75

76.  The person may choose the income calculation or calculations in which an
unrelieved loss or part of the loss is deducted.
 Notwithstanding the provisions of subsections (1) and (2), where a person
makes a loss and if the loss were a profit it would be taxed at a reduced rate,
the loss shall be deducted only in calculating income taxed at the same
reduced rate,
If the loss were a profit and the profit would be exempt, the loss shall be
deducted only in calculating exempt amounts.
76
Business or Investment Losses
Conditions

77. Deduction Criteria
Income Source Eligible Loss Loss Income
Business income Unrelieved business
Loss of
• any other business
• previous six years
Reduced rate
Exempt
Same reduced
rate, Lower
reduced rate,
Exempt
Exempt
Investment
Income
Unrelieved business
Loss
Investment Loss
77
Business or Investment Losses
– Section 19

78. “Loss” means
of a person for a year of assessment from a business or investment shall be
calculated as the excess of amounts deducted in accordance with this Act
(other than under this section or subsection (5) of section 25) in calculating
the person’s income from the business or investment over amounts included
in calculating that income; and
“Unrelieved loss” means
the amount of a loss that has not been deducted in calculating a person’s
income under this section or subsection (5) of section 25.
78
Definition

79. APPLICABILITY OF SPECIFIC DEDUCTIONS
79
Section Expense Business Investment
12 Interest √ √
13 Trading stocks √ -
14 Repairs and improvements √ -
15 R & D and agricultural start up √ -
16 Capital allowances √ -
17 Losses on realisation of business assets
and liabilities
√ -
18 Deductible amount of financial cost √ √
19 Business or investment losses √ √

80. Reversal
Where a person deducts an expense in calculating the person’s income and
the person later recovers the expense, the person shall, at the time of
recovery, include the amount recovered in calculating the person’s income.
Disclaimer or Write off
The person may, at the time of disclaimer or write off, deduct the amount
disclaimed or written off in calculating the person’s income.
a person can disclaim the entitlement to receive an amount or write off a debt
claim as bad if the person has taken reasonable steps in pursuing payment
and the person reasonably believes that the entitlement or debt claim will not
be satisfied.
80
Reversal of amount including bad debts

81. CALCULATION OF ASSESSABLE INCOME
FROM BUSINESS
Income from business xxxx
Less : Exempt amounts xxx
: Final withholding payments xxx (xxx)
Liable Income from business xxxx
Less : Allowable deductions (xx)
Assessable Income from business xxxx
81

82. 82
BUSINESS INCOME