Income Tax Act, 1967.

• Permanent Page URL

Balancing allowances and balancing charges.

265.—(1) Where any capital expenditure has been incurred, on or after the 30th day of September, 1956, on the construction of a building or structure, and any of the following events occurs while the building or structure is an industrial building or structure:

(a) the relevant interest in the building or structure is sold,

(b) that interest, being a leasehold interest, comes to an end otherwise than on the person entitled thereto acquiring the interest which is reversionary thereon,

(c) the building or structure is demolished or destroyed, or, without being demolished or destroyed, ceases altogether to be used,

an allowance or charge (in this Chapter referred to as a balancing allowance or a balancing charge) shall, in the circumstances mentioned in this section, be made to, or, as the case may be, on, the person entitled to the relevant interest immediately before that event occurs, for the year of assessment in his basis period for which that event occurs:

Provided that—

(i) no balancing allowance or balancing charge shall be made to or on any person for any year of assessment by reason of any event occurring after the end of his basis period for the fiftieth year of assessment after that in which the building or structure was first used, and

(ii) in relation to a building or structure the capital expenditure on the construction of which has been incurred on or after the 1st day of January, 1960, and which falls to be regarded as an industrial building or structure by reason of its use for the purposes of the trade of hotel-keeping and in relation to a building or structure which falls to be regarded as an industrial building or structure by reason of its use for the purposes of growing fruit, vegetables or other produce in the course of a trade of market gardening within the meaning of section 54, this Part shall have effect as if “tenth year” were substituted for “fiftieth year” in the foregoing provisions of this subsection.

(2) Where there are no sale, insurance, salvage or compensation moneys, or where the residue of the expenditure immediately before the event exceeds those moneys, a balancing allowance shall be made and the amount thereof shall be the amount of the said residue or, as the case may be, of the excess thereof over the said moneys.

(3) If the sale, insurance, salvage or compensation moneys exceed the residue, if any, of the expenditure immediately before the event, a balancing charge shall be made and the amount on which it is made shall be an amount equal to the excess, or, where the residue is nil, to the said moneys.

(4) If, for any of the relevant years of assessment (as defined for the purposes of this subsection) an annual allowance has not been made, subsections (2) and (3) shall have effect subject to the modification that the amount of the balancing allowance, or, as the case may be, the amount on which the balancing charge is to be made, shall be reduced by applying thereto the fraction, the numerator of which is the number of the relevant years of assessment for which an annual allowance has been made in respect of the expenditure and the denominator of which is the total number of the relevant years of assessment.

In this subsection, “the relevant years of assessment” means all years of assessment after that in which the building or structure was first used for any purpose up to and including that in which the event takes place which gives rise to the allowance or charge:

Provided that where, before the said event but on or after the 15th day of April, 1959, the building or structure has been sold while an industrial building or structure, the said expression means all years of assessment for which either—

(a) an annual allowance is made by reason of the building or structure being an industrial building or structure at any time between the sale and the event, or, where there has been more than one such sale, between the last such sale and the event, or

(b) an annual allowance would have fallen to be made if the building or structure had been an industrial building or structure at all times between the sale, or, as the case may be, the last such sale, and the event.

(5) Notwithstanding anything in the preceding provisions of this section, in no case shall the amount on which a balancing charge is made on a person in respect of any expenditure on the construction of a building or structure exceed the amount of the industrial building allowance, if any, made to him in respect of that expenditure together with the amount of any annual allowances made to him in respect of that expenditure for years of assessment his basis periods for which end on or before the date of the event which gives rise to the charge.