Inland Revenue

(a) wherever arising, in the case of a person who is resident in Sri Lanka in that year of assessment; and

(b) arising in, or derived from, Sri Lanka in the case of every other person.

(a)

whether received or derived horn the employer or others ,

(b) the value of any conveyance granted free of any charge by an employer to any employee, 01 any sum so granted for the purchase of any conveyance ,

(c)

(d) the rental value of any place of residence provided rent-free by the employer or where a place of residence is provided by an employer at a rent less than the rental value, the excess of the rental value over such rent.

For the purposes of this paragraph the rental value of any place of residence shall be-

Provided that,

shall be disregarded ; and

(e) the value at the time of its disposal, of any share of a company , received as a benefit , from the employer or on behalf of the employer at no cost or at a price which is less than the prevailing market value of such share of a company whether directly or through a share option scheme ;

The value at the time of its disposal of such share shall be the surplus over the cost of acquisition of such share –

Provided however, in the event of the death of such employee during his period of employment with such employer the value of such share shall be zero.

For the purpose of this paragraph the profits from employment arising in accordance with the preceeding provisions shall be charged with income tax in the year of assessment during which such sale, disposal or cessation of employment took place, on the basis that such profits from the sole taxable income within the meaning of Chapter VII for that year of assessment and such tax shall be recovered in accordance with the provisions of Chapter XIV of this Act:

Provided further, that where the employer was not instrumental in the disposal of such share such employee shall pay the tax due on such profit from employment in accordance with the provisions of Chapter XIII of this Act.

(a) where the market value of such benefit can be readily ascertained, such market value ; or

(b) where the market value of such benefit cannot be readily ascertained, or such benefit has no market value, the cost that would have to be incurred by any other individual to obtain such benefit:

Provided that the Commissioner-General may, having regard to the market value of that benefit or the cost that would have to be incurred by any other individual to obtain that benefit, by Order published in the Gazette, specify the value to be placed on any benefit and where a value is so specified in respect of a benefit, such value shall be deemed to be the value of such benefit.

(a) the change of ownership of any property occurring in any manner whatsoever ;

(b) the surrender or relinquishment of any right in any property ;

(c ) the transfer of some of (in lights in any property ,

(d) the redemption of any share, debenture 01 other obligation ,

(e) the formation of a company ,

(f) the dissolution of a business of the liquidation of a company ,

(g) the amalgamation or merger of two or more businesses or companies , or

(h) any transaction in connection with the promotion of which any person who is not a party to such transaction receives a commission or reward

(a) a change of ownership of property, means, subject to the provisions of subsection (4), the amount by which the value of the property at the time when such change of ownership occurs exceeds its value at the time when it was acquired by that person ,

(b) the surrender or relinquishment of any light or the transfer of some of the lights in any property means subject to the provisions of subsection (4) the value of the consideration for such surrender, relinquishment or transfer ,

(c) She redemption of any share debenture or other obligation means subject to the provisions of subsection (4) the value of all property received by him in consequence of such redemption less the value. of that which is redeemed at the tune when it was acquired by him or where that which is redeemed is any property referred to in paragraph(e) or paragraph (f)or paragraph (g) or paragraph(h)or subsection (3), less such value of that property as is specified in that paragraph ,

(d) the formation of a company, means, subject to the provisions of subsection (4), the value of the consideration received by him for any transaction in connection with the formation of such company ;

(e) the dissolution of a business or the liquidation of a company, means, subject to the provisions of subsection (4), the amount by which the value of all properly received by him in consequence of such dissolution or liquidation exceeds the value of his share of the capital of such business or company at the time when such share was acquired by him ;

(f) the amalgamation or merger of two or more companies, means, where such person was a shareholder of any of those companies, any money received by such shareholder in consequence of such amalgamation or merger, and where such person was not a shareholder of any of those companies, the value of the consideration received by him for any transaction in connection with such amalgamation or merger; and

(g) the promotion of a transaction to which such person was not a party, means, the commission or reward received by him in connection with such promotion.

(a) where, the property was acquired before April 1, 1977, by the person to whom such gain arises then, subject to the provisions of paragraph (c) , paragraph (d), paragraph (e), paragraph (f), paragraph (g) and paragraph (h), the value of the property at the time when it was acquired by such person shall be an amount equal to she market value of the property on April 1 1977 ,

(b) where the properly was acquired on or after April 1, 1977, by the person to whom such gain arises then, .subject to the provisions of paragraph (c), paragraph (d), paragraph (e), paragraph (f), paragraph (g), paragraph (h), paragraph (l) and paragraph (m), the value of the property at the time it was acquired by such person shall if such acquisition was”

(c)where the property was acquired by the person to whom such gain arises in his capacity beneficiary under a trust or the testate or intestate heir of the deceased, in consequence of a transfer by the trustee of such trust or by the executor appointed to administer the estate of such deceased, the value of the property at the time of such acquisition shall if the date of the acquisition of such property by such trustee or executor is ”

(d) where the person to whom the gain arises had tome into possession of the property immediately alter the cessation of a life interest of any other person in the property or after the cessation of the rights of fiduciary in that property the value of the property at the Mine when the first mentioned person acquired such property shall if the date of the. cessation of such life interest or such. rights of a fiduciary is”

(e) where. the property is a bonus share, issued on or after April 1 1977 to the person to whom such gain arises, OK value of the property at the time when it was acquired by such person shall be deemed to be nil

(f) where the. property is a share. issued on or after April 1 1977 to the person to whom such gain arises at a price less than the market value of such share, the value of the property at the time when it was acquired by such person shall be an amount equal to the cost of acquisition of such property

(g) where the property consists of any shares received by the person whom such gain arises in lieu of shares held by him in any of two or more. companies which have amalgamated or merged or after April 1 1977 the value of the property at the time when it was so received shall if the last- mentioned shares were acquired by him –

(h) where the properly consists of shares In. respect of which there has been a return or distribution of capital, the value of the property at the time when such shares were acquired shall if such shares were acquired by the person to whom such gain arises”

(i) the value of the property at the time of the occurrence of the transaction which resulted in such gain shall if such transaction is ”

(j)the value of any consideration received by the person to whom such gain arises shall, where the consideration is-

(k) where, in the case of a change of ownership of the property of any person occurring by sale, the Assessor is of the opinion that the sale price is less than the market value of that properly at the time of the sale, then unless such person satisfies the Assessor that there was reasonable cause for the difference between the sale price and such market value, the value of such property at the time of the sale shall be an amount equal to the market value of that property at that time ;

(l) where, the property, is immovable property and that property was acquired by way of gift or inheritance, on or after April 1 1977 by the person to whom the capita! gain arises from any person who had acquired such property prior to April 1 1977 the value of such property at the lime it was acquired by the first mentioned person shall be an amount equal to the market value of such property on April 1 1977 increased by the cost of any improvements additions or alterations to that property made by the second mentioned person after April 1 1977 and

(m) where the property its immovable property and that property was acquired by way of gift or inheritance on or after April 1 1977 by the person to whom such gain arises from any person who had acquired such property on or after April I 1977 the value of such property at the time when it was acquired by the mentioned person shall if the second mentioned person had acquired that property. –

increased by the cost of any improvements, additions or alterations to that property made by the second-mentioned person after it was acquired by him.

(a) any expenditure (oilier than the purchase price if any) incurred on or after April I, 1977, solely in connection with the acquisition of the property by the person who is the owner of that property immediately before the occurrence of the transaction which resulted in such gain ;

(b) any expenditure incurred on after April 1, 1977, by such owner in making any improvements, additions or alterations to that property if no deduction in respect of such expenditure is. or has been allowed under section 23 of this Act or under section 23 or paragraph (1) of subsection (2) of section 3! of the Inland Revenue Act . No 28 of 1979.

(c) any expenditure incurred by such owner solely in connection with the transaction which resulted in such gain.

(i) the Incorporated Council of Legal Education established by Council of Legal Education Act, (Chapter 276).

(ii) the Institute of Chartered Accountants of Sri Lanka established by the Institute of Chartered Accountants of Sri Lanka Act, No. 23 of 1959.

(iii) the Sri Lanka Tea Board established by the Sri Lanka Tea Board Law, No. 14 of 1975 ;

(iv) the Ceylon National Library Services Board established by the Ceylon National Library Services Board Act No 17 of 1970,

(v) any University which is established or deemed to be established under the Universities, No. 16 of 1978 ,

(vi) the Coconut Development Authority; the Coconut Research Board and the Coconut Cultivation Board, established by or under the Coconut Development Act No 46 of 1971 ,

(vii) the Widows and Orphans’ Pension Fund of public officers of Sri Lanka (Chapter 431),

(viii) any Widows’ and Orphans’ Pension Fund or Scheme established lot the Local Government Service

(ix) the World Tourism Organization;

(x) any institution or trust of a public character established by any written law solely for the purposes of scientific research

(xi) the United Nations Organization including the net annual value of any land and improvements thereon in Sri Lanka owned by and occupied by or on behalf of the Organization ,

(xii) the S. W. R. D. Bandaranaike National Memorial Foundation established by the S. W. R. D. Bandaranaike National Memorial Foundation Law No 2 of 1975

(xiii) the National Science Foundation established by the Science and Technology Development Act. No 11 of 1994

(xiv) the Industrial Technology Institute established by the Science and Technology Development Act, No. 11 of 1994;

(xv) the International Development Association ;

(xvi) the Sri Lanka Standards institution established by the Sri Lanka Standards Institution Act, No, 60 of 1984;

(xvii) the Asian Development Bank ;

(xviii) any Resort Authority constituted under subsection (1) of section 57 of the Tourist Development Act, No. 14 of 1968 ;

(xix) the Ceylon Tourist Board established by the Ceylon Tourist Board Act, No. 10 of 1966 ;

(xx) the International Finance Corporation ;

(xxi) the International Bank for Reconstruction and Development or any other international or foreign organization approved by the Minister, being profits and income attributable to the interest and other charges on any loan granted to the Development Finance Corporation ;

(xxii) the Monetary Board established by the Monetary Law Act (Chapter 422) being the profits and income of the Central Bank of Sri Lanka ;

(xxiii) any registered society within the meaning of the Co-operative Societies Law. No. 5 of 1972, the majority of the members of which are resident in Sri Lanka being profits and income of that society arising out of any business specified by the Minister by notice published in the Gazette having regard to Government policy in relation to the Co-operative movement. For the purpose of ascertaining the membership of a registered society of which another registered society is a member, each of the members of the second-mentioned society shall be deemed to be a member of the first-mentioned society ;

(xxiv) she Sri Lanka Foundation Institute established by the Sri Lanka Foundation Law, No. 31 of 1973 ;

(xxv) the Tower Hull Theatre Foundation established by the Tower Hall Theatre Foundation Act, No. 1 of 1978;

(xxvi) the Sri Lanka Inventors Commission established by the Sri Lanka Inventors Incentives Act, No. 53 of 1979;

(xxvii) the Ceylon Medical Council established by the Medical Ordinance (Chapter 105) ;

(xxviii) Ayurvedic Medical Council established by the Ayurveda Act. No. 31 of 1961 ;

(xxix) the Homeopathic Council established by Homeopathy Act. No. 7 of 1970 ;

(xxx) the Sri Lanka College of Physicians established by the Sri Lanka College of Physicians (Incorporation) Act, No. 9 of 1971 ;

(xxxi) the Institute of Engineers, Ceylon, incorporated by the Institute of Engineers, Ceylon Act, No. 17 of 1968 ;

(xxxii) the Sri Lanka Export Credit Insurance Corporation established by the Sri Lanka Export Credit Insurance Corporation Act, No. 15 of 1978 ;

(xxxiii) the Sri Lanka Export Development Board established under the Sri Lanka Export Development Board Act, No. 40 of 1979 ;

(xxxiv) the Sri Lanka Ex-Servicemen’s Association established by the Sri Lanka Ex-Servicemen’s Association Law, No. 8 of 1976 ;

(xxxv) a company registered under Part VIII of the Companies Act, No. 17 of 1982, being profits and income arising to such company from a ship which is” (i) engaged in international operations ; (ii) owned or chartered by such company ; and (iii) deemed to be a Sri Lanka ship by reason of a determination made under paragraph (c) of section 30 of the Merchant Shipping Act, No. 52 of 1971, other than profits and income arising to such company form the carriage, by that ship, of passengers, mails, livestock and goods, to or from, a port in Sri Lanka ;

(xxxvi) the Institute of Fundamental Studies, Sri Lanka, established by the Institute of Fundamental Studies, Sri Lanka Act, No, 55 of 1981 ;

(xxxvii) the International Winged Beans (Dambala) Institute established by the International Winged Bean (Dambala) Institute Act, No. 7 of 1982 ;

(xxxviii) the Buddhist and Pali University of Sri Lanka and any Higher Educational Institution established by, or under, the Buddhist and Pali University of Sri Lanka Act, No. 74 of 1981 ;

(xxxix) the International Irrigation Management Institute ;

(xl) the Sri Lanka Institute of Printing established by the Sri Lanka Institute of Printing Act. No. 18 of 1984;

(xli) the Energy Conservation Fund established by the Energy Conservation Fund Act, No. 2 of 1985 ;

(xlii) the Tea Small Holdings Development Authority established by the Tea Small Holdings Development Law, No, 35 of 1975 ;

(xliii) the Co-operative Development Fund established under the Finance Act, No. 11 of 1963 ;

(xliv) the Board of Investment of Sri Lanka established by the Board of Investment of Sri Lanka Law, No. 4 of 1978;

(xlv) the President’s Fund established by the president Fund Act, No. 7 of 1978

(xlvi) the National DEFENCE fund established by the National Defence fund Act No 9 of 1985 ;

(xlvii) the Sri Lanka Institute of Architects incorporated by the Sri Lanka Institute, of Architects Law, No 1 of 1976

(xlviii) the Surveyors’ Institute of” Sri Lanka incorporated by the Surveyors’ Institute of Sri Lanka Act, No. 22 of 1982;

(xlix) the Institute of Chemistry, Ceylon incorporated by the Institute of Chemistry (Ceylon) Act, No. 15 of 1972;

(1) the Sri Lanka Institute of Development Administration established by the Sri Lanka Institute of Development Administration Act, No. 9 of 1982;

(li) the Trust Fund set up with European in Economic Community Funds for the benefit of the settlers in” (i) Zones 2 and of System B area and (ii) System Garca demarcated and administered by the Mahaweli Authority of’ Sri Lanka established by the Mahaweli Authority Act, No. 23 of 1979 ;

(lii) the Agricultural and Agrarian Insurance Board established by the Agricultural and Agrarian Insurance Law, No. 20 of 1999 ;

(liii) the Superior Courts Complex Board of Management established by the Superior Courts Complex Board of Management Act, No. 50 of 1987 ;

(liv) the international Committee of the Red Cross ;

(lv) the institute of Policy Studies of Sri Lanka established by the Institute of Policy Studies of Sri Lanka Act, No. 53 of 1988 ;

(lvi) the Credit Information Bureau of Sri Lanka established by the Credit Information Bureau of Sri Lanka Act, No. 18 of 1990 ;

(lvii) Rubber Research Board established under the Rubber Research Ordinance, (Chapter 439) ;

(lviii) the Buddha Sasana Fund established by the Buddha Sasana Fund Act, No, 35 of 1990 ;

(lix) the J.R. Jayewardene Centre established by the J.R. Jayawardene Centre Act, No. 77 of 1988 ;

(lx) the Institute of Supply and Materials Management, Sri Lanka established by the Institute of Supply and Materials Management, Sri Lanka Act, No. 3 of 1981 ;

(lxi) the Stabilization Fund for Tea, Rubber and Coconut established under Part IV of the Finance Act, No. 38 of 1971 ;

(lxii) the Janasaviya Trust Fund incorporated under the Trust Ordinance (Chapter 96);

(lxiii) the Institute of Bankers of Sri Lanka established by the Institute of Bankers of Sri Lanka Act, No. 26 of 1979;

(lxiv) the Overseas Private Investment Corporation of’ the United States of America ;

(lxv) the Overseas Economic Co-operation Fund of Japan ;

(lxvi) the World Conservation Union ;

(lxvii) the Institute of Personnel Management, Sri Lanka, incorporated by the Institute of Personnel Management, Sri Lanka Law, No. 24 of 1976 ;

(lxviii) Public Enterprises Reform Commission of Sri Lanka, established by the Public Enterprises Reform Commission of Sri Lanka, Act, No. 1 of 1996 ;

(lxix) the Securities and Exchange Commission of Sri Lanka established by the Securities and Exchange Commission of Sri Lanka Act, No. 36 of 1987;

(lxx) the Bamhiranaike Museum Committee incorporated under the Bandaranaike Museum Committee (Incorporation) Act, No, 28 of 1997 ;

(lxxi) the Geological Survey and Mines Bureau established under the Mines and Minerals Act, No. 33 of 1992;

(lxxii) the Commonwealth Development Corporation ;

(lxxiii) the India – Sri Lanka Foundation incorporated under the Companies Act, No. 17 of 1982 ;

(lxxiv) the European Investment Bank ; and

(lxxv) The Nordic Development Fund established pursuant to a treaty entered between the Governments of Denmark. Finland. Iceland. Norway and Sweden on November 2, 1988 ;

(lxxvi) Management Corporation established under Apartment Ownership Law No. 11 of 1973 as last amended by Act. No. 39 of 2003;

(lxxvii) the Sri Lanka Institute of Taxation incorporated by the Sri Lanka Institute of Taxation (Incorporation) Act, No. 21 of 2000; and

“(LXXVIII) The Nordic Investment Bank:

(i) the income of any trust or other matter vested in or administered by such authority or institution, being income to which such authority or institution is not beneficially entitled ; and

(ii) the profits and income- for any period commencing on the date of acquisition or vesting, as the case may be, of any business undertaking acquired by or vested in the Government under the Business Undertakings (Acquisition) Act, No, 35 of 1971 ;

(i) the Government of any foreign country, being profits and income derived by that Government either directly or through any agency of that Government from aid granted in money, goods, services or in any other form by that Government to the Government of Sri Lanka ;

(ii) the Government of the People’s Republic of China, or of any agency of that Government, being profits and income derived from the business of ship-owner or charterer and referred to in any agreement entered into between that Government and the Government of Sri Lanka ;

(iii) a foreign currency banking until from all off-shore transactions of the unit for any year of assessment commencing on or before April 1, 2003.

For the purposes of this subparagraph any foreign currency transaction which any foreign currency banking unit enters into, with any other foreign currency banking unit, shall be deemed to be an off-shore transaction ;

(i) She profits of a business carried on by that institution if such profits are applied solely to a charitable purpose of that institution and”

(ii) the net. annual value of”

(iii) the profits and income from any property donated by royal or other grant before March 2, 1815, to any place of public worship administered by such institution, in so far as such profits and income are applied to the purposes to which grant was made ;

(i) carried on by individuals who are not citizens of Sri Lanka or by a company the shares of which are owned entirety by individuals who are not citizens of Sri Lanka or by non resident companies , and

(ii) approved by the Minister

(a) the emoluments pension and any other benefits arising to any person from the, office of the President of the Republic of Sri Lanka.

(b) the official emoluments for any year of assessment commencing on or before April 1, 2005, paid to -”

and such pension or any such profits, from employment referred to in paragraph (c) of subsection (1) of section 4 as are received by any person in respect of past services performed by such person or by any other person whether before or after the commencement of this Act, as an officer or employee referred to in items (i), (ii), (iii), (iv) (v) (VI),(VII) (VIII) OR (ix)

(bb) one half of the official emoluments for any year of assessment commencing on or after April 1,2005, paid to –

(c) the emoluments arising in Sri I Lanka and any income not arising in Sri Lanka of any individual who is a scientist, technician expert or adviser who is not a citizen of Sri Lanka and who is brought to and employed in Sri Lanka by any undertaking being an enterprise with which an agreement has been entered into by the Board of Investment under section !7 of the Board of Investment of Sri Lanka Law. No 4 of 1978 for the purposes of that under taking

Provided That the emoluments of an individual shall not be exempt from income tax after the date of the cessation of employment of such individual in such undertaking or the date on which the exemption from tax granted, by such agreement ends whichever is the earlier;

(d) the official emoluments, arising in Sri Lanka, and any income not arising in or derived from Sri Lanka of”

(e) the official emoluments of any citizen of sri Lanka who is employed as an expert technical official by the United Nations Organisation or by any specialised Agency of that Organisation

(f) the official emoluments of any individual who is employed by the World Tourism Organization the International litigation Management institute, the Colombo Plan Bureau the Asian Development Bank the World Bank the international Committee of the Red Cross, the World Conservation Union or the European Investment Bank.

(g) the value of any travel warrant or passage granted to a person who is not citizen of Sri Lanka to enable him to come to Sri Lanka to assume duties or to visit his home abroad or to return from Sri Lanka on the termination of his services whether on retirement or otherwise or of any travel warrant or passage granted to the wife or any son or d daughter of such person to come to Sri Lanka or to visit his or her home abroad or to return from Sri Lanka on the Termination of the services such person

(h) any allowance granted by an employer to his employee for traveling, subsistence and lodging in respect of travel by such employee outside Sri Lanka in connection with his employment

(i) the emoluments earned, or the pension arising, in any year of assessment, in foreign currency, by or to, any individual resident in Sri Lanka in respect of”

outside Sri Lanka in the course of any employment carried on, or exercised by him or his spouse, if such emoluments or pension are paid to him in Sri Lanka or such emoluments or pension less such amount expended by such individual outside Sri Lanka as is considered by the Commissioner-General to he reasonable expenses) are remitted by him to Sri Lanka ;

(j) the emoluments earned in any year of assessment commencing prior to April 1, 2003, by any individual employed on a ship which is”

(k) profits and income not exceeding in the aggregate four thousand eight hundred rupees from all sources other than employment for any year of assessment commencing prior to April 1, 2003, derived by or arising or accruing to, an individual or any child whose total statutory income is aggregated with the income of that individual, if the total statutory income, for that year of assessment, of that individual consists only of profit and income”

and accordingly, where any income tax has been paid by deduction or otherwise, by such individual in any year of assessment, in respect of any profits and income which are exempt under this paragraph such life lax shall, on an application in that behalf being made in writing by such individual within three years of the end of that year of assessment, be refunded to him ;

(l) the value of any free transport by motor coach provided by an employer to an employee for travel by such employee, from his residence to his place of work or from place of work to his residence,

(m) such part of any sum paid to an employee at the time of his retirement, from any provident or pension fund. or the Employees Trust Fund established by the Employees Trust Fund Act, No 46 of 1980 as represents income derived by that fund, for any period commencing on or after April 1, 1987 from investments made by it,

(n) such part of any sum referred to in paragraph(c) of subsection (i)of section 4(1) paid to any employee at the time of his retirement from any employment in am company. formed under the Commission of Public Corporations or Government Owned Business Undertakings into Public Companies Act, No 23 of Act. 1987 as is attributable to his period of service ending before April 1, 1997 in any public corporation or any Government Owned Business Undertaking, as the case may be

(o) such part of any sum referred to in paragraph (c) of subsection (1) of section 4 paid to any employee at the time of his retirement from any employment in any public corporation other than any public corporation referred to in sub-paragraph (ii) of paragraph (b) of subsection (1), as is attributable to the period of service of such employee prior to April 1, 1997, in such public corporation ;

(p) for any year of assessment commencing on or before April 1, 2005, any sum paid to any employee by the employer of such employee, being a sum paid as compensation for loss of any office or employment consequent to

“(pp) for any year of assessment commencing on or after April 1, 2005, such part of any sum paid to any employee being a sum paid as compensation for loss of any office or employment consequent to –

(a) has entered into a contract of employment ; or

(b) is brought to, and employed in, Sri Lanka,

(a) any dividend paid by a company with which an agreement has been entered into by the Board of Investment of Sri Lanka under section 17 of the Board of Investment of Sri Lanka Law. No. 4 of 1978 being an agreement which has been entered into prior to December 31. 1994. on an application made in that behalf prior to November 11. 1993″

(b) any dividend paid by a flagship company with which an agreement has been entered into by the Board of Investment of Sri Lanka to any shareholder during the period for which the profits and income of that company are exempt from income lax under the terms of that agreement or within one year thereafter out of the profits and income of such company which are exempt from income tax ;

in this paragraph, “flagship company” means any company which has entered into an agreement with the Board of Investment of Sri Lanka under section 17 of the Board of Investment of Sri Lanka Law. No. 4 of 1978 and which has. in accordance with such agreement, invested in Sri Lanka, within the period specified in such agreement, not less than fifty million United Slate of America Dollars or its equivalent in any other foreign currency”

(c) any dividend paid by a company with which an agreement has been entered into on or after November 8, 1995 by the Board of Investment of Sri Lanka under section 17 of the Board of Investment of Sri Lanka Law. No. 4 of 1978 to any shareholder of that company during the period for which the profits and income of that company are exempt from income tax under the terms of that agreement or within one year thereafter out of the profits and income which are exempt from income tax ;

(d) any dividend out of the profits of any company with which an agreement has been entered into by the Board of Investment of Sri Lanka under section 17 of the Board of Investment of Sri Lanka Law. No. 4 of 1978 from the operation by such company of a hospital with facilities for paying and non-paying patients for indoor and outdoor treatment, paid to any share holder of such company during the period of five years reckoned from the commencement of the year of assessment in which such hospital commences operations :

(e) any dividend out of the profits within the meaning of paragraph (a) of section 3 of a company”

paid to any shareholder of such company during the period for which the profits and income of that company are chargeable with income tax at such rate as is determined in accordance with sub-paragraph (a) of the further proviso to paragraph (iv) of regulation 2 of Regulations No. 1 of 1995 made under section 24 of the Board of Investment of Sri Lanka Law, No. 4 of 1978, as last amended by Regulation published in Gazette No. 1019/13 of March 19. 1998 and specified in such agreement or within one year thereafter ;

(f) any dividend paid to a shareholder of a company out of such profits and income of that company arising on or after April 1. 1977. which are exempt from income lax under section 15, 17, 18, 18A, 19,20, 20A, 21, 21A, 21B, 21C, 21D, 21E. 2IF. 21G or 21H of this Act or section 8(a) (xxxviii), 15, 16A, 16B. 16c, 16D, 17A, 17C, 17D, 17J, 17JJ, 17K, 17KK, 17L, 17M, 18, 19, 20, 20A, 20B, 20C, 21, 22, 22A, 22B, 22c, 22D, 22DDD or 22DDDD of the Inland Revenue Act. No. 28 of 1979 or under the Inland Revenue Act. No.4 of 1963. if such dividend is paid during the period for which such profits and income of that company are exempt from income tax under any of those provisions or within one year thereafter ;

(g) any dividend paid to a shareholder of a company, out of any such dividend received by that company during the period for which dividends as is referred to in paragraphs (a), (b), (c), (d), (e) or (f) respectively, are exempt from income tax, if the first mentioned dividend is paid during any year of assessment in which the second-mentioned dividend was received by that company or within one year thereafter ;

(h) any dividend paid to a shareholder of a company out of any such dividend as is referred to in paragraphs (a), (b), (c), (d), (e) or (f) received by that company through one or more intermediary companies during the period for which the dividends referred to in paragraphs (a), (b), (c), (d), (e) or (f) are exempt from income tax or within two years thereafter, if the first mentioned dividend is paid during the year of assessment in which the second mentioned dividend was received or within one year thereafter ; and

(i) any dividend paid to an unit holder of a unit trust or a mutual fund, on or after April 1, 2003. out of the taxable profits and income of such unit trust or mutual fund.

(a) The provisions of paragraph (b), (c), (d). or (e) of subsection (1) shall not apply to any dividend paid on or after April 1, 2004 . in relation to any agreement referred to therein , which has been entered into on or after November 6, 2002 : or

(b) The provisions of paragraph (f) of subsection (1) shall not apply to any dividend paid on or after April 1, 2004 by any company referred to in that paragraph, which qualified for an exemption on to after November 6, 2002.

(a) the net annual value of not more than one place of residence owned by, and occupied by or on behalf of an individual ;

(b) the income accruing to the owner of any house constructed prior to April 1.2003 for the year of assessment in which the construction of that house was completed and for the six year;. assessment immediately succeeding that year of assessment, if such house is used solely for residential purposes and”

Provided that where the floor area of the house is one thousand and five hundred .square feet or less the income accruing to the owner shall be exempt from income lax for the year of assessment in which the construction of that house was completed and for the nine years of assessment immediately succeeding that year of assessment ;

(c) the income accruing to the owner of a house, the income from which was or is not exempt from income tax under paragraph (b) of this subsection and which house is converted into two or more places of residence, each such place of residence being separately assessed for the purpose of rates, such income accruing being the income from any such place of residence for”

(d) the net annual value of any land and improvements thereon owned by a body of persons the primary object of which is the promotion of any spoil which is recognized as a sport for the purposes of the Sports Law. No. 25 of 1973 and used for that object by that body.

(a) any capital gain arising on”

(b) the aggregate amount of the capital gain of any person for any year of assessment which arises in respect of movable property other than stocks, shares, debentures or debenture stocks, if such aggregate amount does not exceed two thousand rupees ;

(c) the first five thousand rupees of the capital gain of any person for any year of assessment, if such person has a total assessable income for the three years of assessment immediately preceding that year of assessment which is less than the total of the allowances which under subsection (1) of section 30 of this Act. or subjection (1). of section 30 of the Inland Revenue Act. No. 28 of 1979. are required to be deducted from his assessable income in arriving at his taxable income for the three years of assessment ;

(d) the aggregate amount of the capital gains of any person for any year of assessment commencing on or after April 1, 2002 arising from any transaction stipulated in section 7.

(i) on or after April 1. 2001, in respect of services rendered by that company or partnership in that year of assessment out side Sri Lanka (“including services relating to any construction project) ; and

(ii) on or after April 1. 2003. in respect of any off-shore business which does not any way involve any goods manufactured or produced in Sri Lanka or any goods imported into Sri Lanka.

(i) the sale of gold, gems or jewellery, for any year of assessment commencing prior to April 1,2005 ;

(ii) export of gold, gems or jewellery, for any year of assessment commencing on or after April 1,2005;

(i) any precious stones or metals not mined in Sri Lanka ;

(ii) any petroleum, gas or petroleum product ; or

(iii) such other products as may be approved by the Minister for the purposes of this paragraph having regard to the foreign exchange benefits that are likely to accrue to the country from the export of such products.

(a) not being profits and income arising in or from Sri Lanka : and

(b) accruing from moneys lying to his credit in any account opened by him in a commercial bank for the deposit of sums remitted to him in foreign currency from any country outside Sri Lanka.

(a) being a company which is engaged only in carrying on one or more of the undertakings hereinafter specified, namely an undertaking for ”

(b) being a company which is an Export Production Village Company.

(a) which is a people’s company within the meaning of the Companies Act. No. 17 of 1982 ;

(b) She shareholders of which are the Export Development Board established by the Sri Lanka Export Development Act. No. 40 of 1979, and the producers of any of the products produced by that company : and

(c) the products of which are exported by the company or through, any other company engaged in the export of goods or commodities ;

(a) cultivating land with plants of whatever description other than tea. rubber and coconut ; or

(b) the production of planting materials certified by the Department of Agriculture as being of high quality. for cultivation referred to in paragraph (a) : or

(c) carrying out research work for improving the quality and character of planting materials for cultivation of land referred to in paragraph (a).

(i) the export of any fresh or processed vegetables or fruits ; and

(ii) the cultivation of land not less than five acres in extent with vegetables or fruits in that year of assessment.

(a) an undertaking carried on by a company-

(b)

(c) an undertaking of a pioneering nature as determined by the Minister by Order published in the Gazette carried on by a company on or after April 1, 2004. with an investment in excess of rupees two hundred and fifty million.

(a) Notwithstanding the provisions of subsection (1). for any company having an investment not less than rupees one thousand million in any pioneering undertaking as determined by the Minister, the period of exemption shall be the corresponding period referred to in Column II below, provided the corresponding minimum investment as given in Column I has been made-

(b) The amount of investment referred to in subparagraph (i) of paragraph (b) of subsection (2) shall not be applicable to any Export Production Village Company.

(c) In case of a company receiving income from any other trade or business in addition to the income from any specified undertaking or designated project or pioneering undertaking as referred to above, the exemption provided under this section shall be applicable only in respect of the profits and income from the relevant, specific undertaking, designated project or pioneering undertaking , as the case may be.

(i) “agriculture'” means the cultivation of land with plants of any description, rearing of fish or animal husbandry including poultry farms. veterinary – and artificial insemination services and other support services ;

(ii) “agro processing” means the processing of any agricultural product or fishing product including deep sea fishing, but excludes the processing of black tea in bulk and the manufacture of liquor ;

(iii) “non-traditional products” means my goods (other than black tea in bulk, crepe rubber, sheet rubber. scrap rubber, latex and fresh coconuts,) including deemed export of such goods , where not less than eighty per centum of the total turnover of such undertaking is from export or deemed export of such non-traditional goods for any year of assessment ;

(iv) “deemed export” means the production or manufacture and supply by any person or partnership of any commodities (other than black tea in bulk, crepe rubber, sheet rubber, scrap rubber, latex and fresh coconuts) to any exporter of such goods without further production or manufacture by such exporter, or the production or manufacture and supply of any goods to any exporter for the production, manufacture or packaging for export of any commodity which is a non-traditional product.

(a) the year of assessment in which the business that is acquired commences to make profits ; or

(b) any year of assessment not later than two years reckoned from the date on which the business that is acquired commenced commercial operations,

(i) acquiring the ownership of the enterprise as an owner

(ii) acquiring not less than fifty one per centum of the ownership of the enterprise with management rights or as partner or a joint venture partner ; or

(iii) acquiring the business (including the assets, liabilities and employees) other than by way of acquiring the shares of such enterprise, by way of a Deed.

(a) is qualified for an exemption from income tax on the export of non-traditional products, from the dale on which such exemption period is due to expire ; or

(b) other than an undertaking referred to in paragraph (a) from the dale on which each undertaking commences to any on commercial operations.

(i) a project which is of a pioneering nature and the operation of which results in value addition and the promotion of economic development:

(ii) a project which is engaged in the business of information technology ;

(iii) a project which is connected to the rehabilitation of non-performing or under performing industries within the meaning of section 21E ; or

(iv) any other project as may be specified by the Minister by Order published in the Gazette.

(a) the venture capital company shall not have commenced commercial operations prior to April 1. 2003 ; and

(b) the specific investment shall not be made in relation to a company which is at the time of making the first investment an associate company.

(i) not less than forty per centum of the total equity capital of such company during the second year from the year in which such company commenced its commercial operations, on or before the end of that second year ;

(ii) not less than eighty per centum of the total equity capital of such company during the third year from the year in which such company commenced its commercial operations, on or before the end of that third year ;

(iii) not less than eighty per centum of the total equity capital of such company during the fourth and fifth years from the year of commencement of commercial operations, on or before the end of such fourth and fifth years respectively.

(i) which has entered into a Technical Service Agreement a management company possessing the required experience in the relevant area of investment ; or

(ii) which has in its employment, professional staff who have been trained by foreign venture capital companies and other local staff possessing the required professional venture capital management experience.

(a) an allowance equal to the sum expended by such person in the purchase of any implement or equipment for any undertaking of deep-sea or off shore fishing carried on by such person, for any year of assessment commencing on or before April 1, 2003. ;

(b) for any year of assessment commencing on or before April 1, 2003, an allowance for depreciation by wear and tear of”

Provided that no deduction under the preceding provisions of this paragraph shall be allowed to a person in respect of any capital assets referred to in sub-paragraph (i), or sub-paragraph (d), or sub-paragraph (iii) or sub-paragraph (iv) or sub-paragraph (v) or this paragraph, in respect of which the total of the allowances granted for depreciation in the preceding years of assessments is equal to the cost of acquisition or the cost of construction, as the case may be. of such capital asset :

(bb) an allowance for depreciation by wear and tear of the following assets acquired, constructed or assembled and arising out of their use on or after April I, 2004. by such person in any trade, business , profession or vocation carried on by him –

(c) (c) A sum equal to –

by such person as consideration for obtaining a licence, in his favour, of any manufacturing process used by such person in any trade or business carried on by such person;

Provided that no deduction under the provisions of this paragraph shall be allowed to any person in respect of any such payment if the total of the sums deducted in the preceding years of assessment is equal to the amount of such payment :

(cc) a sum equal to one-fourth of any payment made by such person in any year of assessment commencing on or after April 1, 2002 but on or before March 31, 2004, in the acquisition of any intangible asset such as a patent, copyright or trade mark (other than any goodwill) used by him in any trade or business carried on by him :

Provided that no deduction shall be allowed to any person under this paragraph in respect of any such payment if the total of the sum deducted in the preceding years of assessment is equal to the amount of such payment ;

(d) an allowance in respect of any computer software acquired by him during the period of which the profits and income are being ascertained and used by him in any trade, business, profession, or vocation carried on or exercised by him, such allowance being :-

of the cost of acquisition of such computer software on or before March 31, 2004 ;

Provided that no deduction under the preceding provisions of this paragraph shall be allowed to any person in respect of any computer software if the total of the allowances granted in the preceding years of assessment in respect of such computer software is equal to the cost of acquisition of such computer software ;

(e) any sum expended by such person for the renewal of any capital asset employed by such person for producing such profits or income, if no allowance for the depreciation thereof is deductible in respect of that asset ;

(f) any sum expended by such person for the repair (not renewal) of any plant, machinery, fixtures, building, implement, utensil or article employed for producing such profits and income :

Provided that the sum deductible under this sub-paragraph shall, in the case of a company carrying on the business of letting premises for commercial purposes –

Provided further that for any year of assessment commencing on or after April 1, 2004. the provisions of sub-paragraph (ii) above , shall be applicable to the business of letting any premises ;

of the gross rent receivable by such company for such premises;”;

(g) a sum equal to the bad debts representing the supply of goods or services by such person on credit incurred by such person in any trade, business, profession, vocation or employment which have become bad debts during the period for which the profits are being ascertained and such sum as the Commissioner-General considers reasonable for doubtful debts to the extent that they are estimated to have become bad during that period, notwithstanding that such bad or doubtful debts were due and payable prior to the commencement of that period :

Provided that all sums recovered during that period on account of the amounts previously written off or allowed in respect of bad or doubtful debts shall for the purposes of this Act be treated as receipts of that period of that trade, business, profession, vocation or employment and for the purpose of this proviso, sums recovered shall be deemed to include any reduction as at the last date of such period in any estimated amount of a doubtful debt previously allowed as a deduction;

(h) interest paid or payable by such person ;

(i) any contribution by an employer, to a pension. provident or savings fund, or to a provident or savings society, which is approved by the Commissioner-General subject to such conditions as he may specify ;

(j)

which such person is liable to pay for the period for which the profits and income are being ascertained in respect of any trade, business. profession or vocation carried on or exercised by him ;

Provided that where at the time of making any assessment it appears to an Assessor that any such tax so payable has not been paid, he may refuse to allow any deduction in respect of such tax :

Provided further that where it appears to an Assessor that any such tax in respect of which a deduction has been refused, has been paid within a period of three years from the end of the year of assessment to which such assessment relates, he shall, on an application made in writing within twelve months of making such payment and supported by such proof as he may require make an amended assessment allowing such deduction notwithstanding the provisions of section 142, and any tax found to have been paid in excess as a result of such amended assessment shall be refunded notwithstanding the provisions of section 169 ;

(k) the expenditure incurred in any year of assessment commencing on or after April 1, 2000 but prior to April 1, 2002, by such person in carrying on any scientific, industrial or agricultural research for the development of the trade or business carried on by such person :

(kk) the expenditure including capital expenditure incurred in any year of assessment commencing on or after April 1, 2002 by such person in carrying on any scientific, industrial, agricultural or any other research for the upgrading of any trade or business carried on by such person;

(l) any expenses incurred by such person in”

(m) the actual expenses incurred by such person or any other person in his employ in traveling within Sri Lanka in connection with the trade, business profession or vocation of the first-mentioned person :

Provided that no deduction under the preceding provisions of this paragraph shall be allowed to any person”

(n) in the case of a company, expenditure incurred in the formation or of that company ;

(o) the expenditure incurred by such person in operating a motor coach used for transporting employees of such person to and from their place of work ;

(p) the expenditure incurred by such person in the payment of gratuity to an employee on the termination of employment of such employee due to cessation of the trade, business, profession or vocation carried on by such person :

(q) any annual payment made by such person to any fund, approved for the purposes of this paragraph, by the Commissioner-General and maintained for the purposes of payment, under the Payment of Gratuity Act, No. 12 of 1983. of gratuities to employees on the termination of their services :

(r) such part of the lump sum payment, which not being an advance payment made by such person to any other person in connection with the letting, or lease, to the first-mentioned person of any commercial premises as bears to the total lump sum payment the same proportion as the number of months in the year for which lease rent is payable bears to the total number of months comprised in the lease ;

(s) any sum paid on or before March 31, 2004, by a public corporation or Government Owned Business Undertaking as a special levy, to the Government.

(t) expenditure incurred by any person in the training, in any recognized institution for a period not exceeding sixty days, of any employee employed by such person in any trade or business carried on by such person, if it is proved to the satisfaction of the Commissioner-General that such training is”

For the purposes of this paragraph.

(a) an allowance for depreciation equal to the cost of acquisition or the cost of construction, as the case may be. of such capital asset has been granted in respect of that capital asset, such part of the proceeds of disposal as is not in excess of the cost of acquisition or the cost of construction, as the case may be. of such capital asset shall, whether such disposal takes place while such trade, business, profession or vocation continues or after its cessation. be treated as a receipt of such trade, business. profession or vocation, in ascertaining the profits and income, within the meaning of paragraph (a) of” section 3. of such trade, business, profession or vocation ;

(b) an allowance for depreciation has been granted in respect of that capital asset but the total amount of such allowance is less than the cost of acquisition or the cost of construction, as the case may be. of such capita] asset the proceeds of disposal as is not in excess of the cost of acquisition or the cost of construction as the case may be of such capital asset over the difference between the cost of acquisition or the cost of construction, as the case may he. of such capital asset and the total allowance for depreciation granted in respect of such capital asset shall whether such disposal takes place while such trade, business, profession or vocation continues or after its cessation, be treated as a receipt of such trade. business, profession or vocation, in ascertaining the profits and income of such trade business, profession or vocation within the meaning of paragraph (a) of section 3 ;

Provided that where such difference exceeds the proceeds of such disposal, the excess shall be treated for the purposes of subsection (1) as an expense incurred in the production of income :

Provided further that nothing in this paragraph shall apply to”

(a) where it appears to an Assessor that any interest is unpaid and cannot be recovered, any assessment which includes such interest shall, notwithstanding the provisions of section 142. be reduced by the amount of the interest included which has been shown to be unpaid and irrecoverable or. if income tax has been paid in respect of such interest, such tax may be refunded on a claim in writing made within three years of the end of the year of assessment in respect of which such tax was paid ;

(b)where any interest falling due in any year of assessment in respect of a loan has not been received and is likely to be irrecoverable, the person to whom such interest is due may exclude such interest from the profits and income chargeable with income tax for that year of assessment;

(c) where it appears to an Assessor that am interest which has been excluded from an assessment under paragraph (b) has subsequently been received and that income tax has not been paid in respect of such interest, he shall, notwithstanding anything in subsection (5) of section 134 limiting the period within which an assessment, or additional assessment may be made, make an assessment or additional assessment including such interest.

(a) such person has let on hire such capital asset”

(b) such person uses such capital asset in any undertaking carried on by him in partnership with the person from whom it was acquired or with any member of the family of the person from whom it was acquired :

(a) by the other spouse ; or

(b) by a partnership of which that other spouse is a partner.

(a) “allowance for depreciation”, in relation to any capital asset, means any allowance which shall be deducted in respect of that asset under”

(b) “capital asset” in relation to a trade, business, profession or vocation means plant, machinery, fixture, fittings, utensils , articles or equipment or any bridge, railway, reservoir electricity or water distribution line, toll roads used for the purpose of producing the income in such trade business, profession or vocation or building constructed for the purposes of such trade, business, profession or vocation :

(c) “proceeds” in relation to the disposal of any capital asset means”

(d) “disposal”, in relation to the disposal of any capital asset by any person includes”

(e) “qualified building” means a building constructed to be used for the purpose of a trade, business, profession or vocation other than to be used as a dwelling house by an executive officer employed in that trade. business, profession or vocation :

(f)

(a) domestic or private expenses, including the cost of traveling between the residence of such person and his place of business or employment ;

(b) expenses incurred in connection with his employment other than the expenses referred to in paragraph (g) and paragraph (i) of subsection (1) of section 23 ;

(c) any expenditure incurred in traveling outside Sri Lanka in connection with any trade, business, not being a business referred to in paragraph (d), profession or vocation carried on or exercised in Sri Lanka by such person, other than the expenses incurred in traveling outside Sri Lanka solely in connection with the”

(d) any expenditure incurred in traveling outside Sri Lanka in connection with the business of any undertaking of operating any hotel for tourists, carried on by such person, other than”

(e) entertainment expense incurred by such person or his employee or on his behalf in connection with any trade, business, profession or vocation carried on or exercised by him :

Provided that a deduction may be allowed in respect of such entertainment expenses incurred by such person or on his behalf, in any year of assessment commencing on or after April 1, 2002, but prior to April 1, 2005, if such expenses, if the expenses so incurred are directly related to any trade, business, profession or vocation carried on, or exercised by such person;

(f) entertainment allowances paid by such person to his executive officer, in any year of assessment commencing prior to April 1, 2002 and in any year of assessment commencing on or after April 1, 2005 ;

(g) any disbursements or expenses of such person, not being money expended for the purpose of producing such profits or income ;

(h) any expenditure of a capital nature or any loss of capital incurred by such person ;

(i) the cost of any improvements effected by such person ;

(j) any sum recoverable under a contract of insurance or indemnity, if the amount received under such contract is not treated as a receipt from such trade , business, profession or vocation under section 89 of the Inland Revenue Act, No. 28 of 1979 or under section 95 of this Act :

(k) rent of or expenses in connection with, any premises or part of a premises not occupied or used for the purposes of producing such profits and income ;

(l) any amount paid or payable by such person by way of ”

Any regulation prescribing a tax or levy for the purpose of this paragraph may be declared to take effect from a date earlier than the date on which such regulation is made :

(v) any Economic Service Charge levied under Finance Act, No. 11 of 2004 on or after April 1st, 2004;

(vi) any Value Added Tax on Financial Services levied under Chapter IIIA of the Value Added Tax Act, No. 14 of 2002, (inserted by amendment Act, No. 13 of 2004) on or after April 1,2005;

(vii) any Social Responsibility Levy chargeable under the Finance Act, No, 5 of 2005 as is referred to in item (4) of the First Schedule to the said Act, levied on or after April 1, 2005 ;”;and

(m) any annuity, ground rent, or royalty paid by such person ;

(n) any payment by such person to any pension. provident. savings, widows’ and orphans’ pension. or other society or fund, except such payments as are allowed under paragraph (c) of subsection (1) of section 23 ;

(o)

incurred by such person in providing any place of residence to any employee of such person or to the spouse, child or parent of such employee over the rental value of such place of residence which is included in the profits from employment of such employee within the meaning of section 4.

For the purposes of this paragraph ”expenditure’ shall include rent, lease rent, rates, repairs and maintenance or other expenses directly and specifically related to such place of residence whether incurred directly or indirectly by the employer;

(p) such part of the rental paid by him under any agreement entered into by him in any year of assessment commencing on or before April 01, 2003 in respect of”

(pp) such part of the rental paid by him under any finance leasing agreement entered in to by him in any year of assessment commencing on or after April I. 2004. in respect of-

(q) any sum transferred to any reserve or provision (other than any annual payment referred to in paragraph (q) of subsection (1 ) of section 23. for the payment of any sum referred to in subsection (2) of section 32. :

(r) such part of any sum paid or payable by such person, not being any venture capital company, any unit trust or any mutual fund, as consideration for the management of any trade, business, profession or vocation carried on or exercised by him as exceeds”

whichever is higher.

For the purposes of this paragraph, the term “turnover” in relation to any trade, business, profession or vocation and to any period, means the total amount received or receivable from transactions entered into, or for services performed, in that period, in carrying on or exercising such trade, business, profession or vocation excluding any amount received or receivable from the sale of capital assets ; and

(s) any expenditure or outgoing in relation to any asset provided by such person to an employee to be used in the residence of such employee;

(t) any expenditure or outgoing in relation to any movable or immovable property given by such person to any employee at a price less than market value at the time of giving such property,

(u) any expenditure or outgoing in relation to any loan, other advance or credit granted to any employee which is subsequently written off as a bad debt by such person.

(v) one half of such person’s cost of advertisement in connection with any trade, business, profession or vocation carried on or exercised by him in any year of assessment commencing on or after April 1, 2005, other than the cost of advertisement outside Sri Lanka incurred solely in connection with the export trade of any articles or goods or the provision of any services for payment in foreign currency ;

(w) any expenditure incurred in any trade or business carried on in Sri Lanka by any nonresident company, being expenditure in the nature of head office expenditure incurred in any period by reference to the profits and income of which the statutory income from such trade or business for any year of assessment commencing on or after April 1, 2005 is computed.

For the purpose of this paragraph the expression “head-office expenditure” shall have the same meaning as given in section 24A of this Act.

(a) for any year of assessment, in respect of any vehicle used for traveling for the purpose of his trade, business, profession or vocation. except in respect of”

(b) in respect of any plant, machinery, fixtures, equipment or articles provided for the use of any officer or employee of such person in the place of residence of such officer or employee.

(a) the amount of such expenditure ; or

(b) the amount equal to ten per centum of such profits or income.

(a) comprising the aggregate of the total profits from employment of and the total cost of traveling undertaken by every employee and every other’ person employed in or managing the affairs of, any office of such company outside Sri Lanka ; and

(b) in respect of

(a) commences to carry on or exercise a trade, business, profession or vocation in any year of assessment, such person shall make up the accounts of such trade, business, profession or vocation for the period beginning from the date of commencement of such trade, business, profession or vocation and ending on the thirty-first day of March of that year of assessment ; and

(b) ceases to carry on or exercise a trade business, profession or vocation in any year of assessment, such person shall make up the accounts of such trade, business, profession or vocation for the period beginning from the that day of April of that year of assessment and ending on the date of such cessation.

(a) statutory income from interest on which income tax has been deducted under section 122A and section 122B;

(b) statutory income from dividends on which income tax has been deducted under subsection (1A) of section 61, whether received directly form such company which distributes the dividend or through any other company; and

(c) statutory income from interest arising or accruing to any individual in respect of a secondary market transaction on any Security or Treasury Bond issued under the Registered Stock and Securities Ordinance (Chapter 420), or Treasury Bill issued under Treasury Bills Ordinance (Chapter 417), or , Central Bank Securities issued under the Monitory Law Act (Chapter 422) and from the interest on which tax under section 122A has been deducted from a primary dealer,

(a) tax, on the total amount of such interest has been deducted under section 122A or section 122B, as the ease may be : and

(b) such interest income has been accrued or arisen to such primary dealer in respect of a primary market transaction on any Security or Treasury Bonds issued under the Registered stock and Security Ordinance (Chapter 420) or Treasury Bill issued under the Local Treasury Bills Ordinance (Chapter 4 17) or Central Bank Security issued under the Monetary Law Act (Chapter 422) referred to in section 122A or any debt security issued by a company under section 122B as the case may be.

(a)

from which income tax has been deducted in accordance with Chapter XVIB;

(b) the receipt of any lottery prize or winnings from gambling or betting from which tax has been deducted under section 132A ; and

(c) interest received on the compensation payable in respect of any immovable or movable property vested in the Government or in the Land Reform Commission or in a Public Corporation from which the income tax has been deducted under section 33.

(a) sums payable for that year of assessment being a year of assessment commencing prior to April 1, 2002 by such person for that year of assessment by way of annuity, ground rent, royalty or interest not deductible under section 23 ;

Provided that ”

‘For the purposes of this paragraph’ the term “interest” means any interest paid on a loan the proceeds of which are utilized ”

(aa) sums paid by such person for any year of assessment commencing on or after April 1, 2002 but prior to April 1, 2004 by way of an annuity, ground rent, royally or interest not deductible under section 23 :

Provided that –

For the purposes of this paragraph the term “interest” means any interest paid during any year .of assessment on any loan obtained from a bank, financial institution or any other institution recognised by the Commissioner-General.

(aaa) sums paid by such person for any year of assessment commencing on or after April 1, 2004 by way of annuity, ground rent, loyalty or interest not deductible under section 23, which amount has not previously been allowed as a deduction under this section on the basis of amount payable or paid :

Provided that

(b) the amount of a loss (other than such part, if any. of such loss as consists of a capital loss, a loss referred to in subsection (6). a loss referred to in subsection (7), a loss referred to in subsection (8). a loss referred to in paragraph (c) and a loss attributable to any allowance for depreciation or any sum referred to in paragraph (e) of subsection (1) of section 23). incurred by him in any trade, business, profession or vocation during any year of assessment being any year of assessment within the period of six years immediately preceding the first-mentioned year of assessment, or

(c) the amount of a loss (other than such part, if any. of such loss as is attributable to any allowance for depreciation or any sum referred to in paragraph (c) of subsection (1) of section 23) incurred by him in any agricultural undertaking during any year of assessment being any year of assessment within the period of eleven years immediately preceding the first-mentioned year of assessment.

(d) such part, if any. of such loss as is attributable to any allowance for depreciation, incurred by him in any trade, business, profession or vocation during any year of assessment and which has not been allowed against his total statutory income of a previous year of assessment, which if it had been a profit would have been assessable and which had not been allowed against his total statutory income for any year of assessment within with in such period of six years, or eleven years, as the case may be ;

Provided however, not withstanding the provisions of paragraphs (b) or (c) the Minister may determine the maximum period for which a loss may be carried forward in relation to any specific activity considering the importance of such activity for the economic development of Sri Lanka .