ࡱ > '` R p bjbj{P{P >B : : \3 [ T T T 8 T , (V D L xX xX X X X mY mY mY # % % % 3 X p $ ˭ h 3 B 2c iY mY 2c 2c X X 9 w w w 2c X X # w 2c # w w \ { X lX , T l s / O 0 u s u 0 { u { mY Z w [ \ W mY mY mY v ^ mY mY mY 2c 2c 2c 2c B `P d `P Case No. D40/09 Personal assessment whether mortgage loan interest deductible time limit of 6 years for additional assessment sections 42(1), 60(1) and 68(4) of the Inland Revenue Ordinance (IRO). [Decision in Chinese] Panel: Anthony So Chun Kung (chairman), Kenneth S Y Ng and Edward Shen. Date of hearing: 16 October 2008. Date of decision: 18 December 2009. The appellant objected to the additional tax raised for the year of assessment 2000/01 and 2001/02 as well as the personal assessment raised for the year of 2002/03 to 2006/07. He stated that the mortgage interests he paid should be deductible. The appellant was the owner of Shop B (the Property) since 1965. The Property was unencumbered and not used as security for any loan in 1965. However, the appellant used the Property in June 1999, June 2001 and June 2004 respectively as security and obtained a mortgage loan on each occasion. The issue of this case was whether interests paid under the three separate mortgage arrangements in years of assessment 2000/01 to 2006/07 were deductible for the purpose of calculating the personal income of the appellant. Held: In order for the mortgage loan interest to be deductible, the loan must be borrowed for the purpose of producing income chargeable to property tax. Otherwise, the interest paid is not deductible because it would not be in accordance with the provisions of section 42(1) of the IRO. Whether the loan was borrowed for the purpose of applying to the Property is a question of fact. The appellant failed to explain the purpose of the first two loans and there was no evidence that they were borrowed for the purpose of applying to the Property. As for the third loan, the appellant said that he was deeply in debt and had to borrow money for his subsistence. Clearly the third loan was not applied to the Property and the interests therefor could not be deductible for the purpose of section 42(1). Section 60(1) of the IRO provides that if any person chargeable with tax has been assessed at less than the proper amount, the assessor may assess such person additional amount. The only restriction is the time limit of 6 years; the assessor must assess such taxpayer within 6 years after the expiration of the year of assessment concerned. In this case, the year of assessment 2000/01 expired on 31 March 2001 and the additional tax assessed for that particular year of assessment was raised on 28 March 2007. It was within the time limit provided in section 60(1). Appeal dismissed. Cases referred to: D50/96, I R B R D , v o l 1 1 , 5 4 7 D 1 / 0 0 , I R B R D , v o l 1 5 , 1 5 9 T a x p a y e r i n p e r s o n . 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