Allowed under Section 17 and is available for mining business where expenditure is incurred on the search , discovery and testing of minerals and acquisition of rights over deposition , provision of machine and construction of buildings necessary for mining and other incidental expenses. The rate of deduction is 40% expressed in the year of starting and a 10% of expenses in subsequent years.
Commissioner of Income Tax vs. Buhemba Mines Ltd
The company had incurred and paid costs worth Ksh 96 ,940 and successfully resisting a petition for winding up. The company then sought to deduct legal costs from the total income that they were costs for a mining company but the regional commissioner of Income. Tax from Tanganyika disallowed the deduction. The company successfully appealed but the commissioner made a further appeal
ISSUE: Whether legal costs were expenses incurred wholly and exclusively in production and income of the company in terms of Section 14 of the Income Tax Management Act
HELD: These costs were not expenses wholly and exclusively incurred in production and deduction was not allowed.