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10. The Deputy Treasurer of the Colony in his memorandum of December 9th, 1930, suggests that the assessments made on the gross revenue of the waterwerks in past years were contrary to the terms of Section 3 of the Defence Contribution Ordinance No.1 of 1901, and that, by law, annual deductions of 4% of the capital expenditure mot from revenue should be made for 50 years from the gross receipts. This suggestion which is apparently accepted by Colonial Office letter of 27th February, 1931, covering the Governor's despatch is unsupported by the historical circumstances associated with the Section and ignores the correspondence between the Colonial Office and the Hong Kong Goverments when the Section was introduced into the Ordinance
A section on the lines of Section 3 of the Hong Kong Defence Contribution Ordinance No.1 of 1901 is common to all the Military Contribution Ordinances of the Eastern Colonies. The first portion of the Section follows the lines of the Sections drafted for the Ceylon and lauritius Ordinances in 1897 and 1898 when railway receipts were first treated on the basis of net receipts in those Colonies. It was introduced in the Straits Settlements Military Contributien Ordinance in 1899, (see paragraph 4, Class I, above) when it was desired to treat a public telephone system on the basis of net receipts, and the C.o. (C.o. letter No.16849/99 of 5th July, 1899, to the Treasury), stated that "the insertion of this provision will1, .........remove the inconvenience of having to introduce an amending Ordinance in each case of the establishment of a now preductive undertaking" and "Mr. Chamberlain will instruct the Governor af the Straits Settlements that no new undertaking is to be deemed "of a similar character" to railways or telephones without pre ious reference to the Secretary of State, who will then submit the proposal to Their Lordships and to the Secretary of State for Far".
The second portion of the Section follows the lines of a provision (see paragraph 5 above) introduced in Ceylon, kauritius and the Straits Settlements in 1904 (Treasury letter No. 6103/04 to the War Office of 19th April, 1904, and 0.0. letter No. 14248/1904 to the War Office of 17th Hay, 1904) to enable capital expenditure met fram revenue to be treated as if the expenditure had been mot by a loan deduction for the service of which were provided for in the first portion of the Section,
No such provisions were required in Hong Kong until the cmstruction of the British section of tho Kowloon- Chaton Railway in 1011 ag until that date there were no productive undertakings" in the Colony recognised for military contributions purposes, On the opening of the railway it was agreed that the principle of net receipts should be extended to it and an amonding Ordinance on the lines of the Straits Sottlements Ordinances of 1899 and 1904 was approved.
It was howover oxpressly laid down (Treasury letter
No. 15072/11 to the Colonial Office of 12th Augusti ments
etter
that" ...as in the similar case of the Straits Bottiements (0.0. letter of the 5th July, 1899/16849)...... in the event of any 'reproductive undertakings other than railways OT telephones being established by the Colonial Goverment, the principle of not receipts to military contribution shall not be extended to such undertakings without previous reference
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