INCOME TAX

(a) the agent, attorney, factor, receiver, or manager in Ceylon of such person or partnership, and

(b) any person in Ceylon through whom such person or partnership is in receipt of any profits or income arising in or derived from Ceylon ;

(a) in any case-

(b) in the case of an individual, a relative ;

(c) in the case of a company, a director or the secretary ;

(d) in the case of a partnership, a partner ;

(e) in the case of a body of persons, a member ;

(a) a distribution made wholly out of profits from the sale of fixed capital assets where such profits are not chargeable with tax under the provisions of this Ordinance,

(b) a distribution in the form of shares or debentures in so far as it is made out of profits which arose in accounting periods ended before the 1st day of April, 1931, and

(c) the paid-up value of any shares distributed by a company to its shareholders to the extent to which such paid-up value represents the capitalization of the whole or any part of the profits of the company ;

(a) is first named in the agreement of partnership ; or

(b) if there is no agreement, is specified by name or initials singly or with precedence to the other partners in the usual name of the partnership ; or

(c) is first named in the statement made under section 4 of the Business Names Ordinance ;

(1)

(2) For the purposes of this Ordinance, there may be appointed a Commissioner, a Deputy Commissioner, Assistant Commissioners, and Assessors.

(3) An Assistant Commissioner exercising or performing any power, duty, or function of the Commissioner under this Ordinance shall be deemed for all purposes to be authorized to exercise or perform the same until the contrary is proved.

(4) Any powers conferred upon an Assessor by this Ordinance may be exercised by an Assistant Commissioner.

(1) Except in the performance of his duties under this Ordinance, every person who has been appointed under or who is or has been employed in carrying out or in assisting any person to carry out the provisions of this Ordinance, shall preserve and aid in preserving secrecy with regard to all matters relating to the affairs of any person that may come to his knowledge in the performance of his duties under this Ordinance, and shall not communicate any such matter to any person other than the person to whom such matter relates or his authorized representative, nor suffer or permit any person to have access to any records in the possession, custody, or control of the Commissioner.

(2) Every person appointed under or employed in carrying out the provisions of this Ordinance shall before acting under this Ordinance take and subscribe before a Justice of the Peace an oath of secrecy in the prescribed form.

(3) No person appointed under or employed in carrying out the provisions of this Ordinance shall be required to produce in any court any return, document, or assessment, or to divulge or communicate to any court any matter or thing coming under his notice in the performance of his duties under this Ordinance, except as may be necessary for the purpose of carrying into effect the provisions of this Ordinance.

(4) Notwithstanding anything contained in this section, the Commissioner or any officer of the Income Tax Department authorized by the Commissioner in that behalf may communicate any matter which comes to his knowledge-

and may also transmit any return or document received by him or in his possession under this Ordinance to the Commissioner of Estate Duty ; and the Commissioner of Estate Duty may, notwithstanding anything in the Evidence Ordinance relating to the proof of documents, produce or cause to be produced in any court, in any proceedings under the Estate Duty Ordinance, a copy of any particulars contained in any return or document so transmitted, certified by him or on his behalf to be a correct copy of such particulars :

Provided, however, that the Commissioner of Estate Duty may produce or cause to be produced the original of any such return or document in any case where it is necessary to prove the handwriting or the signature of the person who wrote, made, signed or furnished such return or document, but only for the purpose of such proof;

Provided, further, that the Commissioner of Estate Duty shall not in any case be compelled to produce in any court either the original of such document or return or a copy of any particulars contained in such document or return.

(5) Notwithstanding anything contained in this section, the Commissioner may permit the Auditor-General or any officer of the department of the Auditor-General duly authorized by him in that behalf to have such access to any records or documents as may be necessary for the performance of his official duties. The Auditor-General or any officer authorized by him under this subsection shall be deemed to be a person employed in carrying out the provisions of this Ordinance for the purpose of subsection (2).

(1) Income tax shall, subject to the provisions of this Ordinance and notwithstanding anything contained in any other written law or in any convention, grant, or agreement, be charged at the rate or rates specified hereinafter or fixed by resolution, under section 23, for the year of assessment commencing on the 1st day of April, 1932, and for each subsequent year of assessment in respect of the profits and income of every person for the year preceding the year of assessment-

but without prejudice to any provisions of this Ordinance which enact that tax is to be charged in particular cases in respect of the profits and income of a period other than the year preceding the year of assessment.

(2) For the purposes of this Ordinance, without in any way limiting the meaning of the term, ” profits and income arising in or derived from Ceylon” includes all profits and income derived from services rendered in Ceylon, or from property in Ceylon, or from business transacted in Ceylon, whether directly or through an agent.

(1) For the purposes of this Ordinance, ” profits and income ” or ” profits ” or ” income ” means-

(2) For the purpose of this section-

(1) There shall be exempt from the tax-

(2) Where a body of persons resident in Ceylon carries on a provident, building, savings, or thrift society or fund, and

the Commissioner may in his discretion, subject to such conditions as he may specify, restrict or remit the tax payable by such society or fund as the case may appear to him to require.

(3) The exemption conferred by sub-paragraph (i) (ii) of subsection (1) shall not apply in the case of any person referred to in that sub-paragraph unless the Minister, being satisfied that a corresponding official of the Government of Ceylon resident in the country represented by that person is or would be granted similar exemption from income tax by that country, declares that the exemption shall apply in that case.

(1) Where at any time during the period of six years commencing on the 1st day of April. 1951, the Government of Ceylon participates in the formation of any corporation and makes a contribution towards its capital, the Minister of Finance may by notice published in the Gazette declare that this section shall apply to the corporation.

(2) The profits and income of any corporation to which this section applies, being the profits and income for the year of assessment in which the corporation commences business and for each of the next five subsequent years of assessment, shall be exempt from the tax.

(3) Where the profits and income of any corporation for any year of assessment are exempt from tax by virtue of subsection (2), all dividends which are in that year paid to the shareholders of the corporation shall be exempt from tax ; and accordingly the provisions of section 44 shall not apply in relation to such dividends.

(1) This section shall apply-

(2) Subject as hereinafter provided, the profits and income of an undertaking to which this section applies, being profits and income of the undertaking for the year of assessment in which it commences to carry on business and for each of the next five subsequent years of assessment, shall be exempt from the tax :

Provided, however, that any sum, by which the statutory income from any such undertaking for any year of assessment referred to in the preceding provisions exceeds five per centum of the capital employed for the purposes of the undertaking as at the commencement of the period by reference to which such statutory income is ascertained, shall not be exempt from the tax.

Such profits and income as are by the preceding provisions of this subsection exempt from the tax are hereinafter in this section referred to as ” exempted profits “.

(3) Where the total profits of a resident company for any year of assessment are exempted profits within the meaning of subsection (2), then the whole amount of every dividend which becomes payable by the company to any shareholder during that year shall be exempt from the tax.

(4) Where a part only of the total profits of a resident company for any year of assessment constitutes exempted profits within the meaning of subsection (2), then such part of the total amount of the dividends which become payable by the company to any shareholder during that year as bears to that total amount the same proportion as the exempted profits of the company bears to the total profits, shall be exempt from the tax.

(1) Subject to the provisions of subsections (3), (6) and (7), there shall be deducted, for the purpose of ascertaining the profits or income of any person from any source, all outgoings and expenses incurred by such person in the production thereof, including-

(2) In subsection (1) –

” agricultural undertaking” means an undertaking for the purpose of the production of any unmanufactured agricultural, horticultural or animal produce ;

” estate ” has the same meaning as in section 31 (1) (b) of this Ordinance ;

” industrial undertaking ” means –

” member of the subordinate staff ” means any per-son employed in a subordinate capacity who wholly or mainly performs manual or clerical work, or the work of a conductor or tea-maker, or any other work which in the opinion of the Commissioner is of a description substantially similar to the work herein before mentioned ; and

” staff welfare building” means any building at which facilities or amenities for or in connexion with health, recreation or education are provided for the benefit of the subordinate staff.

Any industrial undertaking (as herein before defined) which is carried on together with any undertaking which is not an industrial undertaking (as so defined) shall be regarded for the purposes of paragraph (d) of subsection (1) as a separate undertaking, so, however, that if it is an undertaking which is carried on together with an agricultural undertaking as herein before defined and which is for the purpose of the manufacture of any articles, goods or materials from the produce of that agricultural undertaking or the subjection of such produce to any process, it shall be regarded as part of that agricultural undertaking.

(3) No deduction under paragraph (d) of subsection (1) shall be allowed to any person except on a claim made by him in writing and containing such particulars and supported by such proof as the Assessor may require. The decision of the Assessor on any such claim may be questioned in an appeal made by the claimant in accordance with Chapter XI against an assessment.

(4) Notwithstanding the provisions of section 79, a claim for a deduction under paragraph (d) of subsection (1) made in connexion with the determination of statutory income for the year of assessment commencing on the 1st day of April, 1949, shall be entertained if it is made before the 31st day of January, 1950.

(5) Notwithstanding the provisions of section 79, a claim for a deduction under paragraph (e) of subsection (1) made in connexion with the determination of the statutory income for the year of assessment commencing on the 1st day of April, 1953, shall be entertained if it is made before the 31st day of August, 1954.

(6) In ascertaining the profits or income arising from the rent or annual value of land and improvements thereon, no deduction shall be made for outgoings and expenses except those authorized in section 6.

(7) Subject as hereinafter provided, income arising from interest shall be the full amount of interest falling due whether paid or not, without any deductions for outgoings or expenses :

Provided that-

Any decision of an Assessor in the exercise of any discretion conferred upon him by this subsection may be questioned in an appeal against an assessment in accordance with Chapter XI.

(a) domestic or private expenses, including the cost of travelling between residence and place of business or employment;

(b) any disbursements or expenses not being money expended for the purpose of producing the income ;

(c) any expenditure of a capital nature or any loss of capital;

(d) the cost of any improvements ;

(e) expenses incurred in connexion with any employment other than such expenses not exceeding three hundred rupees in any year as are incurred by a professionally or technically qualified employee in the payment of subscription to a professional or technical society of which he is a member or in the purchase of professional or technical books, journals or reports ;

(f) any sum recoverable under an insurance or contract of indemnity ;

(g) rent of, or expenses in connexion with, any premises or part of premises not occupied or used for the purpose of producing the income ;

(h) any amounts paid or payable by way of United Kingdom income tax, or super tax, or surtax (other than the excess of any such United Kingdom income tax, or super tax, or surtax over such maximum amount of the credit in respect of Ceylon income tax as is allowed by subsection (4) of section 2 of the Double Taxation (Relief) Act), or Ceylon income tax, or Commonwealth tax as defined in section 49 ;

(i) any interest paid or payable other than that allowed under section 11 (1) (g) ;

(j) any annuity, ground rent, or royalty ; or

(k) any payment to any pensions, provident, savings, widows’ and orphans’, or other society or fund, except such payments as are allowed under sections 11 (1) (h) and 11 (1) (i).

(1) Save as provided in this section, the statutory income of every person for each year of assessment from each source of his profits and income in respect of which tax is charged by this Ordinance shall be the full amount of the profits or income which was derived by him or arose or accrued to his benefit from such source during the year preceding the year of assessment, notwithstanding that he may have ceased to possess such source or that such source may have ceased to produce income.

(2) Where the Commissioner is satisfied that any person usually makes up the accounts of a trade, business, profession, vocation, or employment carried on or exercised by him to some day other than the thirty-first day of March, he may direct that the statutory income from that source be computed on the amount of the profits of the year ending on that day in the year preceding the year of assessment. Where, however, the statutory income of any person from a trade, business, profession, vocation, or employment has been computed by reference to an account made up to a certain day, and such person fails to make up an account to the corresponding day in the year following, the statutory income from that source both of the year of assessment in which such failure occurs and of the two years of assessment following shall be computed on such basis as the Commissioner in his discretion thinks fit.

(3) Where on a day within a year of assessment any person whether resident or non-resident commences to carry on or exercise a trade, business, profession, vocation, or employment in Ceylon, or, being a resident person, elsewhere, any profits arising therefrom for the period from such day to the end of the year of assessment shall be statutory income of such person for such year of assessment.

(4) Where on a day within the year preceding a year of assessment any person whether resident or non-resident has commenced to carry on or exercise a trade, business, profession, vocation, or employment in Ceylon, or, being a resident person, elsewhere, his statutory income therefrom for that year of assessment shall be the amount of the profits for one year from such day.

(5) The statutory income of any person for any year of assessment from a trade, business, profession, vocation, or employment which such person whether resident or non-resident has commenced to carry on or exercise in Ceylon, or being a resident person, elsewhere, within the two years preceding such year of assessment, shall be reduced to the amount of the profits of the year of assessment.

(6) Where a person whether resident or non-resident ceases to carry on or exercise a trade, business, profession, vocation, or employment in Ceylon, or, being a resident person, elsewhere, his statutory income therefrom shall be-

and he shall not be deemed to derive statutory income from such trade, business, profession, vocation, or employment for the year of assessment following that in which the cessation occurs :

Provided that where any such person becomes entitled to receive after the date on which such cessation occurs a pension or any sum payable in commutation of pension, such person shall be deemed to have commenced a new employment on the date next succeeding the date of such cessation and such pension or sum payable in commutation of pension shall be deemed to be profits arising from such new employment ; and the provisions of this subsection and of subsections (3), (4) and (5) shall apply accordingly. This proviso shall have no application in any case where such cessation occurs on any date in any year of assessment prior to the year of assessment commencing on the 1st day of April, 1936.

(7) For the purposes of this Ordinance, any employment carried on or exercised by any person, whether resident or non-resident, shall not be deemed to cease by reason only of the grant of leave to that person, whether such leave is granted preparatory to retirement or otherwise.

(8) For the purposes of this section, a person shall be deemed to carry on or exercise an employment notwithstanding that he carries on or exercises a trade, business, profession or vocation if such trade, business, profession or vocation is carried on or exercised by him as the employee of another and not on his own account or in partnership with another ; and a person so deemed to carry on or exercise an employment shall be deemed to commence or cease to carry on or exercise such employment when he commences or ceases to be such an employee : Provided that if a person who is so deemed to carry on or exercise an employment carries on or exercises, in addition to such employment, any trade, business, profession or vocation on his own account or in. partnership with another, the profits arising from such trade, business, profession or vocation shall be assessed as profits from a separate source.

(9) Where a person becomes resident on a day within a year of assessment, his income from that day to the end of such year from a source not being a trade, business, profession, vocation, or employment to which subsections (3) and (4) apply shall be statutory income for such year of assessment. Where a person becomes resident on a day within the year preceding a year of assessment, his statutory income for such year of assessment from a source not being a trade, business, profession, vocation, or employment to which subsections (3) and (4) apply shall be the income arising therefrom for one year from such day :

Provided that the provisions of this subsection shall not apply to any source of profits or income arising in or derived from Ceylon which was a source of profits or income of that person before he became resident.

(10) The statutory income of any person ceasing to be resident from any source not being a trade, business, profession, vocation, or employment to which subsection (6) applies, shall, for the year of assessment in which he ceases to be resident, be the profits or income for the period beginning on the first day of April in that year and ending on the date on which he ceases to be resident, and he shall not be deemed to derive statutory income from such source for the year of assessment following that in which he ceases to be resident:

Provided that the provisions of this subsection shall not apply to any source of profits or income arising in or derived from Ceylon which is retained by such person after he ceases to be resident.

(11) Where any person dies on a day within a year of assessment, his statutory income for such year shall be the amount of profits and income of the period beginning on the first day of April in that year and ending on that day.

(12) Subject as hereinafter provided, the statutory income of the executor of any deceased person from the estate of that person shall be- (a) as regards the year of assessment in which the death occurs, the profits or income of the period from the date of death to the end of that year of assessment; (b) as regards the year of assessment next following that in which the death occurs, the profits or income of one year from the date of death ; and (c) as regards any subsequent year of assessment, the profits or income of the year preceding that year of assessment:

Provided that-

(13) The statutory income for any year of assessment of any beneficiary of the estate of a deceased person administered by an executor shall, subject to the provisions of subsections (10) and (11), be the amount of profits or income received by or distributed to him, or applied to his benefit, out of the estate during the year preceding that year of assessment (otherwise than as the capital amount, or any part of the capital amount, of his interest in the estate).

(14) Notwithstanding the provisions of section 79, a claim made under this section to an adjustment of any assessment by reference to the profits or income for any period other than the year preceding the year of assessment shall be entertained if it is made within the period of twelve months next succeeding that year of assessment. A claim so made shall be regarded as an appeal for the purposes of Chapter XI.

(1) The assessable income of a person for any year of assessment shall be his total statutory income for that year subject to the following deductions : –

(2) Any decision of an Assessor in the exercise of any discretion conferred upon him by subsection (1) may be questioned in an appeal against an assessment in accordance with Chapter XI.

(3) Where at any time within the three years of assessment immediately succeeding any year of assessment commencing on or after the 1st day of April, 1955, any person ceases to carry on any trade, business, profession, vocation or employment, he shall be entitled to a deduction from the statutory income for that year of assessment of the amount of a loss incurred by him in that trade, business, profession, vocation or employment in any of those three years which, if it had been a profit, would have been assessable under this Ordinance, and which has not been allowed against his statutory income of any year. For the purpose of allowing that deduction, the assessable income of that person for that year of assessment shall, notwithstanding the provision of section 79, be revised. A claim of a deduction under this subsection shall be regarded as an appeal for the purposes of Chapter XI:

Provided that-

(4) For the purposes of subsection (1) (b) and (c) and subsection (3), the loss incurred during any year of assessment shall be computed, where the Commissioner so decides, by reference to the year ending on the day in such year of assessment which would have been adopted under section 13 (2) for the computation of statutory income of the following year of assessment if a profit had arisen.

(5) In the case of an individual resident in Ceylon, any loss deducted under this section shall, in the first instance, be deducted from statutory income which is computed on earned income within the meaning of section 18, and any balance of loss to be deducted from other statutory income shall be reduced by an amount similar to the allowance which would have been due under that section in respect of earned income if the loss in question had been a profit:

Provided that where any person carries on more than one agricultural undertaking, a loss incurred in any such undertaking shall be deducted in the first instance from the statutory income arising from his other agricultural undertakings.

(6) Where any person has been declared bankrupt or adjudged insolvent by a competent court, no loss incurred prior to the date of bankruptcy or insolvency shall be set off against income arising after such date.

(7) As regards losses incurred prior to the 1st day of April, 1932, the provisions of this section shall extend only to the year ending on the 31st day of March, 1932, or to such other period not exceeding twelve months as would, if a profit had arisen, have been adopted under section 13 (2) for the computation of statutory income for the year of assessment commencing on the 1st day of April, 1932.

(8) The amount of a loss for the purposes of this section shall be ascertained in the manner provided in this Ordinance for the ascertainment of profits.

(9) No deduction under this section shall be allowable except on a claim made in writing by the person assessable, containing such particulars and supported by such proof as the Commissioner may require.

(1) An individual resident in Ceylon shall be entitled to claim for any year of assessment that the following allowances be deducted from his assessable income in arriving at his taxable income : –

(2) Subsection (1) of this section shall for each year of assessment commencing on or after the 1st day of April, 1951, have effect subject to the following modifications : –

(3) For the purposes of this section –

(1) Where the assessable income for any year of assessment of an individual not resident in Ceylon consists solely of earned income within the meaning of section 18 and does not exceed one thousand rupees, such income shall not be taxable.

(2) Subject to the provisions of subsection (4), where a non-resident person receives any sum by way of dividend from a non-resident company or by way of interest, annuity, ground rent, or royalty which has been disallowed or excepted under the provisions of section 15 (1) (a) (ii) or 30 (2), such sum shall not be regarded as income of such non-resident person arising in or derived from Ceylon, and he shall not be chargeable with tax or entitled to any relief from Ceylon tax under sections 48 and 49 or to any repayment of tax in respect thereof.

(3) Subject to the provisions of subsection (4), any sum received by a non-resident person as the profits or income of that person arising from any Treasury Bill issued under the Local Treasury Bills Ordinance shall be exempt from the tax.

(4) The provisions of subsections (2) and (3) shall not operate so as to exclude any sum mentioned in either of those subsections from the computation of the profits of any trade or business carried on in Ceylon where such sum forms part of the receipts of such trade or business.

(1)

(2) Where for any year of assessment no tax is chargeable under subsection (1) in respect of the income of an individual resident in Ceylon, or where for any year of assessment the tax chargeable under that subsection upon the taxable income of an individual resident in Ceylon amounts to less than one per centum of his assessable income, tax shall be charged for such year of assessment in respect of the income of either such individual at the rate of one per centum upon his assessable income for that year :

Provided that tax charged under this subsection shall be in lieu of and not in addition to the tax, if any, chargeable under subsection (1) ;

Provided, further, that where an individual is resident in Ceylon for a part only of a year of assessment the provisions of this subsection shall apply to the income of the resident period.

(3) In the application of the provisions of subsection (2) in the case of the year of assessment commencing on the 1st day of April, 1942, and each subsequent year of assessment, such provisions shall have effect as if for the words “one per centum”, wherever those words occur collectively in that subsection, there were substituted the words ” one and a half per centum ” :

Provided that the preceding provisions of this subsection shall not apply in the case of the year of assessment commencing on the 1st day of April, 1949, and each of the four years of assessment immediately succeeding.

(4) Where, by virtue of any resolution under section 23, for any year of assessment commencing on or after the 1st day of April, 1955 –

then tax shall be charged for such year of assessment upon his assessable income at the rate of one per centum if his assessable income does not exceed six thousand rupees and at the rate of two per centum if his assessable income exceeds six thousand rupees, so, however, that if the assessable income exceeds six thousand rupees, the tax chargeable shall not be more than the aggregate of-

(5) Notwithstanding the provisions of subsections (1) and (2), the tax payable for any year of assessment by an individual who is resident in Ceylon throughout such year shall not be more than the amount by which his assessable income for that year exceeds two thousand four hundred rupees.

(6) In subsection (5), the words ” two thousand four hundred ” shall, for the three years of assessment commencing on the 1st day of April, 1932, 1933, and 1934, respectively, and for the year of assessment commencing on the 1st day of April, 1950, and for each subsequent year of assessment, be read as ” four thousand eight hundred.

(7)

(8) Until the 31st day of March, 1937, tax shall be charged for each year of assessment at twice the unit rate increased by an additional rate of two per centum upon the taxable income for that year of every company whose shares are not movable property situate in Ceylon for the purposes of the Estate Duty Ordinance :

Provided that for the year of assessment commencing on the 1st day of April, 1936, tax shall be charged upon the taxable income of any such company at twice the unit rate only.

(9) Tax shall be charged-

upon the taxable income for that year of every company whose shares are not movable property situate in Ceylon for the purposes of any written law making provision for the imposition and collection of estate duty in Ceylon :

Provided, however, that –

(10)

(11) Tax shall be charged upon the taxable income of any Government other than the Government of the United Kingdom or the Government of Ceylon-

Provided that –

(12) Tax shall be charged for each year of assessment ending prior to the 1st day of April, 1951, at the unit rate upon the taxable income for that year of every mutual life insurance company, whether resident or non-resident: Provided that for the year of assessment commencing on the 1st day of April, 1947, and for the next two subsequent years of assessment, the rate of the tax chargeable as aforesaid shall be increased by an additional rate of three per centum on such taxable income ;

Provided, further, that for the year of assessment commencing on the 1st day of April, 1950, the rate of tax chargeable as aforesaid shall be increased by an additional rate of five per centum on such taxable income.

(13) Tax shall be charged for each year of assessment ending prior to the 1st day of April, 1951, at twice the unit rate upon the taxable income for that year of every executor :

Provided that for the year of assessment commencing on the 1st day of April, 1945, and for the next five subsequent years of assessment, the rate of the tax chargeable as aforesaid shall be increased by an additional rate of three per centum on such taxable income ;

Provided, further, that where the Commissioner in his discretion considers that the whole of the tax so chargeable on an executor would be liable to be refunded under section 27, such tax shall not be charged.

(14) Where for any year of assessment the taxable income of an individual exceeds, in consequence of the inclusion in his statutory income of a sum received in commutation of pension or refunded under section 46 (1) or section 49 of the Widows’ and Orphans’ Pension Fund Ordinance or under any regulation relating to any widows’ and orphans’ pension fund or scheme established for the Local Government service which corresponds to the said section 46 (1) or section 49, the sum to which it would amount if no such commutation or refund were included, the excess shall be chargeable, notwithstanding anything contained in any other subsection, at the rate ascertained by dividing the tax payable by him for the preceding year of assessment (exclusive of any increase in tax at the additional rates under the proviso to paragraph (b) of subsection (1) or the proviso to paragraph (b) of subsection (7) ) by the amount of his assessable income for such preceding year:

Provided that where any such individual was resident in such preceding year of assessment and no tax was payable by him for that year of assessment, the said excess shall not be chargeable ;

Provided, further, that where any such individual was non-resident in such preceding year of assessment, the rate at which the said excess is chargeable shall be determined by the Commissioner.

(15) Where, in consequence of the inclusion in the statutory income of an individual of –

his taxable income for any year of assessment commencing on or after the 1st day of April, 1955, exceeds that which would be his taxable income if no such afore-mentioned sum were included in his statutory income, the excess, notwithstanding anything contained in any other subsection, shall, if he was liable to tax in the three immediately preceding years of assessment, be chargeable with tax at the average of the effective rates at which he was liable to tax in those three years, or, if he was liable to tax for only two of those three years, be chargeable with tax at the average of the effective rates at which he was liable to tax in those two years, or, if he was liable to tax for only one of those three years, be chargeable with tax at the effective rate at which he was liable to tax in that year:

Provided, that, where he was non-resident in any of the three immediately preceding years of assessment referred to in the preceding provisions of this subsection, the rate at which the aforesaid excess is chargeable with tax shall be determined by the Commissioner, so, however, that the amount payable by him as tax on such excess shall not be more than that which would be payable if he had been resident;

Provided further that, where the excess referred to in the preceding provisions of this subsection is in consequence of the inclusion in the statutory income of such sum as is referred to in paragraph (d) of those provisions and tax has already been paid in respect of that sum or any part thereof, the amount of the tax chargeable under those provisions on such excess shall be reduced by the amount of the tax already paid and, if the amount of the tax already paid is more than the tax so chargeable on such excess, no tax shall be so chargeable on such excess.

For the purposes of this subsection, the effective rate of tax for any year of assessment shall be the percentage which the amount of tax payable for that year, without any deduction for any relief under sections 44, 45, 46, 47, 48 (1) and 49, bears to the amount of the assessable income for that year.

(16) Tax shall be charged for each year of assessment ending prior to the 1st day of April, 1951, at twice the unit rate upon the taxable income for that year of every person other than those dealt with in the foregoing subsections ;

Provided that for the year of assessment commencing on the 1st day of April, 1945, and for the next five subsequent years of assessment, the rate of the tax chargeable as aforesaid shall be increased by an additional rate of three per centum on the taxable income of every such person.

(17) Notwithstanding anything in subsection (16), tax shall be charged for the year of assessment commencing on the 1st day of April, 1947, and for the next two subsequent years of assessment, at twice the unit rate, increased by an additional rate of eight per centum upon the taxable income for that year of every company, not being a company in the case of which tax is chargeable under subsection (9) or subsection (12).

(18) Notwithstanding anything in subsection (16), tax shall be charged for the year of assessment commencing on the 1st day of April, 1950, at twice the unit rate, increased by an additional rate of ten per centum upon the taxable income for that year of every company, not being a company in the case of which tax is chargeable under subsection (9) or subsection (12).

(19) The unit rate for the year of assessment commencing on the 1st day of April, 1932, shall be the rate specified in the Schedule, and may be amended for any subsequent year of assessment by a resolution of the House of Representatives passed before the first day of September in such year of assessment. In the absence of any such amendment, the unit rate for any year of assessment shall be that in force for the preceding year.

(1) The provisions of section 22, other than subsections (2), (3), (5), (6), (14) and (19) shall not apply for any year of assessment commencing on or after the 1st day of April, 1951.

(2)

(3) Any resolution under subsection (2) may provide for the charging of tax at the unit rate referred to in subsection (19) of section 22 or at multiples of the unit rate, whether with or without additional rates, and for the charging of tax at different rates upon the taxable income of persons of different classes or descriptions, or at different rates on different portions of taxable income.

(4) Where an individual is chargeable, as a resident or non-resident, for a part only of any year of assessment, any resolution under subsection (2) by virtue of which tax is chargeable at different rates on different portions of taxable income shall, in its application in the case of such individual, have effect as if each of those portions of income were reduced in the proportion which the number of days during which he is so chargeable bears to the number of days in that year of assessment.

(5) Subsection (2) of section 22 shall, in its application in respect of each year of assessment commencing on or after the 1st day of April, 1951, have effect as though for the expression ” under subsection (1) “, wherever it occurs in that subsection, there were substituted the expression ” by virtue of any resolution under section 23 “.

(6) Subsection (5) of section 22 shall, in its application in respect of each year of assessment commencing on or after the 1st day of April, 1951, have effect as though for the expression ” subsections (1) and (2) ” there were substituted the expression ” any resolution under section 23 and of subsection (2) of this section “.

(7) In any case where the Commissioner in his discretion considers that the whole of the tax charge-able, by virtue of a resolution under subsection (2), on an executor, would be liable to be refunded under section 27, such tax shall not be charged.

(8) Subsection (14) of section 22 shall in its application in respect of each year of assessment commencing on or after the 1st day of April, 1951, have effect as though, for all the words from ” (exclusive of” to ” subsection (7) ) “, there were substituted the following : –

” (exclusive of any tax chargeable at any rate specified in a resolution under section 23 as an additional rate) “.

(1) For the purposes of this Ordinance, the assessable income of a married woman for any year of assessment during the subsistence of her marriage shall be deemed to be part of the assessable income of her husband for that year and shall be charged accordingly :

Provided that –

(2) For the purposes of this section, a marriage shall not be deemed to subsist if the wife is living apart from her husband under the decree of a competent court or a duly executed deed of separation, or if the husband and wife are in fact separated in such circumstances that the separation is likely to be permanent.

(3) Where under subsection (2) a marriage is not deemed to subsist, the allowance under paragraph (d) of subsection (1) of section 18 in respect of any child shall-

(1) Notwithstanding the provisions of section 24, any husband or wife may give notice in writing to the Commissioner before the first day of June in any year of assessment, or at any time before an assessment is made in any year of assessment, requiring that tax for that year shall be assessed, charged and recovered separately on the income of the husband and on the income of the wife as if they were not married, and all the provisions of this Ordinance shall thereupon apply to each of them accordingly :

Provided that in the case of a person who is not resident in Ceylon immediately prior to his arrival therein, a notice given within the period of twelve months next succeeding his arrival in Ceylon shall be effective for the purposes of this subsection.

(2) Where tax is assessed separately as a result, of a notice under subsection (1), the incomes of the husband and the wife shall be aggregated for the purpose of the allowances from assessable income under Chapter VI and for the purpose of calculating the sums chargeable at different rates on different portions of taxable income and the total tax payable in respect of the incomes of husband and wife shall not be less than the amount which would have been payable if no notice had been given under this section.

The allowances under Chapter VI and the amounts chargeable at different rates on different portions of taxable income shall be apportioned between the husband and the wife by the Commissioner in his discretion, the allowance in respect of earned income being apportioned by reference to the amount of the earned income of each, the other allowances from assessable income in proportion to the assessable income of each, and the amounts chargeable at different rates on different portions of taxable income in proportion to the taxable income of each :

Provided that where an assessment is reduced or increased after such apportionment has been made, the Commissioner shall make a fresh apportionment, and any consequent adjustment shall be made by additional assessment or reduction or repayment of tax, as the case may require.

(3) Wherever one spouse is resident and the other is non-resident and notice under subsection (1) is given by the resident spouse, the resident spouse may in such notice elect that the provisions of subsection (2) be not applied, and in that event, the income from Ceylon of the non-resident spouse shall, notwithstanding the provisions of subsection (2), be deemed to be the income of the resident spouse and shall be assessed accordingly, and no allowance which may be claimed under section 18 (1) (c) and (d) shall be granted.

(4) Where one spouse is resident and the other non-resident, the resident spouse may be deemed the agent of the non-resident spouse for all the purposes of this Ordinance and shall be liable to pay the whole of the tax chargeable in respect of the profits and income of both whether assessed jointly or severally.

(1) An Assessor may give notice in writing to a receiver or trustee requiring him to furnish within the time limited by such notice a return of the income of any person for whom he acts or from any property under his control, and such receiver or trustee shall, for each year of assessment ending prior to the 1st day of April, 1951, be chargeable with tax at twice the unit rate on the whole of such income :

Provided that for the year of assessment commencing on the 1st day of April, 1945, and for the next five subsequent years of assessment, the rate of the tax chargeable as aforesaid shall be increased by an additional rate of three per centum on the whole of such income ;

Provided further that for each year of assessment commencing on or after the 1st day of April, 1951, such receiver or trustee shall be chargeable with tax on the whole of such income at such rate or rates as may be specified in that behalf in a resolution under section 23;

Provided further that where any persons not exceeding ten in number are entitled as beneficiaries to any part or parts of such income, such part or parts may be deducted from the amount on which the receiver or trustee is assessable and may be treated for the purposes of this Ordinance as the income of the beneficiaries. Where there are more than ten such beneficiaries, the Commissioner may direct that the part or parts of the income to which they are entitled shall be treated for the purposes of this Ordinance either-

(2) Where the Commissioner directs in accordance with subsection (1) that the part or parts of any income be treated for the purposes of this Ordinance as the income of a receiver or trustee, such receiver or trustee shall be entitled to deduct tax from any income that he distributes to the beneficiaries, and the provisions of section 44 shall apply, as far as may be, to all sums so distributed in the same way as they apply to dividends paid by a company.

(3) The trustee of an incapacitated person shall be chargeable with tax in like manner and to the like amount as such person would be chargeable :

Provided that nothing in this section shall prevent the direct assessment of an incapacitated person in his own name.

(a) the tax (apportioned as the Commissioner in his discretion thinks reasonable) paid by the executor in respect of the beneficiary’s share of the income of the estate for the said period added to the total amount of the tax paid by the beneficiary ; and

(b) the total amount of the tax which would have been paid by the beneficiary for the said period, if his assessable income for each year of assessment had included his full apportioned share of the income of the estate arising in that year.

(i) no proceedings shall be instituted against the executor under the provisions of Chapter XV of this Ordinance in respect of any act or default of the deceased person ;

(ii) no assessment or additional assessment in respect of a period prior to the date of such person’s death shall be made after the expiry of the third year of assessment subsequent to the year of assessment in which the death occurred ; and

(iii) the liability of an executor under this section shall be limited to the sum of –

(1) Where a trade, business, profession, vocation, or employment is carried on by two or more persons in partnership, the provisions of the following subsections shall apply.

(2) An Assessor may give notice in writing to the precedent partner of the partnership requiring him to furnish within the time limited by such notice a return showing the profits or losses of the partnership from such trade, business, profession, vocation, or employment during the period of twelve months immediately preceding the year of assessment or during any other period in respect of which statutory income may be computed under section 13, ascertained in accordance with the provisions of this Ordinance relating to the ascertainment of profits and income of a person, and showing also any interest, annuity, ground rent, or royalty payable by the partnership in respect of such trade, business, profession, vocation, or employment for the said period. The amount of such interest, annuity, ground rent, or royalty (except where it is payable by a person out of Ceylon to another person out of Ceylon) shall be deducted from the profits or added to the losses ascertained as above, and the figure thus arrived at shall be known as the divisible profit or loss for that period. The precedent partner shall further in such return declare any other income of the partnership for the said period together with the names and addresses of all the partners, and shall apportion among them the whole of the divisible profit or loss and other income in accordance with their shares in the partnership during the period in which the said profit or loss or income arose. Where no active partner is resident in Ceylon, the return shall be furnished by the agent of the partnership in Ceylon.

(3) In computing the profits or losses of the partnership, nothing shall be deducted for salaries or other remuneration of partners or for interest on partners’ capital, but such sums shall be taken into account in apportioning among the partners the divisible profit or loss and other income.

(4) The statutory income of any partner from the partnership shall be computed in accordance with the provisions of section 13 by treating his share of the divisible profit of the partnership as though it were profits of a trade, business, profession, vocation, or employment carried on or exercised by him, and his share of other income as though it accrued to him solely:

Provided that where no return has been made as required by subsection (2) or a return made under that subsection has not been accepted, the Assessor may estimate the statutory income of any partner from the partnership to the best of his judgment.

(5) The share of any partner of a divisible loss shall be a loss incurred by him within the meaning of section 15. The amount of such divisible loss and the partner’s share thereof shall be determined by the Assessor subject to appeal as provided by Chapter XI.

(6) Where a return has been made by the precedent partner in accordance with subsection (2) and has been accepted by the Assessor, the income of each partner resident in Ceylon derived from the partnership shall be assessed upon him individually.

(7) The income of any non-resident partner or partners from the partnership shall be assessable in the name of the partnership or of any resident partner or of any agent of the partnership in Ceylon, and the tax charged thereon shall be recoverable by all means provided in this Ordinance out of the assets of the partnership, or from any partner, or from any such agent.

(8) Where no return has been made in accordance with subsection (2) or the return has not been accepted by the Assessor, either as regards the amount of the profits or income or the allocation thereof among the partners, it shall be lawful for an assessment to be made in the name of the partnership on the estimated amount of the profits and income of the partnership arrived at in accordance with the provisions of this Ordinance relating to the ascertainment of the assessable income of a person, and tax thereon may be charged at twice the unit rate, or where the year of assessment commences on or after the 1st day of April, 1951, at such rate or rates as may be specified in that behalf in a resolution under section 23, and shall be recoverable out of the assets of the partnership, or from any partner, or from any agent of the partnership ; such assessment shall be subject to appeal by any person aggrieved thereby in the manner provided by Chapter XI, and the Commissioner or the board of review, as the case may be, may upon such appeal determine the profits and income and allocate the same among the partners and compute their statutory incomes from the partnership as provided in subsection (4) and the tax payable in respect thereof, which may be reassessed on the individual partners or may be recovered as tax on the assessment appealed against without any new assessment : Provided that for the year of assessment commencing on the 1st day of April, 1945, and for the next five subsequent years of assessment, the rate of the tax chargeable as aforesaid shall be increased by an additional rate of three per centum on the estimated amount of the profits and income of the partnership.

(9) Where under this section income has been assessed in the name of a partnership, and a change occurs in such partnership by reason of retirement or death, or the dissolution of the partnership as to one or more of the partners, or the admission of a new partner, in such circumstances that one or more of the persons who were joint owners of the assets of such partnership continues to be owner or joint owner of such assets, the person or partnership becoming owner of such assets in consequence of such change shall be charged with the said tax or any part of it which remains unpaid, and the provisions of Chapter XIII shall apply to such person or partnership accordingly.

(1) In this section –

(2) For the purpose of ascertaining the profits from an estate, the provisions of this section shall apply in addition to, and shall be read with, Chapter III.

(3) The income and expenditure in connexion with any immature area shall be separately considered, and it shall be lawful for the Assessor to require production of such particulars as may be necessary for that purpose.

(4) Where for any accounting period the expenditure other than capital expenditure incurred by any person on any immature area exceeds the receipts therefrom and such excess is mainly due to the fact that the trees in that area (or a substantial proportion thereof) are not yet in bearing, the amount of such excess or the total amount of such excesses where expenditure has been so incurred by any such person on more immature areas than one, not exceeding in any case fifteen per centum of the profits of that person from his estates for the same period, shall be allowed as a deduction from such profits. The balance of such excess shall be deemed to be capital expenditure.

(a) the cost of the maintenance of any immature area in the estate, and

(b) all expenses incurred by the owner in replanting the whole or any portion of the estate with trees of any description referred to in section 31 (1) (a), including the cost of clearing and preparing the land for such replanting.

(1) Where a company or body of persons has its registered or principal office in Ceylon, or where the control and management of its business are exercised in Ceylon, such company or body of persons shall be deemed to be resident in Ceylon for the purposes of this Ordinance :

Provided that where a company registered in Ceylon proves that it is controlled and managed in the United Kingdom, and that it is treated for the purpose of United Kingdom income tax as resident in that country, it shall be treated as non-resident.

(2) An individual who arrives in Ceylon and who is in Ceylon for a period or periods amounting in the aggregate to more than six months during the year commencing from the date of his arrival shall, if he is in Ceylon at the end of that year, be deemed resident throughout that year ; but if he is not in Ceylon at the end of that year, he shall be deemed resident from the date of his arrival to the date of his last departure during that year, and, subject to the provisions of the following subsections, non-resident from the date of such last departure to the end of that year.

(3) An individual who has been deemed resident throughout a period of twenty-four consecutive months or who would have been deemed to be so resident if this Ordinance had always been in force, shall be deemed to be resident until such time as he is continuously absent from Ceylon for an unbroken period of twelve months. When such person is so absent, he shall be deemed to be non-resident as from the date on which such absence commenced.

(4) Where an individual is deemed resident for any period in accordance with the provisions of any of the foregoing subsections, and at the end of such period is absent from Ceylon for less than three months, such period of absence shall for all the purposes of this section be treated as if it had been spent by him in Ceylon.

(5) Where an individual dies during any year of assessment, and, in respect of the period from the commencement of such year to the date of his death, the Commissioner is satisfied-

the Commissioner may direct that such deceased individual shall be deemed to have been resident or non- resident, as the case may be, for the purpose of granting such relief as the circumstances of the case may require.

(6) An individual who is in the employment of the Government of Ceylon and who is resident in any other country during any period for the purposes of such employment shall, for the purposes of this Ordinance, be deemed to be resident in Ceylon during that period if income tax or any tax of a corresponding nature is not payable in that country in respect of the official emoluments payable to him for such period :

Provided that any such individual who is a citizen or subject of any country other than Ceylon shall not, by reason of his being so deemed to be resident in Ceylon, be liable to tax as a resident as respects any income, other than his official emoluments or other income arising in or derived from Ceylon.

(1) Where a person in Ceylon, acting on behalf of a non-resident person, effects or is instrumental in effecting any insurance or sells or disposes of or is instrumental in selling or disposing of any property, whether such property is in Ceylon or is to be brought into Ceylon and whether the insurance, sale, or disposal is effected by such person in Ceylon or by or on behalf of the non-resident person outside Ceylon and whether the moneys arising therefrom are paid to or received by the non-resident person directly or otherwise, the profits arising from any such insurance, sale, or disposal shall be deemed to be derived by the non-resident person from business transacted by him in Ceylon, and the person in Ceylon who acts on his behalf shall be deemed to be his agent for all the purposes of this Ordinance:

Provided that, where the property sold or disposed of is produced or manufactured by such non-resident person outside Ceylon, the profits from the sale or disposal shall-

(2) The profits of a non-resident person from employment by a resident person shall be chargeable with tax in so far as such profits arise from services or past services rendered in Ceylon.

(1) For the purposes of this section-

(2) Where a non-resident person carries on business with a resident person with whom he is closely connected and the course of such business is so arranged that it produces to the resident person either no profits or less than the ordinary profits which might be expected to arise, the business done by the non-resident person in pursuance of his connexion with the resident person shall be deemed to be carried on in Ceylon, and such non-resident person shall be assessable and chargeable with tax in respect of his profits from such business in the name of the resident person as if the resident person were his agent and all the provisions of this Ordinance shall apply accordingly.

(3) Where tax is chargeable in respect of the profits arising from the sale of goods or produce manufactured or produced outside Ceylon by a non-resident person or by a person or persons with whom he is closely connected, the profits of such non-resident person for the purposes of this Ordinance from the sale of such goods or produce shall be deemed to be not less than the profits which might reasonably be expected to have been made by a merchant, or, where the goods or produce are retailed by or on behalf of the non-resident person, by a retailer of the goods or produce sold, who had bought the same direct from a manufacturer or producer with whom he was not connected.

Where import duty levied on an ad valor basis under the Customs Ordinance has been paid in Ceylon on such goods or produce, the sum to be deducted as the cost of such goods or produce on arrival in Ceylon shall not, for the purpose of computing the profits arising in Ceylon, be greater than the value on which such import duty has been so paid.

(1) Where a non-resident person carries on the business of ship-owner or charterer and any ship owned or chartered by him calls at a port in Ceylon, his full profits arising from the carriage of passengers, mails, livestock or goods shipped in Ceylon shall be deemed to arise in Ceylon :

Provided that this section shall not apply to goods which are brought to Ceylon solely for transhipment.

(2) Where for any accounting period such person produces the certificate mentioned in subsection (3), the profits arising in Ceylon from his shipping business for such period, before deducting any allowance for depreciation, shall be a sum bearing the same ratio to the sums receivable in respect of the carriage of passengers, mails, livestock, and goods shipped in Ceylon as the ratio for the said period shown by that certificate of the total profits to the total sums receivable by him in respect of the carriage of passengers, mails, livestock, and goods:

Provided that where the said total profits have been computed on a basis which differs materially from that prescribed in this Ordinance, the ratio of profits shall be adjusted so as to correspond as nearly as may be to the ratio which would have been arrived at if the profits had been computed in accordance with the provisions of this Ordinance.

(3) The certificate shall be one issued by or on behalf of any income tax authority which assesses the full profits of the non-resident person from his shipping business, and shall certify for any accounting period as regards such business-

(4) Where at the time of assessment the provisions of subsection (2) cannot for any reason be satisfactorily applied, the profits arising in Ceylon may be computed on a fair percentage of the full sum receivable on account of the carriage of passengers, mails, livestock, and goods shipped in Ceylon :

Provided that where any person has been assessed for any year of assessment by reference to such percentage, he shall be entitled to claim at any time within three years of the end of such year of assessment that his liability to tax for that year be recomputed on the basis provided by subsection (2).

(5) Where the Commissioner decides that the call of a ship belonging to a particular non-resident ship-owner or charterer at a port in Ceylon is casual and that further calls by that ship or others in the same ownership are improbable, the provisions of this section shall not apply to the profits of such ship and no tax shall be chargeable thereon.

(1) In addition to any other powers of collection and recovery provided in this Ordinance, the Commissioner may, where the tax charged on the income of any person who carries on the business of shipowner or charterer has been in default for more than three months (whether such person is assessed directly or in the name of some other person), issue to the Principal Collector of Customs or other authority by whom clearance may be granted a certificate containing the name or names of the said person and particulars of the tax in default. On receipt of such certificate, the Principal Collector of Customs or other authority shall be empowered and is hereby required to refuse clearance from any port in Ceylon to any ship owned wholly or partly or chartered by such person until the said tax has been paid.

(2) No civil or criminal proceedings shall be instituted or maintained against the Principal Collector of Customs or other authority in respect of a refusal of clearance under this section, nor shall the fact that a ship is detained under this section affect the liability of the owner, charterer, or agent to pay harbour dues and charges for the period of detention.

(1) The provisions of sections 39 to 41 shall apply in the case of every non-resident person who carries on business as the owner or charterer of aircraft in like manner as they apply in the case of a non-resident person who carries on the business of shipowner or charterer.

(2) In the application of the provisions of sections 39 to 41 to the case of any non-resident person who carries on business as the owner or charterer of aircraft-

(1) The profits of a company, whether mutual or proprietary, from the business of life insurance shall be the investment income of the life insurance fund less the management expenses (including commission) attributable to that business :

Provided that where such a company which is not resident in Ceylon transacts life insurance business in Ceylon whether directly or through an agent, the profits therefrom shall be the same proportion of the total investment income of the life insurance fund of the company as the premiums from life insurance business in Ceylon bear to the total life insurance premiums received by it, subject to a deduction of agency expenses in Ceylon (including commission) and a fair proportion of the expenses of the head office of the company, due account being taken in each case by set-off against such expenses of any income or profits other than life insurance premiums or investment income.

(2) The profits of a non-resident company, whether mutual or proprietary, from the business of insurance (other than life insurance) shall be ascertained by taking the gross premiums from insurance business in Ceylon (less any premiums returned to the insured and premiums paid on reinsurance) and deducting therefrom a reserve for unexpired risks at the percentage adopted by the company in relation to its operations as a whole for such risks at the end of the period of which the profits are being ascertained, and adding thereto a reserve similarly calculated for unexpired risks outstanding at the commencement of such period, and from the net amount so arrived at deducting the actual losses (less the amount recovered in respect thereof under reinsurance), the agency expenses in Ceylon, and a fair proportion of the expenses of the head office of the company, due account being taken in each case by set-off against such expenses of any income or profits other than premiums.

(3) Where the Commissioner is satisfied that by reason of the limited extent of the business transacted in Ceylon by a non-resident insurance company it would be unreasonable to require the company to furnish the particulars necessary for the application of subsections (1) and (2), he may, notwithstanding the provisions of those subsections, permit the profits of the company to. be ascertained by reference to the proportion of the total profits and income of the company corresponding to the proportion which its premiums from insurance business in Ceylon bear to its total premiums, or on any other basis which appears to him to be equitable.

(4) For the purposes of this section, ” investment income of the life insurance fund ” means, in the case of a company whose sole business is life insurance, the whole of its income from investments, and, in the case of any other company, such part of its income from investments as appears fairly attributable to its life insurance business.

(1) Every resident company shall be entitled to deduct from the amount of any dividend which becomes payable during a year of assessment to any shareholder, in the form of money or of an order to pay money, tax –

Provided that –

(2) Every resident company shall be entitled to deduct, from the amount of any dividend which becomes payable during any year of assessment commencing on or after the 1st day of April, 1952, to any shareholder in the form of money or of an order to pay money, tax on such amount at the rate (hereinafter referred to as ” the appropriate rate “) at which tax was, in the year preceding the year of assessment, chargeable upon the taxable income of a resident company :

Provided, however, that –

(3) Notwithstanding that the whole or any part of the amount of a dividend payable to any shareholder during any year is exempt from the tax by virtue of section 9, any deduction which may be made under the preceding provisions of this section shall be calculated on the total amount of the dividend ; and where such deduction is made –

Any such debt shall be recoverable forthwith as such or may be assessed and charged upon the company in addition to any tax otherwise payable by the company under this Ordinance.

(4) Every person who issues a warrant or cheque or other order drawn or made in payment of any dividend which becomes payable in the form of money or of an order to pay money by a resident company after the 31st day of March, 1932, shall annex thereto a statement in writing showing-

(5) Where the assessable income of a person includes a dividend from a resident company paid in the form of money or of an order to pay money, he shall be entitled, on production of a statement relating to such dividend made in accordance with subsection (4), to a set-off against the tax payable by him of the amount of tax shown on such statement:

Provided that where the rate at which tax may be deducted from such dividend has been reduced under the provisions of subsection (1) (iii) or subsection (2) (b), the set-off shall be adjusted as the Commissioner may direct.

(6) Where for any year of assessment ending prior to the 1st day of April, 1951, the assessable income of a person includes a dividend from a resident company in the form of shares or debentures, he shall be entitled to a set-off, against the tax payable by him, of tax on the amount of such dividend-

(7) Where in any year of assessment commencing on or after the 1st day of April, 1951, the assessable income of a person includes a dividend from a resident company in the form of shares or debentures, he shall be entitled to a set-off, against the tax payable by him, of tax on the amount of such dividend at the rate at which tax is chargeable upon the taxable income for that year of a resident company.

(8) Where the assessable income of a person includes a dividend from a company which, although not resident in Ceylon, has paid Ceylon income tax on any part of its profits, he shall be entitled to a set-off of tax in respect of a similar part of the dividend, the amount of which shall be decided by the Commissioner.

(9) In the year of assessment commencing on the 1st day of April, 1932, the assessable income of any person from any dividend or part of a dividend to which subsections (5), (6), and (8) would have applied if this Ordinance had been in force at the time when such dividend became payable shall be deemed to have borne tax at twice the unit rate in force for the year of assessment commencing on the 1st day of April, 1932 and he shall be entitled to the set-off provided in those subsections; but so, however, that the total tax chargeable to such person for such year of assessment shall not be less than the tax which would be charge-able if such dividend or part of a dividend were omitted from his assessable income and no set-off under this subsection were allowed.

(10) The provisions of this section shall apply, as far as may be, to sums distributed by a body of persons out of income assessed under this Ordinance in the same way as they apply to dividends paid by a company.

(1) Where any person in Ceylon pays or credits to any person or partnership out of Ceylon any sum falling due after the 31st day of March, 1932, but before the 1st day of April, 1951, being – (a) interest on debentures, mortgages, loans, deposits, or advances ; or (b) rent, ground rent, royalty, or annuity, which is payable either in respect of property in Ceylon or out of income arising in Ceylon,

whether such sum is due from him or from another person, or from a partnership, he shall be entitled, notwithstanding any agreement to the contrary whether made before or after the passing of this Ordinance, to deduct tax therefrom –

and the amount of tax so deductible shall be a debt due from such person to the Government of Ceylon and shall be recoverable forthwith as such or may be assessed and charged upon such person in addition to any tax otherwise payable by him under this Ordinance :

Provided that –

(2) Where, in any year of assessment commencing on or after the 1st day of April, 1952, any person in Ceylon pays or credits to any person or partnership out of Ceylon any sum falling due as –

whether such sum is due from him or from another person, or from a partnership, he shall be entitled, notwithstanding any agreement to the contrary, to deduct tax on such sum at the rate (hereinafter in this section referred to as the ” appropriate rate “) at which tax was in the preceding year of assessment chargeable upon the taxable income of a resident company ; and the amount of tax so deductible shall be a debt due from such person to the Government of Ceylon and shall be recoverable forthwith as such or may be assessed and charged upon such person in addition to any tax otherwise payable by him under this Ordinance :

Provided that-

(3) Any person who deducts tax in accordance with the provisions of subsection (1) or subsection (2) from any sum paid or credited to a person or partnership out of Ceylon shall thereupon issue to such person or partnership a statement in writing showing –

(4) Where the assessable income of a person includes a sum from which tax has been deducted in accordance with subsection (1) or subsection (2), he shall be entitled, on production of a statement relating to such sum issued in accordance with subsection (3), to a set-off against the tax payable by him of the amount of tax shown on such statement.

(5) Where in consequence of the provisions of this section tax is deducted during any year of assessment from the income of a person out of Ceylon arising from a source in respect of which that person is liable to be assessed for the same year of assessment either directly or through an agent, and no set-off is due under the provisions of subsection (4) for that year of assessment, the Commissioner may grant such relief as he may decide to be reasonable.

(6) Where for any year of assessment ending prior to the 1st day of April, 1951, the whole or part of the assessable income of any non-resident person, other than an individual who is entitled to relief under section 48 (2) and has claimed such relief, is composed of income from which tax has been deducted by virtue of this section or section 44, and the unit rate for that year of assessment is either greater or less than the unit rate for the year preceding the year of assessment in which tax has been deducted, the difference between the tax which has been deducted and the tax which would have been deducted if the unit rate in force for that year of assessment had been the same as the unit rate in force for the year preceding the year of assessment in which tax has been deducted shall not be taken into account, and the income from which tax has been deducted shall be treated for all purposes of this Ordinance as if tax had been deducted therefrom at a rate based upon the unit rate for that year of assessment.

For the purposes of the application of this subsection-

In any case where tax is, under the preceding provisions of this subsection, deemed to have been deducted at a rate higher than the rate at which tax was actually deducted, no person shall be entitled to any repayment by reason only that such tax is so deemed to have been deducted at such higher rate.

(7) Where for any year of assessment commencing on or after the 1st day of April, 1951, the whole or any part of the assessable income of any non-resident person, other than an individual who is entitled to relief under section 48 (2) and has claimed such relief, is composed of income from which tax has been deducted by virtue of this section or section 44, and the rate (hereinafter referred to as the ” new rate “) at which tax is chargeable for that year of assessment upon the taxable income of a resident company is either greater or less than the corresponding rate for the year preceding the year of assessment in which the tax was so deducted, the income from which the tax has been so deducted shall be treated for all purposes of this Ordinance as if tax had been deducted therefrom at the new rate.

In any case where tax is, under the preceding provisions of this subsection, deemed to have been deducted at a rate higher than the rate at which tax was actually deducted, no person shall be entitled to any repayment by reason only that such tax is so deemed to have been deducted at such higher rate.

(1) In this section, “approved donation” means a donation not less in amount than one thousand rupees-

For the purposes of this section, the amount of a donation made to the Government of Ceylon otherwise than in money shall be the value of such donation, and such value shall-

(2) Where an approved donation has been made by any person, then-

whichever amount is the least, shall, for the purposes of subsection (3) of this section, be the permitted allowance in relation to that donation.

(3) In respect of any year of assessment commencing on or after the 1st day of April, 1951, a person who has in the preceding year of assessment made an approved donation shall be entitled on account thereof to such relief from the tax as will secure that the tax payable by him is reduced to the amount which would have been payable as tax if the permitted allowance in relation to that donation had been deducted from his statutory income :

Provided, however, that the total of the relief on account of any approved donation shall not exceed one-half of the permitted allowance in relation to that donation.

(4) Where a person has in any year of assessment made two or more donations, whether to the same approved charity or to different such charities, or to the Government of Ceylon or to one or more approved charities and to the Government of Ceylon, the aggregate amount of the donations, if such amount is not less than one thousand rupees, shall be treated as one approved donation for the purposes of this section.

(1) Where a person-

he shall be entitled to a deduction from the tax payable in respect of that year of assessment of an amount equal to the tax calculated at the effective rate on the amount of such premiums or, as the case may be, on the amount of such contributions :

Provided, however, that such effective rate shall not exceed fifteen per centum, and the amount on which tax is calculated at such effective rate shall not exceed one-sixth of his assessable income for such year of assessment or four thousand rupees, whichever amount is less.

(2) Where under section 24 (1) the assessable income of a wife for any year of assessment is deemed to be part of the assessable income of her husband, any premiums on a life insurance policy paid by her shall, for the purposes of the preceding provisions of this section, be deemed to be premiums paid by her husband.

(3) For the purposes of this section, the effective rate of tax shall be determined as provided in subsection (15) of section 22.

(1) Any person who has paid, by deduction or otherwise, or is liable to pay, Ceylon tax for any year of assessment on any part of his income and has paid, by deduction or otherwise, or is liable to pay, United Kingdom income tax for the corresponding year in respect of the same part of his income, shall be entitled to relief from Ceylon tax on that part of his income at a rate equal to the amount by which the Ceylon rate of tax exceeds half the appropriate rate of United Kingdom income tax :

Provided that if the Ceylon rate of tax exceeds the appropriate rate of United Kingdom income tax, he shall be entitled to relief at a rate equal to half the appropriate rate of United Kingdom income tax. The preceding provisions of this subsection shall not apply in respect of any year of assessment commencing on or after the 1st day of April, 1950.

(2) Any non-resident individual who is a British subject resident in the United Kingdom, or in any other part of Her Majesty’s Realms and Territories or in any British protectorate or protected state, or in any territory in respect of which a mandate on behalf of the League of Nations has been accepted by Her Majesty, or who is a resident of any country which grants to residents of Ceylon in respect of any income tax levied in that country relief similar to that allowed by this subsection, shall be entitled to relief equal to the excess of the Ceylon tax paid by him, by deduction or otherwise, for any year of assessment in respect of his Ceylon income over the amount which bears the same proportion to the amount which would be payable by him for that year by way of Ceylon tax if he were resident in Ceylon and chargeable in respect of his total income from all sources, wherever arising, as the amount of such Ceylon income bears to the amount of such total income from all sources :

Provided that, where any such individual is non-resident for a part only of a year of assessment, the relief shall be calculated by reference to the Ceylon income, total income, and Ceylon tax of that part of such year ;

Provided further that, where any person is entitled to relief under both subsection (1) and subsection (2), the relief granted to him under either one of those subsections shall be reduced by the relief, if any, already granted to him under the other ;

Provided further that no individual resident in any place other than the United Kingdom shall be entitled to relief under this subsection for any year of assessment preceding the year of assessment commencing on the 1st day of April, 1937.

(3) For the purposes of this section-

(4) For the purposes of this section and section 49-

(1) Where any person proves to the satisfaction of the Commissioner that he has paid, or is liable to pay, by deduction or otherwise, both Ceylon tax for any year of assessment and Commonwealth tax for the corresponding year on his income from any source, he shall be entitled to relief from Ceylon tax of one-half of the Ceylon tax or Commonwealth tax paid or payable in respect of his income from that source, whichever is the less :

Provided that the total relief granted under this subsection added to that granted under section 48 (1) shall not exceed one-half of the Ceylon tax after deducting therefrom any relief given under section 48 (2).

(2) For the purposes of this section-

(1) Where the construction of any dwelling house to which this section applies is or has been completed on or after the 1st day of April, 1948, then, in respect of the year of assessment commencing on the 1st day of April, 1949, and each of the four years of assessment immediately succeeding, the person liable to tax in respect of the income from such house shall-

(2) This section shall apply to, and only to, every dwelling house in respect of which the conditions set out in any one of the following paragraphs are satisfied : –

In this subsection-

“authorized rent”, with reference to a dwelling house, means the authorized rent of that dwelling house as determined in accordance with the provisions of the Rent Restriction Act; and

” rates” means the rates levied by any local authority under any other written law.

(1) Where a body of persons, whether corporate or unincorporate, carries on a club or similar institution and receives from its members not less than three-fourths of its gross receipts on revenue account (including entrance fees and subscriptions), it shall not be deemed to carry on a business ; but where less than three-fourths of its gross receipts are received from members, the whole of the income from transactions both with members and others (including entrance fees and subscriptions) shall be deemed to be receipts from a business, and the body of persons shall be chargeable either in respect of the profits therefrom, or in respect of the income which would be assessable if it were not deemed to carry on a business, whichever is the greater.

(2) Where a body of persons, whether corporate or unincorporate, carries on a trade association, chamber of commerce, or similar institution in such circumstances that more than half its receipts by way of entrance fees and subscriptions are from persons who claim or would be entitled to claim that such sums were allowable deductions for the purposes of section 11, such body of persons shall be deemed to carry on a business, and the whole of its income from transactions both with members and others (including entrance fees and subscriptions) shall be deemed to be receipts from a business, and the body of persons shall be chargeable either in respect of the profits therefrom or in respect of the income which would be assessable if it were not deemed to carry on a business, whichever is the greater.

(3) In this section, ” members “, in relation to a body of persons, means those persons who are entitled to vote at a general meeting of the body at which effective control is exercised over its affairs.

(4) Nothing in this section shall operate to annul or reduce any exemption granted in section 7 of this Ordinance.

(1) Where, in the case of a company controlled by not more than five persons-

the Assessor may, subject as hereinafter provided, treat either the whole of such undistributed profits, or a specified part thereof, as distributed in the form of dividends, if the Assessor is of opinion that the whole of such profits, or such specified part thereof, as the case may be, could have been distributed in the form of dividends without detriment to the company’s existing business, and the persons concerned shall be assessable accordingly : Provided that no action under this subsection shall be taken by an Assessor in the case of any such company until the expiration of a period of not less than three months after the date on which the accounts of the company for the previous year have been laid before the company in general meeting ;

Provided, further, that where one of the shareholders of any such company is another company, any amount required by the preceding provisions of this subsection to be treated as having been distributed in the form of dividends to such other company shall, for the purposes of the application of such provisions to such other company, be deemed to be profits of such other company and to form part of the assessable income of such other company.

(2) Where, in the case of a company controlled by not more than five persons-

the Assessor may, subject to the provisions of subsections (3), (4), (5), and (6), treat the whole or a part of the profits of the company, after deducting therefrom any expenditure incurred for the development of the business of the company other than the price paid for the purchase of an existing business or an agricultural undertaking, as distributed in the form of dividends to the shareholders of the company ; and the persons concerned shall be assessable accordingly.

(3) In determining under subsection (2) whether a company has not distributed to its shareholders a reasonable part of its profits, the Assessor shall have regard not only to the current requirements of the company’s business but also to such other requirements as may be necessary or advisable for the maintenance and development of that business.

(4) For the purposes of subsection (2), any of the following sums shall be regarded as profits available for distribution among the shareholders of the company and not as having been applied or being applicable to the requirements of the company’s business or to such other requirements as may be necessary or advisable for the maintenance and development of that business : –

(5) For the purposes of subsection (4), share or loan capital or debt shall be deemed to be issued or incurred otherwise than for adequate consideration if-

and references in this subsection and in subsection (4) to money applied or to be applied for any purpose shall be deemed to include references to money applied or to be applied in or towards the replacement of that money.

(6) No action under subsection (2) shall be taken by an Assessor in the case of any company referred to in that subsection until the expiration of a period of not less than three months after the date on which the accounts of the company for the year referred to as the previous year in that subsection have been laid before the company in general meeting, and, where one of the shareholders of any such company is another company, any amount treated under subsection (2) as having been distributed in the form of dividends to such other company shall, for the purpose of the application of subsection (2) to such other company, be deemed to be profits of such other company and to have been part of the assessable income of such other company.

(7) Where under the preceding provisions of this section the whole or any part of the undistributed profits of a company is treated as distributed in the form of dividends, and any shareholder is assessable accordingly, the additional amount which becomes payable as tax by that shareholder by reason of the operation of that subsection shall be recoverable either from the shareholder or from the company as the Commissioner may in his discretion determine.

(8) Where an Assessor is of opinion that any transaction which reduces or would reduce the amount of tax payable by any person is artificial or fictitious or that any disposition is not in fact given effect to, he may disregard any such transaction or disposition and the persons concerned shall be assessable accordingly.

(9) Nothing in this section shall prevent the decision of an Assessor in the exercise of any discretion given to him by this section from being questioned in an appeal against an assessment in accordance with Chapter XI.

(10) In this section –

(1) Every person chargeable with tax as trustee, executor, or agent, or from whom tax is recoverable in respect of the income of another person, may retain out of any assets coming into his possession or control on behalf of such other person or in his capacity as trustee, executor, or agent so much thereof as shall be sufficient to produce the amount of such tax, and he shall be and is hereby indemnified against any person whomsoever in respect of his retention of such assets.

(2) Where any person acting as trustee or executor has paid tax, and no assets of the trust or estate come into his possession or control out of which he could retain the tax so paid, such tax shall be a debt due from the beneficiaries of the trust or estate to the trustee or executor.

(3) Where a person chargeable with tax or from whom tax is recoverable in respect of the income of another person has paid such tax, and no assets of such other person come into his possession or control out of which he could retain the tax so paid, such tax shall be a debt due to him from such other person.

(1) An Assessor may give notice in writing to any person requiring him to furnish within the time limited by such notice a return of his income containing such particulars and in such form as may be prescribed.

(2) Every person chargeable with tax for any year of assessment who has not been required within a period of three months after the commencement of such year of assessment to make a return of his income for that year as provided in subsection (1) shall within fourteen days after the expiration of such period give notice to the Commissioner that he is so chargeable.

(3) An Assessor may give notice in writing to ,any person when and as often as he thinks necessary requiring him to furnish within the time limited by such notice fuller or further returns respecting any matter for which a return is required or prescribed by this Ordinance.

(4) For the purpose of obtaining full information in respect of any person’s income-

Any person so attending before the Assistant Commissioner may be allowed by the Commissioner his reasonable expenses necessarily incurred in so attending.

(5) An Assistant Commissioner, or an Assessor with the approval of an Assistant Commissioner, may retain in his custody, as long as such retention is necessary for any purpose of this Ordinance, any deeds, plans, instruments, books, registers, accounts, trade lists, stock lists, cheques, paying-in slips or documents which are or have been produced before him or transmitted to him under subsection (4) or which otherwise come or have come into his possession.

(6) A return, statement, or form purporting to be furnished under this Ordinance by or on behalf of any person shall for all purposes be deemed to have been furnished by that person or by his authority, as the case may be, unless the contrary is proved, and any person signing any such return, statement, or form shall be deemed to be cognizant of all matters therein.

(1) The Commissioner may give notice in writing to any officer in the employment of the Government or of any local authority or other public body requiring him to furnish within the time limited by such notice any particulars which he may require for the purposes of this Ordinance which may be in the possession of such officer: Provided that no such officer shall by virtue of this section be obliged to disclose any particulars as to which he is under any express statutory obligation to observe secrecy.

(2) Every person who is an employer shall, when required to do so by notice in writing given by an Assessor, furnish within the time limited by such notice a return containing the names and places of residence and the full amount of the remuneration, whether in cash or otherwise, for the period specified in the notice, of-

(3) Any director of a company, or person engaged in the management of a company, shall be deemed to be a person employed by the company.

(a) receives any profits or income to which this Ordinance applies which belongs to some other person ; or

(b) pays to some other person, or to his order, any such profits or income,

(i) a true and correct statement of all such profits and income; and

(ii) the name and address of every person to whom the same belongs.

(a) the name and address of the owner of such land and improvements ; and

(b) a true and correct statement of the rent payable and any other consideration passing therefor.

(1) Any banker, agent of a banker, or other person in Ceylon who on any date subsequent to the 31st day of March, 1932, pays or credits to any person the value or proceeds of a coupon for any interest, dividend, or other annual payment payable out of or in respect of the stock, funds, shares, or securities of any company or body of persons not resident in Ceylon shall, within thirty days of such date, render to the Commissioner a statement showing the name and address of such person, particulars of such coupon, and the amount paid or credited in respect thereof:

Provided that the Commissioner may authorize any such banker, agent of a banker or other person to render such statements quarterly or half-yearly during any year of assessment.

(2) In this section, ” coupon ” includes any warrant, bill of exchange, or order to pay money purporting to be issued, drawn, or made in payment of any interest, dividend, or other annual payment as aforesaid.

(1) Wherever two or more persons in partnership act in the capacity of trustees or executors, or as agents, or are employers, or are persons in receipt of money, value, or profits to whom section 60 applies, or act in, any other capacity whatever, either on behalf of themselves or of any other person, the precedent partner of such partnership shall be answerable for doing all such acts, matters, and things as would be required to be done under the provisions of this Ordinance by an individual acting in such capacity :

Provided that any person to whom a notice has been given under the provisions of this Ordinance as precedent partner of a partnership shall be deemed to be the precedent partner thereof unless he proves that he is not a partner in such partnership, or that some other person resident in Ceylon is the precedent partner thereof.

(2) Where two or more persons who are not in partnership act jointly in any capacity mentioned in subsection (1), they shall be jointly and severally answerable for doing all such acts, matters, and things as would be required to be done under the provisions of this Ordinance by an individual acting in such capacity.