| 21/11/2008 |
Bil-Malti
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| Board of Special Commissioners - Cases |
| Case No. 15/63 |
Decided: 20 February, 1965 |
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Interests on a loan taken out to purchase a fixed asset which no longer existed were deemed not to have been incurred in the production of income; not deductible from other sources of income - article 10, now 14, Income Tax Act
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Appellant had borrowed a sum of money to build a factory as part of his normal commercial activity. This venture did not prove to be feasible and the factory was closed down. In subsequent years appellant claimed the deduction of interests that were still being paid on the loan. The Commissioner rejected the claim on the basis that the expense had not been incurred in the production of income.
The Board noted, in the first instance, that the Court of Appeal in its decision in case no. 31 had established the principle that there must be a direct link between the expense and the source of income. Moreover, it was specifically provided in article 10 of the Act that interest was deductible only if it was "payable on capital employed in acquiring the income". No income had been so earned because the factory was no longer in use. The Board also pointed out that the law only admitted the transfer of expenses from one source to another in the case of trading losses.
An appeal was entered before the Court from this decision (see case no. 60).
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