Takes two approaches:
-Section 16(1) Allows specified deductions , which would otherwise not be allowed on
Condition that some other section of the Act allows them. Save as otherwise expressly provided for purposes of ascertaining the total income of a person , no deduction shall be allowed.
-Section 16(2) even those deductions allowed by any other section of the Act if they fall
On the list in Section 16(2) then they will not be disallowed.
(a) Expenditure of a person in maintenance of himself or family established or for any
Other personal or domestic purpose including
-Entertainment expenses for personal services.
-Hotel , restaurant/catering expenses unless incurred on meals or accommodation on
Business trips or during training courses or work related conventions/conferences
Alternatively , meals provided for low-income employees n employment expenses.
-Educational trips for self/relatives.
-Club fees including entrance and subscription fees
Rosenberg vs. U.S
The appellant was a jewelry sales clerk who maintained no home but used his brother’s home in Brooklyn New York to collect mail. He traveled in line of work and sought to deduct meals and lodging expenses incurred because they were incurred while away from home in business.
HELD: While these deductions would be allowed if they were reasonable and necessary and if they were incurred in the pursuit of business/ trade and finally were incurred while away from home- taxpayer must have a home.
Deductions not allowed.
Smith vs. Commissioner of Income Tax
Taxpayer working couple deducted babysitting expenses on grounds that since Mrs. Smith would have been unable to leave her work , nurse maid fees should be regarded as a business expense.
Dismissed. Childcare was a basic fixation and it was a mistake to allow a nursemaids fees to be deducted as being essential. Then all expenditure will require to be deducted yet they are personal expenses , which are not allowed.
Commissioner of Income Tax vs. John Gray
The respondent paid money to his estranged wife. The Legal Committee allowed deductions on the money. The respondent appealed and it was allowed because he was not paying money as alimony nor allowance pursuant to a written agreement. Since the effect of allowing deduction was that , same amount , would be income in the hands of the recipient and then taxed there. This was not the case. Deduction not allowed.
1958 Act: Education and childcare allowed to taxpayers who meet certain conditions.
B. A. Shah vs. Income Tax Commissioner
The appellant educated his bro 23 years in University , his sister 21 years in Art School. He sought a child allowance deducted from income coz he was taking care of children.
ISSUE: Whether those were his children/whether , the term children included bros and sisters
Or included ones own offspring.
HELD: The term child in section 52 did not input age but any person with relation of
Illegitimate , adopted , or child. The bro & sister did not meet this condition hence
Deductions did not qualify.
Rasiklal vs. Income Tax Commissioner
Section 44 of the income tax management Act of 1958 claimed deductions because of his brother-19yrs but living with his parents in India. The argument was that Sec 44 allowed a taxpayer who expended money on children by virtue of a custom of community to which the taxpayer belonged. He argued that his parents not being able to maintain their children these were in his custody according to custom. It was HELD that since parent had abdicated responsibility to the respondent and custom was that older children assume responsibility , they were in the hands of the taxpayer. It was not relevant that they were not his.
(b). Section 16 disallows expenditure recoverable under an insurance contract.
(c) .Income tax paid on income unless it is in another country
(d) Contribution to pensions/provident funds that are not operating nationally.
(e) Premiums paid under annuity contracts.
(f). Expenditure by a non-resident/one without a permanent resident in Kenya.
(g) Was incurred by a business not carried on with view to profit.
(h) Expenses for hiring a non-commercial vehicle after 18th June 1976.
(i) Interest paid by companies if it either exceeds 3 times of revenue reserves or paid up capital of all shareholders of capital or sum of all loans incurred 1by the company by 16 June 1968
(k) Any payment for rent , hire or other payments unless solely for the use of an asset or whole some is income in the hands of the recipient.
(l) Expenses disallowed in the absence of section 7(3) , Section 15(2) a , Section 19 and Section 19(4)