CO129-539-8 Military contributions- basis of assessment 25-4-1932 - 27-2-1934 — Page 3

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I doubt this. W.D. comemored

very definite understandings

He

productive undertaking, and I find it difficult

to think of any further arguments we can bring

to hear on this point. I think we shall

ultimately have to abandon this contention although it may be useful not to do so for the moment so

long as there is any possibility of compromise.

As to the allowance for capital expenditure on

water works I do not feel much doubt that the

War Office are right as regards the intention

but equally there can be no doubt that Hong Kong

were right as to the actual meaning of the Ordinance,

and if we accept the War Office view I think we

must logically amend the Ordinance. I am not sure,

however, that we should accept their view. The

War Office are prepared to stand on technicalities

in other connections and as the technicalities are

on our side here I think we should insist on the

law being carried out. We are in a particularly strong position as the War Office concurred in the

draft of this particular section.

Our position is less strong in relation

to Ordinance 14 of 1927 and I feel very doubtful

whether we can continue this argument. On the

other hand we can make our consent to amending

the ordinance conditional on concessions in

other directions.

As regards the treatment of profits on

sales of securities, the 7.0. attempt to draw

istinction firstly between book profits and

actual profits and, secondly, between the

profits arising from sterling appreciation

of securities and profits arising from

depreciation of the Hong Kong dollar.

As

regards