CO129-615-2 Income tax 10-3-1947 - 6-2-1948 — Page 220

19

an amount equal to the excess or, where the said amount still unallowed is nil, to the said moneys.

(4) Notwithstanding anything in the last preceding sub- section, in no case shall the amount on which a balancing charge is made on a person exceed the aggregate of the following amounts, that is to say-

(a) the amount of the initial allowance, if any, made to him in respect of the expenditure in question;

(b) the amount of the annual allowances, if any, made to him in respect of the expenditure in question, including any allowance computed under section 38 (2) (ii) at a rate higher than that prescribed by the Board of Inland Revenue.

40. Where machinery or plant in the case of which any of the events mentioned in subsection (1) of the last preceding section has occurred is replaced by the owner thereof and a balancing charge falls to be made on him by reason of that event or, but for the provisions of this section, would have fallen to be made on him by reason thereof, then, if by notice in writing to the Commissioner he so elects, the following provisions shall effect, that is to say-

(a) if the amount on which the charge would have been made is greater than the capital expenditure on providing the new machinery or plant-

(i) the charge shall be made only on an amount equal to the difference; and

(ii) no initial allowance, no balancing allowance and no annual allowance shall be made or allowed in respect of the new machinery or plant or the expenditure on the pro- vision thereof; and

(iii) in considering whether any, and, if so, what balancing charge falls to be made in respect of the expenditure on the new machinery or plant, there shall be deemed to have been made in respect of that expenditure an initial allowance equal to the full amount of that expenditure;

(b) if the capital expenditure on providing the new machinery or plant is equal to or greater than the amount on which the charge would have been made-

(i) the charge shall not be made; and

(ii) the amount of any initial allowance in respect of the said expenditure shall be calculated as if the expenditure had been reduced by the amount on which the charge would have been made; and

(iii) in considering what annual allowance is to be made in respect of the new machinery or plant, there shall be left out of account a proportion of the machinery or plant equal to the proportion which the amount on which the charge would have been made bears to the amount of the said expenditure; and

(iv) in considering whether any and, if so, what balancing allowance or balancing charge falls to be made in respect of the new machinery or plant, the initial allowance in respect thereof shall be deemed to have been increased by an amount equal to the amount on which the charge would have been made.

Replacement ery or Plant

of Machin-

220

Page 220Page 221