SCHEDULE 2 - Deduction For Capital Expenditure On Mines.
Qualifying mining expenditure
1. Subject to paragraph 2, qualifying mining expenditure for the purposes of this Schedule is expenditure which is incurred in connection with the working of a mine or in preparation for the working of a mine-
(a) on the acquisition of the mine or rights in or over the mine;
(b) on searching for, on discovering and testing or on winning access to deposits of minerals;
(c) on the construction of any works or buildings which, when the mine ceases to be worked, are likely to be of little or no value to any person except in connection with the working of another mine; or
(d) on development, general administration or management before the production of minerals begins or during any period when minerals are not being produced.
2. Where a deduction has been made under section 44 pursuant to Schedule 4 (or under any corresponding provision of any of the repealed laws as defined in Schedule 9) in respect of any expenditure, and that expenditure has not been added to any aggregate income under section 43(i)(c) pursuant to subparagraph 5 (a) of Schedule 4, that expenditure shall be deemed not be qualifying mining expenditure for the purposes of this Schedule.
[Ins. Act 309: s.16]
Deductions for qualifying mining expenditure
3 . Subject to this Schedule, where the business of a person consists or mainly consists of the working of a mine with or without other mines (that business and that person being in this Schedule referred to as the relevant business and the operator respectively) and the operator has incurred qualifying mining expenditure in relation to that mine, then, in the ascertainment of the adjusted income of the operator for the basis period for a year of assessment from the relevant business there shall be allowed pursuant to this Schedule as a deduction under section 34 from the gross income for that period from the relevant business an amount arrived at by dividing the residual expenditure at the end of that period by the residual life at the beginning of that period.
4. (1) The operator shall, when he commences working a mine which forms part of the relevant business and thereafter from time to time as may be necessary, furnish to the Director General a written statement containing an estimate of the life of the mine by reference to the number of years during which the winning and obtaining of minerals from the mine may be expected to continue and setting out the calculations on which that estimate is based; and the Director General, by reference to that estimate or, where no or no proper or sufficient statement has been furnished under this paragraph, by reference to a similar estimate made by him to the best of his judgment shall from time to time as he thinks appropriate fix a figure of the number of years of the life of the mine, and that number shall constitute the estimated life of the mine for the purposes of this Schedule:
Provided that, if the commencement of working was before 1st January 1968, this subparagraph shall not apply as regards that commencement but shall otherwise apply from time to time as may be necessary.
(2) Except where any provision of paragraph 15 applies, a change in the estimated life of a mine shall not affect a deduction which has been or could have been made under section 34 pursuant to this Schedule in ascertaining adjusted income from the relevant business for the basis period for a year of assessment if that basis period ended before the change.
5. Where in a case to which section 41 applies it is necessary as regards a mine to ascertain a deduction under section 34 pursuant to this Schedule in relation to an accounting period of more or less than twelve months-
(a) the residual expenditure at the end of that period shall be divided by the residual life at the beginning of that period; and
(b) the resulting figure shall be increased or decreased in the same proportion as the length of that accounting period bears to a period of twelve months and shall then constitute the amount of the deduction.
Transfer of mine, etc.
6. Paragraphs 7 to 14 shall apply in relation to any particular mine forming part of the relevant business with respect to which the operator has incurred qualifying mining expenditure, and in those paragraphs-
"consideration" means consideration (not being in the nature of or representing income) which is monetary or non-monetary or both;
"the mine" means the particular mine in question;
"mining asset" means either the mine or an asset on or for which the operator has incurred qualifying mining expenditure in connection with or in preparation for the working of the mine;
"other property" means property which is not a mining asset;
"value" means-
(a) in relation to monetary consideration, the amount of the consideration;
(b) in relation to non-monetary consideration, the market value of the consideration at the time of the transaction to which the consideration relates.
7. Subject to paragraph 8-
(a) where the operator transfers a mining asset for a consideration, the value of the consideration shall be deemed to be recovered expenditure in relation to the mine and to be received by the operator at the date of the transfer;
(b) where the operator receives any consideration for the granting of any right in or over the mine or any part thereof, the value of the consideration shall be deemed to be recovered expenditure in relation to the mine and the operator; and
(c) where the operator receives any amount or property by way of compensation, recoupment or otherwise for any qualifying mining expenditure (being expenditure of a kind which does not produce a mining asset) incurred by him in connection with or in preparation for the working of the mine, that amount or the market value of that property at the time of its receipt shall be deemed to be recovered expenditure in relation to the mine and the operator.
8. Where the operator transfers a mining asset together with any other property, then-
(a) if the transfer is made for an undivided consideration and the operator and the transferee are able to agree how much of the value of the consideration should be treated as given for the mining asset and for the other property respectively, they shall within three months of the transfer jointly furnish the Director General with a written statement showing the apportionment of the consideration as so agreed and, subject to subparagraph (c), the part of that value apportioned to the mining asset shall be deemed to be recovered expenditure in relation to the mine and to be received by the operator at the date of the transfer;
(b) if the transfer is made for separate considerations, the operator shall within three months of the transfer furnish the Director General with a written statement showing the value of each consideration and, subject to sub-paragraph (c), the value of the consideration shown in that statement for the mining asset shall be deemed to be recovered expenditure in relation to the mine and to be received by the relevant person at the date of the transfer; and
(c) if the Director General is not satisfied with the apportionment mentioned in subparagraph (a) or with any value shown in the statement mentioned in subparagraph (b), or if there is a failure to furnish a statement in accordance with either of those sub-paragraphs, the Director General shall determine to the best of his judgment the value of the consideration for the mining asset, and the value so determined shall be deemed to be recovered expenditure in relation to the mine and to be received by the operator at the date of the transfer.
9. Where there is a transfer by the operator of a mining asset (with or without any other property) together with a grant by the operator of a right of the kind mentioned in subparagraph 7(b), then, for the purposes of paragraph 8-
(a) the grant shall be treated as forming part of the transfer of that asset; and
(b) the right shall be treated as forming part of that asset,
and that paragraph shall apply accordingly with any necessary modifications.
10. Where the operator transfers a mining asset (with or without other property) either-
(a) for an undivided consideration (as regards that asset and that other property, if any) together with an amount or property of the kind mentioned in subparagraph 7 (c); or
(b) for separate considerations (as regards that asset and that other property, if any) together with an amount or property of that kind,
paragraph 8 shall apply with any necessary modifications.
11. For the purposes of paragraphs 7 to 10-
(a) if any consideration consists partly of money and partly of non-monetary property, the value of the monetary part of the consideration and the value of the non-monetary part thereof shall whenever necessary, be aggregated or aggregated and apportioned, as the case may require;
(b) if the subject matter of a transfer consists of two or more mines or of a right in or over two or more mines, any amount apportioned under those paragraphs to those mines shall be divided and apportioned to each of those mines in the proportion that the residual expenditure in relation to each of those mines at the date of the transfer bears to the total of the residual expenditure in relation to those mines.
12. Where the operator transfers the mine and at the date of the transfer the residual expenditure ascertained immediately before that date exceeds the difference between-
(a) the total amount of all the operator's recovered expenditure received on or before that date; and
(b) the total amount of all his recovered expenditure received prior to that date,
the amount of the excess shall be allowed pursuant to this Schedule under section 34 as a deduction from his gross income from the relevant business for the basis period (being the basis period appropriate to the relevant business for a year of assessment) in which the transfer was made.
13. (1) Where the operator has incurred expenditure in relation to the transfer to him of the mine and any other matter or thing appertaining to the mine, that expenditure shall be treated as qualifying mining expenditure incurred by the operator in respect of the mine.
[Am. Act A226: s.33; Am. Act A429:10]
(2) (Repealed by
Act A226: s.33).
14. Where in relation to the mine there takes place a transaction as a result of which an amount would (but for this paragraph) fall to be treated under any provision of paragraphs 6 to 13 as recovered expenditure of the operator in relation to the mine and-
(a) the operator is a person over whom the other party to the transaction has control;
(b) that other party is a person over whom the operator has control;
(c) some other person has control over both the operator and that other party;
(d) the transaction takes place pursuant to a scheme of reconstruction or amalgamation of companies; or
(e) the Director General is of the opinion that the transaction is or forms part of a transaction to which section 140 applies,
the residual expenditure referable to the mine or any other mining asset immediately before the date of that first-mentioned transaction shall be deemed in the hands of the operator to be recovered expenditure received at that date and in the hands of that other party to be qualifying mining expenditure incurred at that date; and paragraphs 6 to 13 shall not apply in relation to that first-mentioned transaction.
Cessation of working
15. Where in the basis period for a year of assessment the operator permanently ceases to work a mine (otherwise than upon his death of the transfer of the mine by him to any other person), recovered expenditure received by him after the date of the cessation of working shall (notwithstanding any provision of paragraphs 7 to 10) be treated as if it had been received on that date and-
(a) if he so elects, the deductions to be made under section 34 in respect of amounts allowed pursuant to this Schedule in computing his adjusted income from the relevant business for that basis period and for the basis period for each of the five immediately preceding years of assessment (or, if he commenced to work the mine in the basis period for one of those five years other than the earliest thereof, for that first-mentioned basis period and for the basis period being a basis period in which the mine was worked by him for each of the preceding years of assessment) shall be computed as regards each such basis period as if the reference in paragraph 3 to the residual life at the beginning of the basis period were a reference to what the residual life would be if the estimated life were taken to be equal to the number of complete years from the beginning of the first such basis period to the date of cessation of working; and
(b) such repayments of tax and assessments shall be made as are necessary to give effect to this paragraph.
Supplemental provisions
16. Where two or more separate and distinct sets of mining operations are carried on over a source of minerals and none of those sets of operations is carried on contiguously to another of those sets of operations, each of those sets of operations shall be treated for the purposes of this Schedule as being carried on in the working of a separate mine:
Provided that, where a deduction has been given under section 34 in respect of any amount allowed pursuant to this Schedule for qualifying mining expenditure in respect of any such separate mine, no amount shall be allowed pursuant to this Schedule for that expenditure in respect of any other such separate mine and that expenditure shall not be treated as qualifying mining expenditure incurred in respect of that other mine.
17. (1) A person shall not be treated as working a mine for the purposes of this Schedule unless he is actively engaged in working the mine and his gross income from a business of his includes the proceeds of sale of minerals won or obtained by working the mine.
(2) A person is not actively engaged in working a mine within the meaning of subparagraph (1) if he has sublet the mine or authorized any other person to work the mine on payment of a premium, rent or tribute (by whatever name called).
18. Where-
(a) the relevant business consists of or includes the working of a mine; and
(b) the working of that mine begins at any time in the basis period appropriate to the relevant business for a year of assessment,
the number of years of the life of the mine at the time when the working of that mine began shall, in ascertaining the residual life for the purposes of paragraph 3, be deemed to be the number of years of the life of the mine at the beginning of that period.
19. (Repealed by
Act A226: s.33).
20. (Repealed by
Act A226: s.33).
21. (Repealed by
Act A226: s.33).
22. In this Schedule-
"estimated life", in relation to a mine, means the figure of the number of years of the life of the mine fixed from time to time by the Director General under subparagraph 4(1) as the estimated life of the mine;
"recovered expenditure" means any amount ascertained in accordance with paragraphs 6 to 11 or paragraph 14 to be recovered expenditure in relation to any particular mine forming part of the relevant business.
"residual expenditure", in relation to any particular mine forming part of the relevant business and to any particular date, means the total qualifying mining expenditure incurred in respect of that mine before the date by the operator, reduced by the amount of-
(a) any deductions made under section 34 pursuant to this Schedule in respect of that expenditure from the gross income of the operator from the relevant business for the basis period for any year of assessment, being a basis period ending before that date; and
(b) any recovered expenditure in relation to that mine received by the operator on or before that date;
"residual life", in relation to any particular mine forming part of the relevant business and to any particular date, means the number of years of the estimated life of the mine remaining at that date.
