Industrial Building

Allowance

1) Introduction - QBE

2) Industrial buildings

3) Factory

4) Circumstances where buildings are

treated as IB

5) Qualifying building expenditure

6) Constructed building

7) 75% rule

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Industrial Building

Allowance ….cont

8) Purchased industrial building

9) Part of building used as IB

10) Initial allowance

11) Annual allowance

12) Historical development

13) Meaning of disposal

14) Disposal value

15) Building constructed for govt. use2

1) Introduction- QBE

Para 3 Sch 3

Capital expenditure incurred on the construction or purchased of a building which is used at any time after its construction or purchase, as an industrial building

Taxpayer can claim IBA

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2) Industrial buildings

(para63,Sch 3)

Definition:

i) factory

ii) a dock, wharf, jetty, or other similar buildings

iii) a warehouse let to public

iv) building used in the utility business

v) buildings used in the working of mines or farms

vi) mill, workshop, in connection with the working of mine

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3) Factory..para 64

i) a building consisting of a mill, a

workshop, or other building for the

housing of machinery or plant used in

the manufacture of any product or the

subjection of goods or materials to any

process or the generating of power

used for that purpose of that

manufacture or process, and

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3) Factory..para 64

ii) A building used incidental to the

manufacturing business

iii) A building used for the storage of raw

materials, fuels,stores, etc used in the

manufacture processes or for storing

of completed manufactured goods

materials

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4.0 Other buildings treated

as Industrial Building

1) staff welfare

2) living accommodation for employees

-farm, construction of employees quarters, manufacturing, hotel or tourism project, approved service project, child care facilities

3) school/educational institution or technical training

4) private hospital, maternity home, nursing home

5) Research

6) Storage of goods for export.7

4.0 Other buildings treated

as Industrial Building

7)Public road & ancillary structures

8) Building used in approaved science project

9) Building used as hotel

10) Airport

11) Motor racing circuit

12) Old folks care centre

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5 Qualifying building

expenditure

1) architect’s fees

2) cost of preparing plans

3) cost of clearing the old site

4) cost of construction

5) Incidental expenditure

6) Cost of installing fittings

7) Legal charges, stamp duties

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6. Constructed buildings

QBE includes:

a) cost of construction

b) subsequent exp on construction,

extension, alteration & renovation

c) initial repairs

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7. 75 % rule (para 67)

Cost of preparing site for P&M

P & M cost P

Add: Cost of preparing, cutting,

leveling land L

E

If L >75% of E, then E is the QBE

If L < 75% of E, then P is the QBE

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8.0 Purchased Industrial

Building

W.e.f YA 2005, purchase price = QBE

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Part of building used as IB

When part of building not used as IB, the

whole building is treated as IB if the cost of

construction of the part of building not used

as IB is less than 10% of the whole building

If the cost of construction of the non-

qualifying part exceed 10% of the whole

building , then IBA is given in proportion to

part of building used as IB .

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10 Initial allowance

(para 12,13)

10 % IA is given if

1) person incur QBE on the

construction or purchase

2) building used as IB

3) person owned that building at the

end of the basis period

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11. Annual allowance

(para 16, Sch 3)

1. Constructed building- AA 3%

2. Purchased building - AA 3%

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Meaning of Disposal

(para 48, Sch 3)

IB is disposed

1) sale,transfer,or assignment of interest

2) End of concession

3) End of leasehold

4) Demolition or destruction of the building

5) Building ceased to be used as IB

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Rented Premise

If taxpayer rents & uses building as IB,

QBE incurred on renovation cost is

allowed.

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14. Disposal Value

Market value= Disposal value

If building is sold,transferred or

assigned, DV

a) MV or

b) net proceed

Whichever is lower

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14.2 Insurance compensation

Disposal Value is either market value or

insurance compensation, which is the

greater

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14.3 Demolished

If net cost of demolition is negative , it

is added to residual value thus

increasing balancing allowance

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15. Building constructed for

government use

W.e.f YA 2000, IBA will be given if the

building is constructed based on a

build-lease transfer.

IBA- IA 10%

AA 6%

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