ACT, No. 10 OF 2007

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PARLIAMENT OF THE DEMOCRATIC
SOCIALIST REPUBLIC OF
SRI LANKA
INLAND REVENUE (AMENDMENT)
ACT, No. 10 OF 2007
[Certified on 30th March, 2007]
Printed on the Order of Government
Published as a Supplement to Part II of the Gazette of the Democratic
Socialist Republic of Sri Lanka of March 30, 2007
PRINTEDAT THEDEPARTMENT OFGOVERNMENTPRINTING,SRILANKA
TOBEPURCHASED AT THEGOVERNMENT PUBLICATIONSBUREAU,COLOMBO1
Price : Rs. 40.50 Postage : Rs. 12.50

Inland Revenue (Amendment) Act, No. 10 of 2007 1
[Certified on 30th March 2007]
L.D.—O. 04/2007.
ANACT TO AMEND THE INLAND REVENUE ACT, NO. 10 OF 2006
Be it enacted by the Parliament of the Democratic Socialist
Republic of Sri Lanka, as follows :—
1. This Act may be cited as the Inland Revenue Short title.
(Amendment) Act, No. 10 of 2007.
2. Section 4 of the Inland Revenue Act, No. 10 of 2006 Amendment of
(hereinafter referred to as the “principal enactment”) is hereby section 4 of Act,
No. 10 of 2006.
amended in subsection (1) of that section, as follows :—
(1) in paragraph (d) of that subsection by the
substitution for all the words “(ii) the gross rent paid
for such place of residence, whichever is higher,” to
the end of that paragraph, of the following—
“(ii) the gross rent paid for such place of residence,
whichever is higher :
Provided that for any year of assessment,
any excess of the rental value—
(A) over one hundred and twenty thousand
rupees, where the aggregate of the profits
referred to in paragraph (a) does not
exceed one million and eight hundred
thousand rupees ; and
(B) over one hundred and eighty thousand
rupees, where the aggregate of the profits
referred to in paragraph (a) exceeds one
million and eight hundred thousand
rupees,
shall be disregarded ;”; and
2 Inland Revenue (Amendment) Act, No. 10 of 2007
(2) in paragraph (e) of that subsection by the
substitution for the words “at the time of its disposal,
of any share”, of the words and figures “at the time
of its disposal, where such disposal takes place prior
to April 1, 2007, of any share”.
Amendment of 3. Section 8 of the principal enactment is hereby amended
section 8 of the in subsection (1) of that section, as follows :-
principal
enactment.
(1) in paragraph (n) of that subsection, by the
substitution for the words, “public corporation or at
any subsequent time,”, of the words and figures
“public corporation other than any public
corporation referred to in sub-paragraph (ii) of
paragraph (b), or at any subsequent time,”;
(2) in sub-paragraph (ii) of paragraph (o) of that
subsection, by the substitution for the words “the
Commissioner of Labour”, of the words “the
Commissioner of Labour;”; and
(3) by the addition immediately after paragraph (o) of
that subsection, of the following new paragraphs :-
“(p) the value of any benefit accruing to an
employee of any employer from the allotment
or the grant, as the case may be, to such
employee or to any nominee of such employee
by or on behalf of such employer, of any share
or any option to buy any share in any company,
in accordance with a scheme which in the
opinion of the Commissioner-General is
uniformly applicable to all the employees of
such employer.
In this paragraph, the “value” in relation to
any benefit accruing from the allotment of
any share or the option to buy any share,
means the excess, if any, of the market value
of such share at the time of its allotment or at
the time of the sale of the option, as the case
may be, over the price charged for such
allotment or grant, as the case may be ; and
Inland Revenue (Amendment) Act, No. 10 of 2007 3
(q) the emoluments earned in any year of
assessment commencing on or after April 1,
2007, by any resident individual from
employment on a ship which is—
(i) owned or chartered by a company
registered as an off-shore company
under Part XI of the Companies Act,
No. 7 of 2007 ; or
(ii) deemed to be a Sri Lanka ship by virtue
of a determination made under paragraph
(c) of section 30 of the Merchant
Shipping Act, No. 52 of 1971.”.
4. Section 9 of the principal enactment is hereby amended Amendment of
as follows :— section 9 of the
principal
(1) in paragraph (j) of that section, by the substitution enactment.
for the words “such charitable institution.”, of the
words “such charitable institution ;”; and
(2) by the addition immediately after paragraph (j) of
that section, of the following new paragraph :—
“(k) the interest accruing to any person from any
money deposited in any Treasury Bond
Investment External Rupee Account.”.
5. Section 10 of the principal enactment is hereby Amendment of
amended in subsection (1) of that section, by the substitution section 10 of the
principal
for paragraph (b) of that subsection, of the following
enactment.
paragraph :–
“(b) any dividend paid to a unit holder by any unit trust
or mutual fund;”.
6. Section 13 of the principal enactment is hereby Amendment of
amended as follows :— section 13 of the
principal
enactment.
4 Inland Revenue (Amendment) Act, No. 10 of 2007
(1) in sub-paragraph (i) of paragraph (b) of that section,
by the substitution for the words “outside Sri Lanka
(including services relating to any construction
project); and”, of the words and figures “outside Sri
Lanka (including, in relation to the year of
assessment commencing on April 1, 2006, services
relating to any construction project); and”;
(2) by the insertion, immediately after paragraph (d) of
that section, of the following new paragraph :—
“(dd) the profits and income for any year of
assessment earned in foreign currency by any
resident company, a resident individual or any
partnership from services rendered outside Sri
Lanka in that year of assessment, in carrying
out any contruction project in the course of
any trade, business or vocation, if such profits
and income (less any such amount expended
by that compnay, individual or partnership
outside Sri Lanka as is considered by the
Commissioner-General to be reasonable
expenses) are remitted to Sri Lanka through a
bank;”;
(3) in paragraph (t) of that section, by the substitution
for the words “any profits and income derived by or
accruing to any person or partnership other than any
unit trust, mutual fund or any venture capital
company, from the sale of any share”, of the words
and figures—
“any profits and income—
(i) for the year of assessment commencing on
April 1, 2006, derived by or accruing to any
person or partnership other than any unit trust,
mutual fund or venture capital company ; and
(ii) for any year of assessment commencing on or
after April 1, 2007, derived by or accruing to
any person or partnership,
from the sale of any share”; and
Inland Revenue (Amendment) Act, No. 10 of 2007 5
(4) by the substitution, for paragraph (x) of that section
of the following paragraph :—
“(x) an amount equal to the interest payable to any
bank in Sri Lanka, in respect of any loan
granted to a company, the full amount of which
is invested :—
(i) in any new undertaking referred to in
subsection (2) of section 20, where such
company is a company referred to in that
section ; and
(ii) in any relocated undertaking referred to
in subsection (2) of section 21, where
such company is a company referred to
in that section;”.
7. Section 16 of the principal enactment is hereby Amendment of
amended in subsection (1) of that section, by the substitution section 16 of the
principal
for the words “The profits and income of any person”, of the
enactment.
words “The profits and income within the meaning of
paragraph (a) of section 3, other than any profits and income
from the disposal of any capital asset, of any person”.
8. Section 17 of the principal enactment is hereby Amendment of
amended as follows :- section 17 of the
principal
enactment.
(1) in subsection (1) of that section, by the substitution
for the words and figures “on or after April 1, 2002”,
of the words and figures “on or after April 1, 2006”;
and
(2) in sub-paragraph (ii) of paragraph (a) of subsection
(2) of that section, by the substitution for the words
“incorporated with a minimum”, of the words and
figures “incorporated on or after April 1, 2002, with
a minimum”.
6 Inland Revenue (Amendment) Act, No. 10 of 2007
Insertion of new 9. The following new sections are hereby inserted
sections 24A and immediately after section 24 of the principal enactment and
24B in the
principal shall have effect as section 24A and section 24B of that
enactment. enactment :—
“Exemption 24A. (1) The profits and income within the
from income
meaning of paragraph (a) of section 3, (other
tax of the
profits and than any profits and income from the disposal
income from of any capital asset) from the exhibition on or
any new or
after April 1, 2007 of any cinematographic film
upgraded
cinema. in any new cinema or any upgraded cinema
referred to in subsection (3), shall be exempt
from income tax for a period of :—
(a) ten years, where the cinema is a new
cinema ; or
(b) five years, where the cinema is an
upgraded cinema.
(2) The period of ten years or the period of
five years, as the case may be, referred to in
subsection (1) shall, in relation to any cinema,
commence from the commencement of the year
of assessment in which the exhibition of
cinematographic films in such new cinema or
upgraded cinema, as the case may be,
commenced.
(3) For the purposes of this section :—
(a) “new cinema” means a cinema—
(i) in which the exhibition of
cinematographic films commences
on or after April 1, 2007 ; and
Inland Revenue (Amendment) Act, No. 10 of 2007 7
(ii) which is certified by the
National Film Corporation of Sri
Lanka established by the
National Film Corporation of Sri
Lanka Act, No. 47 of 1971 as
being equipped with digital
technology and Digital Theatre
Systems and Dolby Sound
Systems ; and
(b) “upgraded cinema” means a cinema—
(i) in which the exhibition of
cinematographic films had
commenced prior to April 1,
2007 ;
(ii) which was not equipped with
digital technology and Digital
Theatre Systems and Dolby
Sound Systems prior to April 1,
2007 ; and
(iii) which is certified by the
National Film Corporation of Sri
Lanka, established by the
National Film Corporation of
Sri Lanka Act, No. 47 of 1971 as
being equipped on or after April
1, 2007, with digital technology
and Digital Theatre Systems and
Dolby Sound Systems.
Exemption 24B. (1) The profits and income within the
from income meaning of paragraph (a) of section 3, (other
tax of the
profits and than any profits from the disposal of any
income from capital asset) of any person from the operation
the operation of any reopened abandoned factory referred to
of any re- in subsection (2), shall be exempt from
opened
abandoned income tax for the period ending on March 31,
factory. 2011.
8 Inland Revenue (Amendment) Act, No. 10 of 2007
(2) For the purpose of subsection (1),
“reopened abandoned factory” means a factory
which :—
(a) was engaged in the production or
manufacture of any commodity or
article but which had not been so
engaged for an unbroken period of not
less than three years, preceding
November 16, 2006; and
(b) commences to produce or
manufacture such commodity or
article or any other commodity or
article in commercial quantities before
April 1, 2008.”.
Amendment of 10. Section 25 of the principal enactment is hereby
section 25 of the amended in subsection (1) of that section as follows:—
principal
enactment. (1) by the substitution for paragraph (b) of the proviso
to paragraph (a) of that subsection, of the following
paragraph :—
“(b) where:—
(i) any plant or machinery acquired is used
in any business of providing health care,
printing on paper, gem cutting and
polishing, packaging of any commodity
for commercial purposes, rice milling
or such other business as may be
prescribed by the Commissioner-
General by Order published in the
Gezette; or
(ii) the asset consists of a ship acquired on
or after April 1, 2007, being a ship which
is owned or chartered by a company
registered under Part XI of the
Companies Act, No.7 of 2007 or is
Inland Revenue (Amendment) Act, No. 10 of 2007 9
deemed to be a Sri Lanka ship by virtue
of a determination made under
paragraph (c) of section 30 of the
Merchant Shipping Act, No. 52 of 1971,
the rate shall be 33 1/3 per centum of the cost
of acquisition;”;
(2) by the insertion immediately after paragraph (b) of
the proviso to paragraph (a) of that subsection, of
the following new paragraph :-
“(c) where any plant or machinery is acquired on
or after April 1, 2007 and is used in any
business of carrying out construction work,
the rate shall be twenty five per centum of the
cost of acquisition;”;
(3) in paragraph (e) of that subsection, by the
substitution for the words “a sum equal to the bad
debts incurred”, of the words and figures “for the
year of assessment commencing on April 1, 2006, a
sum equal to the bad debts incurred”; and
(4) by the insertion immediately after paragraph (e) of
that subsection, of the following new paragraphs :-
“(ee) for any year of assessment commencing on or
after April 1, 2007, a sum equal to the bad
debts 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 :
Provided that, all sums recovered during
such period on account of the amounts
previously written off or allowed in respect of
bad debts shall, for the purposes of this Act,
be treated as receipts of that trade, business,
profession, vocation or employment, for such
period ;
10 Inland Revenue (Amendment) Act, No. 10 of 2007
(eee) for any year of assessment commencing on or
after April 1, 2007, where such person is a
bank or a financial institution, such sum as
the Commissioner-General considers
reasonable for doubtful debts, to the extent
that they are estimated to have become bad
during the period for which the profits are
being ascertained, and notwithstanding that
such debts were due and payable prior to the
commencement of that period :
Provided that :—
(i) such sum so considered reasonable shall
not exceed one per centum of the
aggregate debts outstanding at the end
of that period ;
(ii) where the doubtful debts estimated by
such person as having become bad
during the period for which the profits
are being ascertained exceeds the sum
deducted under this paragraph, the
excess shall be deemed to be doubtful
debts estimated by such person as
having become bad during the period
immediately succeeding the period
hereinbefore referred to ; and
(iii) where the estimated amount of any
doubtful debt previously allowed as a
deduction has been reduced or such
amount or any part thereof has been paid
during such period, the sum by which
such amount has been so reduced or the
sum so paid shall for the purposes of
this Act, be treated as a receipt of such
bank or financial institution for that
period.
Inland Revenue (Amendment) Act, No. 10 of 2007 11
For the purposes of this paragraph, “financial
institution” shall have the same meaning as
given for that expression in section 147 ;
(eeee) for any year of assessment commencing on or
after April 1, 2007, where such person is not a
bank or a financial institution, such sum as
the Commissioner-General considers
reasonable for doubtful debts, to the extent
that they are estimated to have become bad
during the period for which the profits are
being ascertained :
Provided that, where the estimated amount
of any doubtful debt previously allowed as a
deduction has been reduced or such amount
or any part thereof has been paid during such
period, the sum by which such amount has
been so reduced or the sum so paid shall, for
the purposes of this Act, be treated as a receipt
of such person for such period.
For the purposes of this paragraph “financial
institution” shall have the same meaning as
given for that expression in section 147;”;
(5) in paragraph (h) of that subsection, by the omission
of the provisos to that paragraph ;
(6) in the proviso to paragraph (k) of that
subsection :—
(a) by the substitution in paragraph (iv) of that
proviso, for all the words and figures from “the
trade, business, profession or vocation carried
on by such employer.”, to the end of that
paragraph, of the words, “the trade, business,
profession or vocation carried on by such
employer ; and”;
(b) by the substitution in pargraph (v) of that
proviso, for the words, “place of employment
or vice versa;” , of the following words :—
12 Inland Revenue (Amendment) Act, No. 10 of 2007
“ place of employment or vice versa.
For the purpose of this proviso, “expenses
incurred”, shall include any lease rental or
other rental payment in respect of such vehicle
or the cost of acquisition of such vehicle;”;
and
(7) by the addition, immediately after paragraph (q) of
that subsection, of the following paragraph :—
“(r) the accreditation expenses, where such person
is a person carrying on any profession.”.
Amendment of 11. Section 26 of the principal enactment is hereby
section 26 of the amended as follows :—
principal
enactment.
(1) in subsection (1) of that section—
(a) in paragraph (l) of that subsection :—
(i) by the substitution in sub-paragraph (i)
of that paragraph, for the words and
figures “paragraph (c) of subsection (1)
of section (97);”, of the words and
figures “paragraph (c) of subsection (1)
of section 97,;”;
(ii) by the substitution in sub-paragraph
(iii) of that paragraph, for the words “tax
or levy; and”, of the words “tax or levy;
or”;
(iii) by the substitution in sub-paragraph (iv)
of that paragraph, for the words and
figures “Economic Service Charge Act,
No. 13 of 2006;”, of the words and
figures “Economic Service Charge Act,
No. 13 of 2006 ; or”;
Inland Revenue (Amendment) Act, No. 10 of 2007 13
(iv) by the substitution in sub-paragraph (v)
of that paragraph, for the words and
figures “Value Added Tax Act, No. 14 of
2002;”, of the words and figures, “Value
Added Tax Act, No. 14 of 2002 ; or”;
(v) by the substitution in sub-paragraph (vi)
of that paragraph, for the word and
figure “item iv”, of the word and figure
“item 4”;
(b) in paragraph (x) of that subsection, by the
substitution in paragraph (B) of sub-paragraph
(iv) of that paragraph, for the words “any
previous year.”, of the following words :—
“any previous year ; and
(v) “loan” includes the collection of funds
from the issue of any debt instrument.”;
and
(c) by the addition immediately after paragraph
(x) of that subsection, of the following new
paragraph :—
“(y) the excess, if any, of the aggregate
amount of the interest payable for any
year of assessment by any holding
company to any subsidiary company of
such holding company, in respect of any
loan obtained from such subsidiary
company, over such part of the interest
so payable as is attributable to such part
of such loan as is equal to thrice the
aggregate of the issued share capital
and reserves of such holding company,
at the end of that year of assessment,
where such holding company is a
manufacturer :
14 Inland Revenue (Amendment) Act, No. 10 of 2007
Provided that, where such holding
company is not a manufacturer, the
provisions of the preceding paragraph
shall apply as if for the reference in that
paragraph to the words “thrice the
aggregate of the issued share capital
and reserves”, there were substituted the
words “four times the aggregate of the
share capital and reserves.
In this paragraph—
(i) the expressions “subsidiary
company” and “holding
company” shall have the same
respective meanings assigned to
them in the Companies Act,
No. 7 of 2007;
(ii) any holding company shall,
in relation to any year of
assessment, be deemed to be “a
manufacturer”, if more than fifty
per centum of the turnover for that
year of assessment of such holding
company, is from the sale of
products manufactured by such
holding company ;
(iii) “reserves” do not include reserves
created for the purpose of
accounting for any surplus from
the revaluation of any asset ; and
(iv) “turnover” in relation to any year
of assessment of any holding
company, means the total amount
receivable, whether actually
received or not, from every sale
made in that year of assessment
of products manufactured by such
holding company :—
Inland Revenue (Amendment) Act, No. 10 of 2007 15
(A) after deducting therefrom:—
(i) any sum included in
such total amount,
being proceeds from
the disposal of any
capital asset ;
(ii) the amount of any
bad debt incurred
during that year of
assessment, being an
amount which had
been included in the
turnover of such
holding company for
that or any previous
year of assessment ;
and
(iii) any sum included in
such total amount,
being a sum which
represents the value
added tax ; and
(B) after adding thereto any
sum received during that
year of assessment on
account of any bad debt,
written off or allowed in any
previous year ; and
(v) “loan” includes the collection of
funds from the issue of any debt
instrument.”; and
(2) by the substitution for subsection (4) of that section,
of the following subsection:—
16 Inland Revenue (Amendment) Act, No. 10 of 2007
“(4) In computing the statutory income for any
year of assessment of any person from any trade,
business, profession or vocation carried on or
exercised by such person, no deduction shall be
allowed under section 25 or this section or section
27, in respect of any expenditure or any part thereof,
if it appears to the Assessor that the debt or such part
thereof attributable to such expenditure or any part
thereof, remains unpaid at the time an assessment
for that year of assessment is made:
Provided that, if it is proved to the satisfaction of
the Assessor within three years from the end of that
year of assessment, that such debt or such part thereof
has been paid within two years from the end of that
year of assessment, the Assessor shall,
notwithstanding the provisions of section 171, revise
the assessment allowing the deduction of the sum
so paid and any tax found to have been paid
consequent to such disallowance of such deduction,
shall notwithstanding anything to the contrary in
any other provision of this Act, be refunded.”.
Amendment of 12. Section 32 of the principal enactment is hereby
section 32 of the amended as follows:—
principal
enactment.
(1) in subsection (1) of that section, by the substitution
for paragraph (c) of that subsection, of the following
paragraph :—
“(c) statutory income from interest arising or
accruing to any individual, being interest from
which income tax has been deducted under
section 134 or section 135, as the case may
be ;”;
(2) in subsection (3) of that section, by the addition
immediately after paragraph (c) of that subsection
the following new paragraph :—
Inland Revenue (Amendment) Act, No. 10 of 2007 17
“(d) interest accruing to such person from any
Rupee Denominated Treasury Bond,
purchased out of funds drawn from any
Treasury Bond Investment External Rupee
Account.”; and
(3) in subsection (4) of that section by the substitution
for the words and figure from “in sub-paragraph
(xvii) of that paragraph,”, to the end of that
subsection, of the following words and figures :–
“in sub-paragraph (xvii) of that paragraph, shall
not include :—
(a) any interest from which tax has been deducted
under section 133 or section 134; or
(b) any dividend from which tax has been
deducted under subsection (1) of section 65.”;
(4) in subsection (5) of that section:—
(a) by the substitution in paragraph (a) of that
subsection for the words and figure “referred
to in paragraph (x) of subsection (1)”, of the
words and figures, “referred to in paragraph
(x) or paragraph (y) of subsection (1)”;
(b) in paragraph (b) of that subsection:—
(i) by the substitution for the words “the
amount of a loss incurred”, of the words
“the amount of a loss, other than a loss
referred to in paragraph (c), incurred”;
(ii) by the substitution for all the words and
figures from “this section previously
and any deemed loss,”, to the words
“forward to the next year of assessment
and so on:”, of the following :–
18 Inland Revenue (Amendment) Act, No. 10 of 2007
“this section previously, and any
excess treated as a loss under paragraph
(ii) of the proviso to paragraph (a), upto
a maximum limit of thirty five per
centum of the excess of the total
statutory income for that year, over the
aggregate of :—
(i) statutory income from interest
and dividends referred to in
subsection (1) ;
(ii) any interst income referred to in
subsection (2) ; and
(iii) any reward, share of fine, any
lottery winning and any interest
on compensation payable, as
referred to in subsection (3),
for that year of assessment and any loss
which cannot be deducted, may be
carried forward to the next year of
assessment and so on:”;
(iii) by the substitution in paragraph (B) of
the proviso to that paragraph, for the
words “no loss can be carried forward”,
of the words, “no loss shall be carried
forward”;
(iv) in paragraph (D) of the proviso to that
paragraph:—
(a) by the substitution for the words
“no loss can be deducted”, of the
words “no loss shall be
deducted”; and
Inland Revenue (Amendment) Act, No. 10 of 2007 19
(b) by the substitution for all the
words from “that in which the loss
was incurred.”, to the end of that
proviso, of the following
words:—
“that in which the loss was
incurred.
For the purposes of this
paragraph, a change of ownership
of a company is deemed to have
occurred where more than one
third of the issued share capital of
the company is held at any time
in the year of assessment for
which the claim for deduction is
made, either directly or through
nominees, by persons who did not
hold such capital at any time in
the year of assessment in which
the loss was incurred.
(c) by the addition, at the end of paragraph (b) of
that subsection, of the following new
paragraph:—
“(c) any loss incurred on or after April
1, 2007, in any business of life
insurance, to the extent of any
profits from such business
included in such total statutory
income; the balance, if any, of
such loss after such deduction,
shall be deemed to be a loss for
20 Inland Revenue (Amendment) Act, No. 10 of 2007
the year of assessment
immediately succeeding that year
of assessment.
For the purpose of this
paragraph, profits or loss from any
business of life insurance shall be
computed in accordance with the
provisions of section 92.”; and
(5) in subsection (6) of that section, by the substitution
in paragraph (b) for the words and figures “provided
for paragraph (b) of subsection (2).”, of the words
and figures “provided for in paragraph (b) of
subsection (5).”.
Amendment of 13. Section 34 of the principal enactment is hereby
section 34 of the
principal amended as follows:—
enactment.
(1) in paragraph (b) of subsection (2) of that section :—
(a) by the substitution in sub-paragraph (viii) of
that paragraph, for the words “approved by
the Minister :”, of the words “approved by the
Minister.”; and
(b) by the omission of the proviso to that
paragraph; and
(2) in paragraph (a) of subsection (4) of that section, by
the substitution in sub-paragraph (iii) of that
paragraph, for the words “in that year of assessment
shall not exceed ten million rupees;”, of the
following words and figures :—
Inland Revenue (Amendment) Act, No. 10 of 2007 21
“in that year, of assessment shall not exceed:—
(A) ten million rupees, where such year of
assessment is the year of assessment
commencing on April 1, 2006; and
(B) twenty five million rupees, where such
year of assessment is any year of
assessment commencing on or after April
1, 2007;”; and
(3) in paragraph (b) of subsection (4) of that section, by
the substitution in sub-paragraph (ii) of that
paragraph, for the words “in that year of assessment
shall not exceed ten million rupees; ”, of the
following words and figures:—
“in that year, of assessment shall not exceed:—
(A) ten million rupees, where such year of
assessment is the year of assessment
commencing on April 1, 2006; and
(B) twenty five million rupees, where such
year of assessment is any year of
assessment commencing on or after April
1, 2007;”.
14. Section 37 of the principal enactment is hereby Amendment of
amended in paragraph (d) of subsection (2) of that section, section 37 of the
principal
by the substitution for the words, “fifteen per centum”
enactment.
wherever it occurs in that paragraph, of the words “ten per
centum”.
15. Section 42 of the principal enactment is hereby Amendment of
section 42 of the
amended as follows:—
principal
enactment.
(1) by the renumbering of that section as subsection (1)
of that section;
22 Inland Revenue (Amendment) Act, No. 10 of 2007
(2) in the renumbered subsection (1), by the substitution
for the words “The profits and income arising in Sri
Lanka”, of the words and figures “The profits and
income, for the year of assessment commencing on
April 1, 2006, arising in Sri Lanka”; and
(3) by the addition at the end of the renumbered
subsection (1), of the following new subsection:—
“(2) The profits and income for any year of
assessment commencing on or after April 1, 2007,
arising in Sri Lanka to any consignor or consignee
from the export of any goods brought to Sri Lanka
on a consignment basis and re-exported without
subjecting such goods to any process of manufacture,
shall be liable to income tax at the appropriate rate
specified in the Fifth Schedule to this Act.”.
Amendment of 16. Section 44 of the principal enactment is hereby
section 44 of the
amended by the substitution for the words, “unit trust or
principal
enactment. mutual fund, from the sale of any share or a right to any
share”, of the words and figures “unit trust or mutual fund,
from the sale on or before March 31, 2007, of any share or
right to any share”.
Amendment of 17. Section 45 of the principal enactment is hereby
section 45 of the amended in subsection (1) of that section, by the substitution
principal
enactment. for the words “such specified profits shall be chargeable with
tax at the appropriate rate specified in the Fifth Schedule to
this Act, notwithstanding anything to the contrary in any
other provision of this Act.”, of the words “such specified
profits shall, subject to the other provisions of this Act, be
chargeable with tax at the appropriate rate specified in the
Fifth Schedule to this Act.”.
Amendment of 18. Section 61 of the principal enactment is hereby
section 61 of the
principal amended as follows:—
enactment.
(1) in subsection (1) of that section:—
Inland Revenue (Amendment) Act, No. 10 of 2007 23
(a) by the substitution for paragraph (b) of that
subsection, of the following paragraph:—
“(b) equal to:—
(i) ten per centum of the relevant part
of the aggregate amount of the
gross dividends distributed by
such company in that year of
assessment, out of the profits for
any year of assessment; and
(ii) fifteen per centum of the excess
of thirty three and one third per
centum of the distributable profits
of such company for the year
of assessment immediately
preceding that year of assessment,
(hereinafter in this paragraph
referred to as the “preceding
year”) over the aggregate of the
gross dividends distributed by
such company in such preceding
year, where such company has in
the preceding year distributed
dividends less in amount than
twenty five per centum of the
distributable profits for that
preceding year:
Provided that, where the
Commissioner-General is satisfied,
that any company has been
restrained from distributing or has
set apart, the whole or any part of
its distributable profits for any
year of assessment in order to
comply with any requirement
imposed by any other written law,
24 Inland Revenue (Amendment) Act, No. 10 of 2007
the whole or such part so
restrained from being distributed
or so set apart, shall be deemed to
have been distributed, for the
purposes of determining whether
such company has distributed
twenty five per centum of its
distributable profits for that year
of assessment.
In this paragraph—
“company” does not
include any unit trust
or mutual fund;
“distributable profits” in
relation to any year of
assessment and to any
company means, the
book profits of that
company for that year
of assessment,
reduced by the
aggregate of—
(a) the income tax
payable by that
company for
that year of
assessment
calculated in
accordance
with paragraph
(a);
(b) the cost incurred
by that
company in
that year of
assessment in
the acquisition
of any land or
any capital
asset; and
Inland Revenue (Amendment) Act, No. 10 of 2007 25
(c) any notional
p ro fit
computed on
the basis of a
revaluation of
any capital
asset and
included in
such book
profits,
increased by the
aggregate of the
allowance for
depreciation
deducted in respect
of such capital asset
in calculating such
book profits and any
notional loss
computed on the
basis of a revaluation
of any capital asset
and included in such
book profits;
“relevant part” in relation
to the aggregate amount
of the gross dividends
distributed by any
company, means the
balance of such aggregate
after deducting therefrom
any dividend distributed:—
26 Inland Revenue (Amendment) Act, No. 10 of 2007
(a) to any
company or
other body of
person, who or
which is
exempt from
income tax
u n d e r
paragraph (a)
or paragraph
(c) of section 7;
(b) to any unit
trust or
mutual fund;
(c) to any
shareholder
who is exempt
from income
tax under
section 10 in
respect of such
dividend; or
(d) out of any
dividend
received from
another
resident
company;”;
(b) in paragraph (ii) of the proviso to paragraph
(c) of that subsection, by the substitution for
the words from, “of such balance over such
amount of such dividend.”, to the and of that
paragraph, of the words “of such balance over
such amount of such dividend.”;
(c) by the repeal of paragraph (d) of that
subsection; and
Inland Revenue (Amendment) Act, No. 10 of 2007 27
(2) by the repeal of subsection (2) of that section and
the substitution therefore of the following
subsection:—
“(2) For the purposes of this section “gross
dividends” in relation to any dividend distributed
by any company, means the amount of the dividend
before any deduction is made under section 65.”.
19. Section 63 of the principal enactment is hereby Amendment of
amended as follows:— section 63 of the
principal
enactment.
(1) in paragraph (b) of that section, by the substitution
for the words and figure, “under section 10; or”, of
the words and figure “under section 10;”;
(2) in paragraph (c) of that section, by the substitution
for the words “another resident company,”, of the
words “another resident company;or”;
(3) by the insertion immediately after paragraph (c) of
that section, of the following new paragraph:—
“(d) such dividend is a dividend declared by a
quoted public company,”; and
(4) in the marginal note to that section, by the
substitution for the words “part of the assessable
income”, of the words “part of the total statutory
income”.
20. Section 65 of the principal enactment is hereby Amendment
amended as follows:— of section 65
of the
principal
(1) in subsection (1) of that section :— enactment.
(a) by the substitution for the words “an order to
pay money out of profits on which the taxable
income of that company is computed for any
28 Inland Revenue (Amendment) Act, No. 10 of 2007
year of assessment, income tax equal to ten
per centum:”, of the words “and order to pay
money, income tax equal to ten per centum of
such gross dividend:”; and
(b) by the repeal of the proviso to that subsection
and of the definition of the expression
“amount of gross dividend”, and the
substitution therefor, of the following
proviso:—
“Provided that, in determining for the
purposes of this subsection, the amount of
gross dividend in relation to any dividend
payable by any resident company, no account
shall be taken of such part of that dividend, if
any, as is paid by any other resident company
and received by the first mentioned resident
company, either directly or through one or
more intermediary companies.”; and
(2) in pargraph (d) of subsection (2) of that section :—
(a) by the substitution for sub-paragraph (i)
of that paragraph, of the following
sub-paragraph :—
“(i) dividends received;”; and
(b) by the omission of sub-paragraph (ii) of that
paragraph; and
(3) in the marginal note to that section, by substitution
for the words “entitled to deduct tax”, of the words
“to deduct tax”.
Amendment of 21. Section 66 of the principal enactment is hereby
section 66 of the amended in paragraph (b) of subsection (5) of that section,
principal
by the substitution for the words “and recovery shall apply
enactment.
accordingly.”, of the following words:—
“and recovery shall apply accordingly:
Inland Revenue (Amendment) Act, No. 10 of 2007 29
Provided that the tax so assessed and charged
shall be reduced by the amount of the tax, if any,
referred to in sub-paragraph (ii) of paragraph (b) of
subsection (1) of section 61.”.
22. Section 70 of the principal enactment is hereby Amendment of
amended in subsection (4) of that section, by the substitution section 70 of the
principal
for the words and figure “provisions of section 114,”, of the
enactment.
words and figure “provisions of section 113,”.
23. Section 73 of the principal enactment is hereby Amendment of
section 73 of the
amended in subsection (5) of that section, by the substitution
principal
for the words and figure “provisions of section 114,”, of the enactment.
words and figure “provisions of section 113,”.
24. Section 75 of the principal enactment is hereby Amendment of
amended in subsection (4) of that section, by the substitution section 75 of the
principal
for all the words and figures from “Such part of the taxable
enactment.
income,” to “Act No. 36 of 1987”, of the following words and
figures:—
“Such part of the taxable income:—
(a) for the year of assessment commencing on
April 1, 2006, of any unit trust or mutual fund,
as consists of the profits and income derived
from the business of dealing in shares or debt
instruments; and
(b) for any year of assessment commencing on or
after April 1, 2007, of any unit trust or mutual
fund as consists of the profits and income
derived from dealing in debt instruments,
in accordance with the Securities and Exchange
Commission of Sri Lanka Act, No. 36 of 1987”.
25. Section 78 of the principal enactment is hereby Amendment of
amended in subsection (1) of that section, as follows :— section 78 of the
principal
enactment.
30 Inland Revenue (Amendment) Act, No. 10 of 2007
(1) by the substitution for the words “shall be charged
with income tax on the aggregated amount of the
divisible profits as referred to in section 76 and other
income at the appropriate rate”, of the words and
figures “shall be charged with income tax:—
(a) for the year of assessment commencing on
April 1, 2006, on the aggregate of the divisible
profits referred to in section 76 and other
income; and
(b) for any year of assessment commencing on or
after April 1, 2007, on the excess, if any, of the
aggregate of the divisible profits referred to
in section 76 and other income over six
hundred thousand rupees,
at the appropriate rate”;
(2) by the substitution in the first proviso to that
subsection, for the words and figures “under the
Finance Act, No. 11 of 2004”, of the words and
figures “under the Economic Service Charge Act,
No. 13 of 2006, for that year of assessment”; and
(3) by the substitution in the second proviso to that
subsection, for the words and figures “paid under
the Finance Act, No. 11 of 2004,”, of the words and
figures “paid under the Economic Service Charge
Act, No. 13 of 2006,”.
Replacement of 26. Section 102 of the principal enactment is hereby
section 102 of repealed and the following section is substituted therefore:—
the principal
enactment.
“Deemed 102. (1) Where any non governmental
profits and
organization as defined in subsection (2) of this
income of
any non- section, receives in any year of assessment any
governmental money in the form of a grant, donation,
organization
to be contribution or in any other form, an amount
chargeable equal to three per centum of the aggregate of
with income
tax. such money after deducting from such
Inland Revenue (Amendment) Act, No. 10 of 2007 31
aggregate any part of such money as is received
from the Government of Sri Lanka, shall,
notwithstanding anything to the contrary in any
other provision of this Act, be deemed to be the
profits and income attributable to the aggregate
of such money (hereinafter in this section
referred to as “deemed profits and income”) of
such non-governmental organization for that
year of assessment, and such deemed profits
and income of such non governmental
organization for such year of assessment, shall
be deemed to have arisen in Sri Lanka.
(2) For the purposes of subsection (1) a “non-
governmental organization” means any
organization or association, whether corporate
or unincorporate, formed by a person or a group
of persons on a voluntary basis and which is
non governmental in nature, dependent on
money received in the manner referred to in
subsection (1) and established and constituted
for the provision or relief and services of a
humanitarian nature to the poor and destitute,
the sick, orphans, widows, youth, children or
generally for the provision of relief to the needy,
unless such organization or association is
determined by the Commissioner-General not
to be a non-governmental organization for the
purposes of this section, but does not include
any approved charity within the meaning of
paragraph (a) of subsection (8) of section 34, in
respect of which any remission or reduction has
been granted under subsection (3) of section 35.
(3) The deemed profits and income of a non-
governmental organization shall, subject to the
provisions of paragraph (e) of section 7, be
chargeable with income tax at the appropriate
rate specified in the Fifth Schedule to this Act :
32 Inland Revenue (Amendment) Act, No. 10 of 2007
Provided that where the Commissioner-
General is satisfied that any non-governmental
organization is engaged, in any year of
assessment, in :—
(a) rehabilitation and the provision of
infrastructure facilities and livelihood
support to displaced persons in any
area identified by the Government for
the purposes of such rehabilitation and
provision; or
(b) any other activity approved by the
Minister as being of humanitarian in
nature, taking into consideration the
nature and gravity of any disaster and
the magnitude of relief required to be
provided consequently,
the Commissioner-General may reduce or remit
the tax payable by such non-governmental
organization for that year of assessment, if it
appears to him that such reduction is just and
equitable in all the circumstances of the case.”.
Amendment of 27. Section 106 of the principal enactment is hereby
section 106 of
amended as follows:—
the principal
enactment.
(1) in paragraph (c) of the proviso to subsection (1) of
that section, by the substitution for the words and
figure “under section 133,”, of the words and figures
“under section 133, section 134 or section 135, as
the case may be, ”; and
(2) in subsection (2) of that section, by the substitution
for the words and figure “on or before the November
30”, of the words and figure “on or before
September 30”.
Inland Revenue (Amendment) Act, No. 10 of 2007 33
28. Section 112 of the principal enactment is hereby Amendment of
amended in subsection (1) of that section as follows :— section 112 of
the principal
enactment.
(1) by the substitution in paragraph (c) of that
subsection, for the words and figure “of section 120;
or”, of the words and figure “of section 120;”;
(2) by the substitution in paragraph (d) of that
subsection, for the words “ under that section,”, of
the words “under that section; or”; and
(3) by the addition immediately after paragraph (d) of
that subsection, of the following new paragraph :—
“(e) where any precedent partner of a partnership
fails to furnish within the time specified in a
notice given under subsection (3) of section
76, a return which such precedent partner is
required to furnish under that subsection,”.
29. Section 113 of the principal enactment is hereby Amendment of
amended by the repeal of subsection (3) of that section and section 113 of
the principal
the substitution therefor of the following subsection :—
enactment.
“(3) Notwithstanding anything contained in sub section
(1) and subsection (2) of this section, the entirety of
the tax payable :—
(a) (i) by any company resident in Sri Lanka,
under sub-paragraph (i) of paragraph (b)
of subsection (1) of section 61; or
(ii) by any company not resident in Sri Lanka,
under paragraph (b) of subsection (1) of
section 62 in respect of remittances made
by such company,
shall be paid on or before the thirtieth day
succeeding the date of distribution of such
dividends or making such remittances, as the
case may be;
34 Inland Revenue (Amendment) Act, No. 10 of 2007
(b) by any company resident in Sri Lanka, under
sub-paragraph (ii) of paragraph ((b) of
subsection (1) of section 61, shall be paid on or
before the fifteenth day of May of the year of
assessment immediately succeeding the year
of assessment for which such tax is payable.”.
Replacement of 30. Section 133 of the principal enactment is hereby
section 133 of
repealed and the following section is substituted therefor :–
the principal
enactment.
“Banks and 133. (1) Where any bank or financial
financial
institution pays any interest on any sum of
institutions to
deduct money deposited with it, such bank or financial
income tax. institution shall, subject to the provisions of
subsection (2), deduct income tax in accordance
with the provisions of this section from the
interest payable and such deduction shall be
made at the appropriate rate specified in
subsection (4) and at the time such interest is
paid.
(2) Where any sum of money (in this
subsection referred to as the “first mentioned
sum”) is paid to any bank or financial institution
in return for any pledge in writing that such
bank or financial institution shall pay to the
bearer of the pledge not identified by name in
such pledge, a sum of money which is in excess
of the first mentioned sum (in this subsection
referred to as the “stated sum”) at the time such
pledge is presented for redemption or after such
date as is stated in such pledge, such bank or
financial institution shall deduct income tax
on the excess of the stated sum over the first
mentioned sum. The deduction shall be made
at the rate of ten per centum of such excess and
at the time the first mentioned sum is paid to
such bank or financial institution.
Inland Revenue (Amendment) Act, No. 10 of 2007 35
(3) The deduction referred to in subsection
(1) from any interest referred to therein shall
not apply to any interest :—
(a) of which the recipient is :—
(i) any foreign government;
(ii) the Consolidated Fund of the
Government of Sri Lanka: or
(iii) any Provincial Fund of any
Provincial Council;
(b) which is exempt from income tax under
this Act; or
(c) from which income tax is deductible
under section 37 or section 96.
(4) Where the recipient of the interest from
which income tax is deductible under this
section is :—
(a) any partnership, company or body of
persons other than any charitable
institution, the deduction shall be
made at the rate of ten per centum of
such interest;
(b) any charitable institution which
tenders to the branch of such bank or
financial institution with which the
deposit is made, a declaration in
writing in relation to any year of
assessment that its assessable income
for that year of assessment:—
36 Inland Revenue (Amendment) Act, No. 10 of 2007
(i) does not exceed 300,000 rupees,
no deduction shall be made from
such interest payable to such
charitable institution for that
year of assessment; or
(ii) exceeds 300,000 rupees,
deduction shall be made from
the interest payable to such
charitable institution at the rate
of ten per centum of such interest
for that year of assessment;
(c) any individual then, in relation to any
year of assessment where such
individual tenders to the branch of the
bank or of the financial institution with
which the deposit is made, a
declaration in writing that for that
year of assessment his assessable
income :—
(i) does not exceed 300,000 rupees,
no deduction shall be made from
such interest payable for that
year of assessment;
(ii) exceeds 300,000 rupees but does
not exceed 600,000 rupees,
deduction shall be made from
such interest payable for that
year of assessment, at the rate of
two and a half per centum of
such interest; and
(iii) exceeds 600,000 rupees,
deduction shall be made from
such interest payable for that
Inland Revenue (Amendment) Act, No. 10 of 2007 37
year of assessment on every sum
of money deposited, at the rate
of ten per centum of such
interest;
(d) any charitable institution which has
not tendered the declaration referred
to in paragraph (b) or any individual
referred to in paragraph (c) who has
not tendered the declaration referred
to in that paragraph, as the case may
be, deduction shall be made at the rate
of ten per centum of such interest:
Provided that where such charitable
institution or such individual
maintains:—
(a) one savings account, no
deduction shall be made from
interest paid for any month; or
(b) more than one savings account,
no deduction shall be made from
interest paid for any month in
respect of only one such account,
where the interest paid is less than five
thousand rupees.
For the purpose of this proviso,
“savings account” means an account,
whether or not subject to any
condition affecting the right to
withdraw money therefrom and which
bears interest at a rate not dependent
on the period for which the deposit is
maintained.
38 Inland Revenue (Amendment) Act, No. 10 of 2007
(5) Where any interest payable to any person
or partnership is credited to any account
maintained by any bank or financial institution
for or on behalf of such person or partnership,
such interest shall be deemed to have been paid
to such person or partnership, at the time such
interest is so credited.
(6) The interest payable by any bank or
financial institution on any sum of money
deposited with it jointly by two or more
individuals, shall be apportioned among such
individuals in accordance with the mandate
given to such bank or financial institution in
relation to the apportionment among such
individuals of such sum or the interest thereon,
and such part of the interest as is apportioned
to any such individual, shall be deemed to be
the interest payable to such individual on such
part of such sum as is apportioned to him.
(7) Every bank or financial institution which
deducts income tax in accordance with the
provisions of subsection (1) from any interest
paid by it to any person or partnership, as the
case may be, shall issue to such person or
partnership a statement setting out the
following particulars:—
(a) the gross amount of the interest paid;
(b) the rate of tax and the amount of tax
deducted;
(c) the net amount of interest actually
paid; and
(d) the period to which such interest
relates.
Inland Revenue (Amendment) Act, No. 10 of 2007 39
(8) (a) Where income tax is deductible by
any bank or financial institution in accordance
with this section, from the interest payable to
any individual or charitable institution, such
individual or charitable institution may, if the
amount of income tax payable by him or it for
any year of assessment, had the interest from
which tax is deductible under this section been
included in the assessable income of such
individual or such charitable institution, as the
case may be, for that year of assessment, is less
than the income tax deductible for that year of
assessment under this section, make an
application to the Commissioner-General in
such form and containing such particulars as
may be specified by the Commissioner-
General, requesting that a direction be issued
to that bank or financial institution to make
the necessary adjustments in the deduction of
income tax for that year of assessment.
(b) The Commissioner-General or any other
officer authorized by the Commissioner-
General may, on an application made by any
individual or charitable institution under
paragraph (a), issue to the bank or financial
institution specified in such application, the
necessary direction in writing (a copy of which
shall be issued to the applicant) and such bank
or financial institution shall comply with such
direction :
Provided that any such direction issued, may
be varied at any time.
(c) Any individual or charitable institution
who or which is not satisfied with a direction
issued under paragaraph (b) in respect of any
year of assessment may, within thirty days of
40 Inland Revenue (Amendment) Act, No. 10 of 2007
the issue of such direction, appeal to the
Commissioner-General in writing setting out
precisely the grounds of such appeal. The
decision of the Commissioner-General on any
appeal made to him under this paragraph, shall
be final and conclusive:
Provided that the Commissioner-General
shall on request made in writing by such
individual or charitable institution, cause an
assessment to be made under section 163 on
such individual or charitable institution for that
year of assessment, for the purpose of enabling
such individual or charitable institution to
prefer an appeal under section 165 against such
assessment.
(d) Every bank and financial institution
shall:—
(i) keep a proper record of the interest
paid by it in any year of assessment to
any person or partnership and the date
or dates on which such interest is paid,
in such manner as may be specified by
the Commissioner-General ; and
(ii) permit any officer authorized in
writing by the Commissioner- General,
to inspect any record maintained by it
under sub- paragraph (i) .”.
Amendment of 31. Section 134 of the principal enactment is hereby
section 134 of amended as follows :—
the principal
enactment. (1) by the renumbering of that section, as subsection
(1) of that section ; and
(2) by the addition immediately after the re-numbered
subsection (1) of that section, of the following new
subsection :–
Inland Revenue (Amendment) Act, No. 10 of 2007 41
“(2) The excess referred to in subsection (1) shall
be deemed to be interest accruing from such
Security, Treasury Bond, Treasury Bill or
Central Bank Security, as the case may be.”.
32. Section 135 of the principal enactment is hereby Amendment of
amended by the repeal of subsection (2) of that section. section 135 of
the principal
enactment.
33. Section 137 of the principal enactment is hereby Amendment of
amended as follows :– section 137 of
the principal
(1) by the renumbering of that section, as subsection enactment.
(1) of that section;
(2) in the re-numbered subsection (1) of that section,
by the substitution for the words and figure “referred
to in section 133, on which”, of the words and figure
“referred to in section 134, on which”; and
(3) by the addition immediately after the re-numbered
subsection (1) of that section, of the following new
subsection :–
“(2) Where any person is engaged in any primary
market transaction or any secondary market
transaction involving any corporate debt
security issued by or on behalf of any
company, on which income tex has been
deducted under section 135 during any year
of assessment at the rate of ten per centum at
the time the interest is paid or credited or the
discount is allowed on such security, such
person shall be entitled to a notional tax credit
at ten per centum of the grossed up amount of
interest income from such transaction, to an
amount of one ninth of the same, if such
interest income forms part of the statutory
income of such person being a company or
the assessable income of such person being a
person other than a company, for that year of
assessment.”.
42 Inland Revenue (Amendment) Act, No. 10 of 2007
Amendment of 34. Section 138 of the principal enactment is hereby
section 138 of
the principal amended in subsection (2) of that section, by the substitution
enactment. for the words “Where any person being a company which has
included any interest income referred to in section 133 of
this Act”, and for the words “assessment, but such company”,
of the words “Where any person other than an individual
who or which has included any interest income referred to in
section 134 of this Act” and of the words “assessment, but
such person”, respectively.
Amendment of 35. Section 139 of the principal enactment is hereby
section 139 of
the principal amended as follows :—
enactment.
(1) in subsection (1) of that section, by the substitution
for the words and figures “of section 133 or section
136” and for the words and figures “under section
133 or section 136”, of the words and figures “of
section 133 or section 135” and of the words and
figures “under section 133 or section 135”
respectively ;
(2) in subsection (5) of that section, by the substitution
for the words and figures “under section 133 or
section 136”, of the words and figures “under section
133 or section 135” ; and
(3) in the marginal note to that section, by the substitution
for the words and figures “sections 133 or 136.”, of
the words and figures “sections 133 or 135.”.
Amendment of 36. Section 153 of the principal enactment is hereby
section 153 of
amended as follows :—
the principal
enactment.
(1) in subsection (1) of that section by the substitution,
for the words“of such specified fee.”, of the
following words and figures:—
Inland Revenue (Amendment) Act, No. 10 of 2007 43
“of such specified fee:
Provided that where the specified fee for any year
of assessment commencing on or after April 1, 2007,
consists of fees in respect of any construction work,
the rate at which income tax is deductible from such
fees, shall be one pre centum.”; and
(2) in subsection (2) of that section in the definition of
the expression “specified fee”, by the substitution
for the words “includes any commission, brokerage
or other sums”, of the words “includes any
commission, brokerage, a payment made for the
supply of any article on a contract basis through
tender or quotation or other sums”.
37. Section 166 of the principal enactment is hereby Amendment of
amended in subsection (1) of that section, by the substitution section 166 of
the principal
for the words “consisting of not more than twenty members”, enactment.
of the words “consisting of not more than thirty members”.
38. Section 173 of the principal enactment is hereby Amendment of
amended in subsection (3) of that section as follows :— section 173 of
the principal
enactment.
(1) by the substitution for all the words from “For the
purposes of this paragraph “income tax”, to the end
of sub-paragraph (B) of that subsection, of the
following words and figures :—
“For the purposes of this paragraph “income
tax”:—
(A) in relation to a company for any year of
assessment shall not include tax payable
by that company, under paragraph (b)
of subsection (1) of section 61, for that
year of assesssment ;
44 Inland Revenue (Amendment) Act, No. 10 of 2007
(B) in relation to any person, for any year of
assessment means, the income tax which
would have been payable by such
person for the year preceding that year
of assessment (hereinafter referred to as
the “preceding year”) had any profits
and income, other than the net annual
value of a residence and any subsidy
exempt from income tax under this Act,
which were exempt from income tax,
under this Act or any other written law
and in respect of which such exemption
ceased in such preceding year, been
taken into account in computing the
assessable income of that person for that
year of assessment;”;
(2) by the substitution for sub-paragraph (c) of that
subsection of the following :—
“(iii) the Commissioner-General may reduce or
waive any penalty payable under this section,
if it appears to the Commissioner-General that
such reduction or waiver is just and equitable
in all the circumstances ;
(iv) the Commissioner-General shall waive the
penalty accrued on the tax for any year of
assessment ending on or before March 31,
2005, and which remained unpaid as at
October 1, 2005, if the entirety of such tax is
paid in accordance with a scheme agreed to
on or before December 31, 2007, with him in
that behalf, within a period of not more than
three years succeeding the date of such
agreement. Where any such scheme so agreed
Inland Revenue (Amendment) Act, No. 10 of 2007 45
to is not adhered to, the Commissioner-
General shall, notwithstanding the provisions
of the preceding paragraph, not reduce or
waive such penalty.”.
39. Section 175 of the principal enactment is hereby Amendment of
amended as follows :— section 175 of
the principal
enactment.
(1) in paragraph (b) of that section, by the substitution
for the words “which was in default or goes into
default”, of the words “which was in default or went
into default” ;
(2) by the insertion immediately after paragraph (b) of
that section, of the following new paragraph :—
“(bb) any income tax charged and levied under the
Inland Revenue Act, No. 38 of 2000 and which
was in default or goes into default on or after
April 1, 2006 ;”;
(3) in paragraph (d) of that section, by the substitution
for the words and figures “or in section 113”, of the
words and figures “or in section 165 of the Inland
Revenue Act, No. 38 of 2000, or in section 113” ;
and
(4) in paragraph (e) of that section by the substitution
for the words “a company is required to pay under
this Act ; or under”, of the words “a company was
required to pay under”.
40. Section 200 of the principal enactment is hereby Amendment of
amended as follows :— section 200 of
the principal
enactment.
(1) in subsection (7) of that section, by the substitution
for the words and figures “paragraph (a) of section
8, shall be refunded”, of the words and figures
“paragraph (a) section 7, shall be refunded” ; and
46 Inland Revenue (Amendment) Act, No. 10 of 2007
(2) in subsection (8) of that section:—
(a) by the substitution in paragraph (a) of that
subsection, for the word and figure “section
134”, of the words and figures “section 133 or
section 134” ; and
(b) in paragraph (b) of that subsection, by the
substitution for the word and figure “section
133”, of the words and figures “section 133 or
section 134”.
Amendment of 41. Section 207 of the principal enactment is hereby
section 207 of amended by the substitution for the words, “authorized
the principal
enactment. representative to the Commissioner-General or a
Commissioner or a Deputy Commissioner or an Assessor,
then,”, of the words “authorized representative to the
Commissioner-General or the Senior Deputy Commissioner-
General or a Deputy Commissioner-General or a Senior
Commissioner or a Commissioner or a Deputy Commissioner
or a Senior Assessor or an Assessor, then”.
Amendment of 42. Section 208 of the principal enactment is hereby
section 208 of
amended and follows :—
the principal
enactment.
(1) in subsection (4) of that section, by the substitution
for the words “with the written approval of a
Commissioner of Inland Revenue or”, of the words
“with the written approval of the Commissioner-
General of Inland Revenue or” ; and
(2) in subsection (5) of that section, by the substitution
for the words “an Assessor of Inland Revenue, shall
be deemed”, of the words “an Assessor of Inland
Revenue or a Tax Officer of Inland Revenue, shall
be deedmed”.
Inland Revenue (Amendment) Act, No. 10 of 2007 47
43. Section 217 of the princpal enactment is hereby Amendment of
section 217 of
amended as follows :— the principal
enactment.
(1) by the insertion, immediately after the definition of
the expression “commercial bank”, of the following
new definition :—
“Commissioner” means a Commissioner of Inland
Revenue, appointed or deemed to be
appointed under this Act;”;
(2) in paragraph (a) of the definition of the expression
“Commissioner-General” by the substitution for the
words. “includes a Senior Deputy Commissioner, a
Deputy Commissioner-General, Senior
Commissioner and Deputy Commissioner,”, of the
words “includes the Senior Deputy Commissioner-
General, a Deputy Commissioner-General, Senior
Commissioner, a Commissioner and Deputy
Commissioner”;
(3) by the insertion immediately after the definition of
the expression “Deputy Commissioner” of the
following new definition :—
“Deputy Commissioner-General” means a Deputy
Commissioner-General of Inland Revenue
appointed or deemed to be appointed under
this Act;”;
(4) by the repeal of the definition of the expression
“mutual fund”; and
(5) by the insertion immediately after the definition of
“Securities and Exchange Commission”, of the
following new definitions:—
48 Inland Revenue (Amendment) Act, No. 10 of 2007
“Senior Deputy Commissioner-General” means the
the Senior Deputy Commissioner-General of
Inland Revenue appointed or deemed to be
appionted under this Act ;
“Senior Commissioner” means a Senior
Commissioner of Inland Revenue appionted
or deemed to be appionted under this Act ;”.
Amendment of 44. Section 218 of the principal enactment is hereby
section 218 of amended as follows :—
the principal
enactment.
(1) in subsection (2) of that section:—
(a) by the substitution for the words and figures
“under any provisions of the Inland Revenue
Act, No. 38 of 2000 for a period specified in
those provisions and there remains on March
31, 2000, in relation to any person,” of the
words and figures “under any provisions of
the Inland Revenue Act, No. 28 of 1979 or of
the Inland Revenue Act, No. 38 of 2000, as
the case may be, for a period as specified in
any of those provisions and there remains on
March 31, 2006, in relation to any person,”;
(b) by the substitution in the proviso to that
subsection, for the words and figures “year of
assessment commencing on or after April 1,
2000, shall,”, of the words and figures “year
of assessment commencing on or after April 1,
2006, shall,”;
(2) in subsection (4) of that section, by the substitution
for the words and figures “any year of assessment
commencing on or after April 1, 2000, such balance
shall,”, of the words and figures “any year of
assessment commencing on or after April 1, 2006,
such balance shall,”;
Inland Revenue (Amendment) Act, No. 10 of 2007 49
(3) by the substitution for subsection (5) of that section,
of the following subsection:—
“(5) Where an individual:—
(a) pays on or after April 1, 2006, to the
Government of Sri Lanka or to any
institution referred to in paragraph (ee)
of subsection (2) of section 31 of the
Inland Revenue Act, No. 28 of 1979,
any amount:—
(i) in the repayment of the capital of
any loan ; or
(ii) as monthly payments in terms of
any rent purchase agreement,
referred to in that paragraph ; or
(b) has incurred prior to Apirl 1, 2006, any
expenditure referred to in paragraph (i)
of subsection (2) of section 31 of the
Inland Revenue Act, No. 38 of 2000,
and apportioned to any year of
assessment commencing on or after April
1, 2006,
the amount so paid or the expenditure so
apportioned, as the case may be, shall,
notwithstanding anything in subsection (1) but
subject to the conditions specified in the respective
paragraphs referred to in paragraph (a) and (b), be
deductible from the assessable income of that
individual for any year of assessment commencing
on or after April 1, 2006, as if the Inland Revenue
Act, No. 28 of 1979 or the Inland Revenue Act, No.
38 of 2000, as the case may be, continues to be in
force.”;
50 Inland Revenue (Amendment) Act, No. 10 of 2007
(4) by the substitution for subsection (6) of that section,
of the following subsection:—
“(6) The allowance for depreciation in respect of
any :—
(a) capital asset acquired prior to April 1,
2000, or any qualified building
constructed prior to April 1, 2000 ; or
(b) capital asset acquired on or after April
1, 2000, but prior to April 1, 2006, or
any qualified building constructed on
or after April 1, 2000, but prior to April
1, 2006,
shall, notwithstanding the non-application
referred to in subsection (1), be computed in
accordance with the respective provisions of
the Inland Revenue Act, No. 28 of 1979 or the
Inland Revenue Act, No. 38 of 2000, as the
case may be.”; and
(5) in the marginal note to that section, by the
substitution for the words and figures “Inland
Revenue Act, No. 38 of 2000.”, of the words and
figures “Inland Revenue Act, No. 28 of 1979 or
Inland Revenue Act, No. 38 of 2000.”.
Amendment of 45. The First Schedule to the principal enactment is
the First hereby amended as follows :—
Schedule to the
principal
enactment. (1) by the substitution for Part IV of that Schedule
of the following P art—
“Part IV
The rates of income tax applicable to certain profits from
employment specified in subsection (2) of section 35.
Inland Revenue (Amendment) Act, No. 10 of 2007 51
(a) For the year of assessment commencing
on April 1, 2006-
Where the period of contribution or
the period of service, as the case may
be, in relation to the excess referred
to in subsection (2) of section 35
(other than any sum referred to in the
proviso to that subsection) is less than
20 years.
on the first Rs. 1,000,000 of the sum
received NIL
Where the period of contribution or
the period of service, as the case may
be, in relation to the excess referred
to in subsection (2) of section 35
(other than any sum referred to in the
proviso to that subsection) is not less
than 20 years.
on the first Rs. 2,000,000 of the sum
received NIL
on the next Rs. 500,000 5 per centum
on the next Rs. 500,000 10 per centum
on the balance 15 per centum
(b) For any year of assessment
commencing on or after April 1,
2007-
Where the period of contribution or
the period of service, as the case may
be, in relation to the excess referred
to in subsection (2) of section 35
(other than any sum referred to in the
proviso to that subsection) is less than
20 years.
52 Inland Revenue (Amendment) Act, No. 10 of 2007
on the first Rs. 2,000.000 NIL
on the next Rs. 1,000,000 5 per centum
on the balance 10 per centum
Where the period of contribution or
the period of service, as the case may
be, in relation to the excess referred
to in subsection (2) of section 35
(other than any sum referred to in the
proviso to that subsection) is not less
than 20 years.
on the first Rs. 5,000,000 NIL
on the next Rs. 1,000,000 5 per centum
on the balance 10 per centum.”.
(2) by the addition at the end of Part IV of that Schedule,
of the following new Part :—
“Part V
The rate of income tax applicable to as per Part I,
any sum referred to in the proviso to but subject
subsection (2) of section 35 to a
maximum
of 20 per
centum.
Amendment of 46. The Second Schedule to the principal enactment is
the Second hereby repealed and the following Schedule is substituted
Schedule to the
therefore :—
principal
enactment.
Inland Revenue (Amendment) Act, No. 10 of 2007 53
“SECOND SCHEDULE [Section 61 and 75]
Rates of Income Tax-Companies
PART – A
1. Any venture capital company-on
the taxable income for every year
of assessment commencing on or
after April 1, 2006. 20 per centum
2. Any unit trust or mutual fund—
(a) For the year of assessment
commencing on April
1, 2006—
(i) on such part of the
taxable income as is
referred to in sub
section (4) of
section 75 ; 10 per centum
(ii) on the balance part of
the taxable income; 20 per centum
(b) For any year of assessment
commencing on or after
April 1, 2007—
on the taxable income 10 per centum
PART – B
1. (a) For the year of assessment commencing on April
1, 2006—
Any company other than a
company referred to in PART
A and of which the taxable
income does not exceed Rs.
5,000,000. 15 per centum
54 Inland Revenue (Amendment) Act, No. 10 of 2007
(b) For any year of assessment
commencing on or after April
1, 2007—
any Company—
(A) (i) of which the
taxable income
does not
exceed Rs.
5,000,000 ;
(ii) which is not a
company
referred to in
PART A ; and
(B) which is not the
holding company,
a subsidiary
company, or an
associate company
of a group of
companies.
on the taxable
income. 15 per centum
For the purpose of item(B), the
expressions “holding company”,
“subsidiary company”, and,
“group of companies” shall have
the same respective meanings
which they have in the Companies
Act, No.7 of 2007.
2. Any company for the year of assessment in which its
shares are first quoted in any official list published
by a stock sxchange licensed by the Securities and
Inland Revenue (Amendment) Act, No. 10 of 2007 55
Exchange Commission of Sri Lanka, (hereinafter
referred to as the “first year of assessment”) and for
each year of assessment within the period of four
years immediately succeeding that first year of
assessment, for which the taxable income exceeds
Rs. 5,000,000—
on the taxable income for
that year of assessment 33 1/3 per centum
Provided that where such first year of assessment
is any year of assessment which commences prior to
April 1, 2006, the rate of 33 1/3 per centum shall
apply in relation to any year of assessment which
falls within such period of four years, but which
commences on or after April 1, 2006.
3. Any company other than any company herein before
referred to in this Schedule, for any year of
assessent—
on the taxable income for
that year of assessment 35 per centum
4. Where the taxable income of any company for any
year of assessment exceeds five million rupees, then
such part of the tax computed in accordance with
this Act, as being payable by such company for such
year of assessment as is attributable to such excess,
shall not be more than such excess.”.
47. (1) Amendments made to sections 4(1), 13, 25(1), Retrospective
78(1), 102, 153, 218 and the First Schedule to the principal effect.
enactment by sections 2(1), 6(4), 10(5) and (6), 25(2) and (3),
26, 36(2), 44(3) and (4) and 45(2) respectively, of this Act,
shall be deemed for all purposes to have come into force on
April 1, 2006.
56 Inland Revenue (Amendment) Act, No. 10 of 2007
(2) The amendment made to section 32(3) of the principal
enactment by section 11(1) of this Act, shall be deemed for
all purposes to have come into force on November 1, 2006.
Validation of 48. Where, prior to the date of commencement of this
certain Act but on or after April, 1, 2006 the Board of Investment of
exemptions
provided for in Sri Lanka has entered into an agreement with an enterprise
agreements under section 17 of the Board of Investment of Sri Lanka
entered into by Law, No. 4 of 1978, and the agreement provides for the
the Board of exemption of the whole or any part of the profits and income
Investment of
Sri Lanka. of such enterprise from income tax payable under the principal
enactment, such exemption shall be deemed to have been
and to be, valid and effectual from the date of such agreement,
as if such exemption had been expressly granted to that
enterprise by the principal enactment.
Sinhala text to 49. In the event of any inconsistency between the
prevail in case of Sinhala and Tamil texts of this Act, the Sinhala text shall
inconsistency.
prevail.

Annual subscription of English Bills and Acts of the Parliament Rs. 885 (Local), Rs. 1,180
(Foreign), Payable to the SUPERINTENDENT, GOVERNMENT PUBLICATIONS BUREAU, NO. 32,
TRANSWORKS HOUSE, LOTUS ROAD, COLOMBO 01 before 15th December each year in respect
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