THE COMMISSIONER OF INLAND REVENUE v. TAI ON MACHINERY WORKS LTD

THE COMMISSIONER OF INLAND REVENUE v. TAI ON MACHINERY WORKS LTD

Premises used by a trader for storage and incidental sorting/packing as part of that trader's wider buying and resale business do not qualify as an 'industrial building or structure' under s.40(1); interest incurred during construction of a revenue-earning asset is capital in nature and not deductible under s.16(1) because s.17(1) excludes capital expenditure.

Citation
THE COMMISSIONER OF INLAND REVENUE v. TAI ON MACHINERY WORKS LTD
Parties
Appellant and Respondent (cross Appeal): The Commissioner of Inland Revenue; Respondent and Appellant (cross Appeal): Tai On Machinery Works Ltd.
Court
Court of First Instance
Jurisdiction
Hong Kong
Case Number
HCIA2/1968
Procedural Posture
Inland Revenue Appeal (s.69, Cap.112) / Judgment on Appeal From Board of Review on a Stated Case
Outcome
Company's appeal dismissed; Commissioner's cross-appeal allowed; Commissioner's determinations reinstated in part.
Legal Topics
Deductibility of Interest, Capital Vs Revenue Expenditure, Definition of Industrial Building, Tax Assessment Procedure
Source Language
EN
Tax Law Statutory Interpretation Administrative Law Deductibility of Interest Capital Vs Revenue Expenditure Definition of Industrial Building Tax Assessment Procedure

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Parties

The Commissioner of Inland Revenue

Appellant and Respondent (cross Appeal)

Tai On Machinery Works Ltd.

Respondent and Appellant (cross Appeal)

Procedural Posture

Inland Revenue Appeal (s.69, Cap.112) / Judgment on Appeal From Board of Review on a Stated Case

Legal Issues

  1. 1 Whether upper four floors used by tenant for storage/processing qualify as an 'industrial building or structure' under s.40(1)
  2. 2 Whether interest on overdrafts paid during construction period (before building capable of producing profits) is deductible under s.16(1)(a) or excluded as capital under s.17(1)

Ratio Decidendi

Premises used by a trader for storage and incidental sorting/packing as part of that trader's wider buying and resale business do not qualify as an 'industrial building or structure' under s.40(1); interest incurred during construction of a revenue-earning asset is capital in nature and not deductible under s.16(1) because s.17(1) excludes capital expenditure.

Court Disposition

Company's appeal dismissed; Commissioner's cross-appeal allowed; Commissioner's determinations reinstated in part.

Orders

  • Findings of the Board varied in respect of second head; answers to para.7 questions: (a) No; (b) Yes; third head: No
  • Findings of the Commissioner reinstated where varied; Board's decision upheld on other points (paras 11-15)