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time it was stated that loans could not be raised at less than 3%. When the system was introduced, the deductions were not made retrospective in respect of past expenditure, were allowed to be continued for 50 years in respect of sư h expenditure. The concession does not apply if the capital expenditure met fram revenue is not permanently borne by revenue, i.e., if a loan is subsequently floated to repay to revenue any sums temporarily utilized from revenue (Treasury Letter No. 15603/12 to Colonial Office of 12th August, 1912 (Mauritius)).
It should also be noted that it has been pointed out definitely in connection with loans for special services (Treasury Letter No. 7673/08 of 8th August, 1908 to the Colonial Office (Straits Settlements)) that it cannot be admitted that in all cases "revenue raised for the purpose of paying interest on loans for certain purposes would be exempt from assessment to military contribution" and as regards capital expenditure met from revenue (War Office letter No. 10/992 (F.1.) of 18th July, 1908, to Treasury (Hong Kong)) "the Army Council are not prepared to admit as a general principle that the appropriation of revenue to capital expenditure should entitle a Colony to the exclusion of such revenue in calculating military contribution".
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6. Class II. Exclusion completely of certain item s not regarded as revenue
It
No general principle has governed the decisions in this class. Each case has been examined on its merits. may, however, be said that in certain cases reimbursements received by a Colony for activities outside its normal functions have been approved for exclusion, e.g., repayments of loans raised to relieve distress or to enable colonists to purchase mechanical transport. Again, where the expenses of a special service have exceeded the derived revenue, exemption has been given (Hong Kong, receipts of Wei-hai-Wei Post Office with the condition that the net receipts basis should be adopted if the revenue at any time exceeded the expenditure).
On the other hand, items which might strictly be regarded as not "revenue" have not been exempted, when application has been made, because they were included in the gross revenue in
8 Local Revenue, District Collections (not Municipal) made in the Straits Settlements for roads, land drainage, etc., which must be expanded by the Government in full in the localities where raised, refused 1907.
The revenue derived from Christmas Island and Labuan, which came under the Government of the Straits Settlements after 1895 and have no garrison, was exempted from the contribution while the expenditure on them exceeded the revenue. With the growth of revenue from these sources, the items are now treated on the basis of net receipts.
7. Class III. Special exemptions. Revenue fram taxation of a purely temporary character definitely earmarked for a particular service has beon exempted in certain casos. Where a special tax has been levied for purposes of harbour improvements on the adjacent property owners who will benefit, the proceeds were exempted (Straits Sottlemonts), The exclusion from assosament of revenue specially raised in Mauritius to enable anti-malarial measures to be undertaken was agreed to in principle.