15
(14)
receipts basis.
nhat
Our second line of defence
here is even if they are not treated wholly on a net receipts basis, Hong Kong is entitled,
to deduct an allowance on the capital expendi-
ture met out of revenue. It is clear from the
enclosure to No.1 that Hong Kong think they
are entitled to do this under their law. Mr.
Roseway took the view that such deduction is
only permissible when the revenue in question is being treated on a net receipts basis. Looking at the correspondence printed in Eastern
123, Nos.189 et seq., I am afraid that it is
probable that the War Office are right as
regards their intentions at that time. I
have, however, consulted Mr. Roberts-Wray as
to the meaning of the Ordinance as it now
stands (see minute attached) and he agrees with
the Hong Kong view. I think therefore we
should take the line that Hong Kong are entitled
to make this deduction under their Ordinance,
the draft of which was concurred in by the
War Office, and leave the War Office to raise
the issue of intention if they want to.
Finally, in connection with the
Water Works, there is the exemption of the
interest on the loan raised in 1927. Here I
play
think we must make the best we can with
m
the precedent of the Straits Settlements Harbour
and River improvements expenditure in 1906
(see Nos.93 97 in Eastern 123). In that
case special taxation was imposed to meet the
cost of improvements, and the Straits took the
precaution of getting exemption before pro-
ceeding with the work. Hong Kong did not
impose