1964_INLAND_REVENUE_ORDINANCE — Page 94

1989 Ed.]

Inland Revenue

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(b) in calculating the reducing value of the class of machinery or plant under section 39B(4), not exceed the capital expenditure incurred on the provision of that machinery or plant.

(7) For the purposes of subsection (6), the capital expenditure incurred on the provision of the machinery or plant shall be taken as (Amended 7 of 1986 s. 6)

(a) in a case where section 37(2A) applies, the "cost of the asset" computed in accordance with that section;

(b) in a case where section 39B(6) applies, the capital expenditure computed in accordance with that section; or

(c) in any other case, the aggregate capital expenditure incurred by the person in question on the provision of the machinery or plant for the purposes of producing profits chargeable to tax under Part IV.

39E. Allowances under this Part in respect of capital expenditure on leased machinery and plant (Added 63 of 1980 s. 3)

(1) Notwithstanding anything to the contrary in this Part, a person (in this section referred to as "the taxpayer") who incurs capital expenditure on the provision of machinery or plant, being machinery or plant acquired by the taxpayer under a contract entered into after the commencement of the Inland Revenue (Amendment) Ordinance 1986 (7 of 1986), for the purpose of producing profits chargeable to tax under Part IV shall not have made to him the initial or annual allowances prescribed in section 37, 37A or 39B if, at a time when the machinery or plant is owned by the taxpayer, a person holds rights as lessee under a lease of the machinery or plant, and-

(a) the machinery or plant was, prior to its acquisition by the taxpayer, owned and used by that person (whether alone or with others), or any associate of that person (which person or any such associate is hereinafter referred to as "the end-user");

(b) the machinery or plant, not being a ship or aircraft or any part thereof, is while the lease is in force-

(i) used wholly or principally outside Hong Kong by a person other than the taxpayer; and

(ii) the whole or a predominant part of the cost of the acquisition or construction of the machinery or plant was financed directly or indirectly by a non-recourse debt;

(c) the machinery or plant is a ship or aircraft or any part thereof and-