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With regard to the question of the treatment of water works revenue Their Lordships concur in the Army Council's view that the proposal to treat the water- works in the New Territories as a new productive under- taking, involving the assessment for military contribution of the revenue from those water works on a net receipts basis, would constitute a violation of the underlying principles on which the calculation of the military contribution is based and that therefore such a proposal camot be accepted.
{
As regards the waterworks loan charges, Their · Lordships infer that the Secretary of State for the Colonies apparently no longer desires to sustain the view that Section 15 of the Hong Kong Loan Ordinance No.14 of 1927 can be supported by reference to the precedent of the River and Harbour Improvements in the Straits Settlements in 1906; they are in agreement with the Army Council's view that the concession made in Section 15 was erroneous, and consider that it should afford no precedent in any future case. They note, however, the representations of the Acting Governor, endorsed by your Department, as to the opposition and bitterness that would be aroused by any attempt to repeal this Section; and they accept the submission, made by the Army Council, that in all the circumstances it is not now practicable to repeal it.
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As regards the proposed new loan of approximately $28,000,000 to be raised gradually for general development purposes, Their Lordships are prepared to agree with the Council that, as a special concession and without prejudice to the principles of the military contribution, the amounts raised by extra taxation and appropriated from revenue to meet the interest and sinking fund charges of the new public works loan should in this instance be exempted from assessment for military contribution, provided that the claim to treat water+works revenue, wherever derived, on the basis of net receipts is abandoned.
}
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