Finance (Miscellaneous Provisions) Act, 1968
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Computation under Case I of Schedule D of profits or gains from dealing in or developing land. |
18.—(1) Where a business of dealing in or developing land is, or is to be regarded as, a trade within Schedule D or a part of such a trade, the provisions applicable to Case I of that Schedule shall, as respects the computation of the profits or gains of the business, have effect subject to the provisions of subsection (2). | |
(2) (a) Any consideration, other than rent or an amount treated as rent under section 83 of the Income Tax Act, 1967 , for the disposal of an interest in any land, or in a part of any land, shall be treated as a consideration for the disposal of trading stock and shall accordingly be taken into account as a trading receipt. | ||
(b) Any interest (hereafter in this subsection referred to as the superior interest) in any land held by the trader which has become trading stock of the trade shall thereafter, until the discontinuance of the trade, continue to be such trading stock and the value thereof at any time prior to the discontinuance shall be taken to be an amount equal to the cost to the trader of its acquisition diminished by an amount equal to the cost to the trader of creating any interest (hereafter in this subsection referred to as an inferior interest) to which the superior interest has become subject. | ||
(c) For the purposes of paragraph (b) the cost of the acquisition of the superior interest shall, subject to paragraphs (e) and (f), be taken to be the aggregate of the following amounts, that is to say: | ||
(i) where the interest is a leasehold interest, the amount of any fine, premium or other like sum paid by the trader in consideration for the grant of the lease, or, if he has obtained the lease by assignment, the amount paid by him in consideration of the assignment; | ||
(ii) where the interest is a leasehold interest, an amount equal to the market value at the time of the acquisition of any rent reserved under the lease; | ||
(iii) where the interest is not a leasehold interest, the amount paid by the trader for the acquisition of the interest together with an amount equal to the market value at the time of the acquisition of any fee farm rent, rentcharge, annuity or other annual payment reserved or charged upon the land; | ||
(iv) the amount paid by the trader by way of legal and other expenses incidental to the acquisition of the interest; | ||
(v) where the trader has developed the land, the amount of the expenditure incurred by him on the development; | ||
but where the trader has more than one interest in the land, no amount shall be taken into account under subparagraph (v) except in relation to that interest to which the other or all the others are subject. | ||
(d) For the purposes of paragraph (b) the cost to the trader of creating an inferior interest shall be taken to be— | ||
(i) where the inferior interest is an interest in the whole of the land to which the superior interest extends, the amount by which the cost to the trader, computed in accordance with paragraph (c), of the acquisition of the superior interest exceeds the market value of any interest retained by him, or | ||
(ii) where the inferior interest is an interest in a part of the land to which the superior interest extends, the amount by which the portion of the cost of acquisition of the superior interest which is attributable to that part exceeds the market value of any interest in that part retained by him. | ||
For the purposes of subparagraph (ii) the portion of the cost of acquisition of the superior interest which is attributable to a part of the land to which that interest extends shall be arrived at by apportioning in such manner as is just each of the several amounts which, under paragraph (c), are taken as making up the said cost of acquisition. | ||
(e) Where the trader has acquired the superior interest in any land otherwise than for consideration in money or money's worth, he shall, subject to paragraph (f), be deemed, for the purposes of paragraph (c), to have acquired the interest for a consideration equal to its market value at the time of acquisition. | ||
(f) Where at the time of acquisition of the superior interest the trade had not been commenced or the interest was not then appropriated as trading stock, the trader shall be deemed for the purposes of paragraph (c) to have purchased the interest for a consideration equal to its market value at the time of its appropriation as trading stock. | ||
(g) Any consideration (other than a payment to which section 87 of the Income Tax Act, 1967 , applies) for the granting by the trader of any right in relation to the development of any land shall be taken into account as a trading receipt. | ||
(h) As respects any land an interest in which falls to be treated as trading stock— | ||
(i) rent payable or receivable shall, save to the extent provided by the foregoing provisions of this subsection, be disregarded, and | ||
(ii) other receipts and outgoings arising from, or attributable to, the occupation or use of the land by the trader (other than use for the purposes of the trade) or by any other person shall likewise be disregarded. |