DEDUCTION FOR WEAR AND TEAR OF PLANT AND MACHINERY RULES

DEDUCTION FOR WEAR AND TEAR

OF PLANT AND MACHINERY

SUBSIDIARY LEGISLATION 123.01

DEDUCTION FOR WEAR AND TEAR OF PLANT

AND MACHINERY RULES

1st January, 2002

LEGAL NOTICE 298 of 2001, as amended by Legal Notices 323 of

2001, 291 of 2010 and 322 of 2018.

The title of these Rules is Deduction for Wear and Tear of

Plant and Machinery Rules.

Amended by

L.N. 323 of 2001;

Minimum number of years over which items of plant and machinery

L.N. 291 of 2010;

L.N. 322 of 2018.

are to be depreciated

Category

Years

1. Computers and Electronic Equipment

2. Computer software

3. Motor Vehicles

4. Furniture, Fixtures, Fittings and Soft

Furnishings

5. Equipment used for construction of buildings

and excavation

6. Catering Equipment

7. Aircraft airframe, aircraft engines, Aircraft engine

or airframe overhaul and Aircraft interiors and

other parts

8. Ships and vessels

9. Electrical and Plumbing Installations and

Sanitary Fittings

10. Cable Infrastructure

11. Pipeline Infrastructure

12. Communication

and

Broadcasting

Equipment

In these rules, unless the context otherwise requires, terms

and expressions used herein shall have the meaning assigned to

them in the Income Tax Act, hereinafter referred to as "the Act".

Annual deductions for wear and tear of plant and

machinery under article 14(1)(f) of the Act shall be calculated on

the straight-line method over the minimum number of years,

prescribed in the Schedule to these rules.

Where an item of plant and machinery may be classified

under more than one of the items in the Schedule it shall be

classified in accordance with its preponderating use in each year.

Annual deductions for wear and tear shall constitute

permissible deductions only in cases where proper records and

documentation have been kept of the cost of the assets in respect of

which a deduction is claimed.

The cost of an asset shall be determined in accordance with

generally accepted accounting principles.

Where the asset is used in the production of the income for

part of the accounting year or year to which a year of assessment

refers only owing to the occurrence of any of the following events,

the annual deduction for wear and tear in respect of that asset shall

be ascertained as set out hereunder

(a) if the asset is acquired or completed on any date other

than that on which the year commences, the deduction

shall be calculated as if the asset had been used for the

whole year, and

(b) if the asset is sold or otherwise transferred, destroyed

or is put out of use as being worn out or obsolete or

useless or no longer required, on any date other than

that on which the year terminates, no deduction shall

be allowed in respect of the year in which that event

occurs.

Where a person acquires an asset from another person and -

(a) that person is controlled and beneficially owned to the

extent of more than fifty per cent by the other person;

or

(b) that person controls and beneficially owns more than

DEDUCTION FOR WEAR AND TEAR

OF PLANT AND MACHINERY

fifty per cent of the other person; or

(c) both such persons are controlled and beneficially

owned to the extent of more than fifty per cent by

another person or persons,

the wear and tear deductions that shall be due to such person shall

be computed on the lesser of -

(i)

the written down value of the asset in the hands

of the other person on the date of acquisition by

such person, such written down value being

calculated after adding or deducting any

balancing charge or allowance as the case may

be; or

(ii)

the cost of acquisition to the new owner.

Where an asset is acquired other than by onerous title, the

annual wear and tear deduction to such person shall not be greater

than that which would have been allowable to the previous owner.

Where a person makes use of an asset which does not

belong to him on such terms that the burden of wear and tear falls

on the user and not on the owner of the asset, wear and tear shall be

computed in accordance with these rules and shall be allowed as a

deduction to the user to the same extent as if the owner of the asset

had retained its use and were using it in the production of the

owner’s income.

Where an asset is used both in the production of the income

and for other purposes, annual deduction for wear and tear shall in

all cases be computed in accordance with these rules, but the

deduction to be allowed in each year in respect of such deductions

so computed, shall be reduced in the proportion of the use of the

asset in the production of the income to its total use.

The written down value of plant and machinery in respect

of which a deduction for wear and tear has been allowed prior to

year of assessment 2002 shall, for the purpose of these rules, be

deemed to be the cost of acquisition on which wear and tear

allowances are to be allowed, in accordance with these rules, for

that year of assessment and subsequent years of assessment in

respect of such plant and machinery.

DEDUCTION FOR WEAR AND TEAR

OF PLANT AND MACHINERY

Medical Equipment

Lifts and Escalators

Air-conditioners

Equipment mainly designed or used for the

production of water or electricity

Other machinery

Other plant