TAXATION I

TMU 07308
TOPIC 4: BUSINESS INCOME

Nyantamba, G (2020/2021)

YEAR 2020/2021 Nyantamba, G

11/02/2024 1
 Introduction:
• In broad terms, a business is a
commercial or industrial activity of an
independent nature undertaken for
profit.Sec. 3 ITA 2004(RE:2019), business
include a trade, concern in the nature of
trade, manufacture, professional,
vocational, or isolated arrangement with
business character and a past, present or
prospective business but excludes
employment

11/02/2024 YEAR 2020/2021 2

Nyantamba, G
Professional

• A skill acquired by the person

through advanced education, training
and experience, the practice that is
guided by professional code of
conduct

11/02/2024 YEAR 2020/2021 3

Nyantamba, G
Vocational
• The way in which the human being
passes life in earning his or her living.
• Regular and continuous profit earning
which does not fall within the
categories of trade, business,
professional, or employment

11/02/2024 YEAR 2020/2021 4

Nyantamba, G
Manufacturing
• No definition given in law
• Manufacturing occurs only when raw
materials are used (converted) in
producing another product which is
commercially distinct from the raw
materials.

11/02/2024 YEAR 2020/2021 5

Nyantamba, G
 Manufacturing Cont...

• Manufacturing refers to production

of goods commercially different
from the raw material used.
Manufacturing is to make or process
raw materials into finished products
especially in industrial operation

11/02/2024 YEAR 2020/2021 6

Nyantamba, G
TRADE
Trade is an act of providing goods or
services to others in exchange for a
reward (Cambridge dictionary)

11/02/2024 YEAR 2020/2021 7

Nyantamba, G
Factors Behind B’ness (Barges of Trade)
• Profit motive
• Quantity of transaction
• Mode and method of acquisition of the asset
• Nature of the asset
• Length of ownership of the asset
• The way sale occurs
• Method of financing the asset
• Frequency of similar transactions
• Supplementary work and marketing

11/02/2024 YEAR 2020/2021 8

Nyantamba, G
BUSINESS INCOME

11/02/2024 YEAR 2020/2021 9

Nyantamba, G
What is business income?

A person's income from a business

for a year of income is the
person's gains or profits from
conducting the business for the
year of income

11/02/2024 YEAR 2020/2021 10

Nyantamba, G
Inclusions
• Service fees
• Incomings from trading stocks
• Gain on realisation of business asset
or liabilities
• Gains on realisation of depreciable
assets
• Amounts derived as consideration for
accepting a restriction on the
capacity to conduct the business;

11/02/2024 YEAR 2020/2021 11

Nyantamba, G
 Inclusions cont..
• Gifts and other ex gratia payments
• Amounts connected with the business
and that would otherwise be included
in investment
• Amount of tax benefit or advantage
• Amounts including reverse of
amounts as bad debts, bad debts
writing off, discount allowed,
fluctuations in foreign exchanges
11/02/2024 YEAR 2020/2021 12
Nyantamba, G
EXCLUSIONS
• Exempt amounts
• Final withholding payments
• Amount included in calculating
persons income from employment

11/02/2024 YEAR 2020/2021 13

Nyantamba, G
Exempt amounts & FWPs

Exempt amounts refer to Sec. 10,

52, 60, 63 AND second schedule to
the ITA 2004 (Exempt amounts)
FWPs refer to Section 86 of ITA
2004

11/02/2024 YEAR 2020/2021 14

Nyantamba, G
 TAX DEDUCTIONS

11/02/2024 YEAR 2020/2021 15

Nyantamba, G
 DEDUCTIONS
• These are the expenses incurred by
the business to derive income from
business
• After knowing elements which
constitute business income the next
step is to understand deductible
business expenses

11/02/2024 YEAR 2020/2021 16

Nyantamba, G
 General Principles of
Deductions
• For the purposes of calculating a person's
income for a year of income from any
business or investment, there shall be
deducted all expenditure incurred during
the year of income, by the person wholly
and exclusively in the production of income
from the business or investment EXCEPT
• Expenditure of capital nature
• Consumption expenditure
• Excluded expenditure

11/02/2024 YEAR 2020/2021 17

Nyantamba, G
Expenditure of a capital
nature
• That secures a benefit lasting longer
than twelve months

11/02/2024 YEAR 2020/2021 18

Nyantamba, G
Consumption expenditure
• Expenditure incurred by any person
in the maintenance of himself, his
family or establishment, or for any
othepersonar l or domestic purpose

11/02/2024 YEAR 2020/2021 19

Nyantamba, G
Excluded expenditure
• Tax payable under ITA,2004
• Bribes and corrupt practice exp.
• Fines and similar penalties
• Exp. in deriving exempt amounts &
FWP
• Distributions by an entity
• Mining operation expenditure
• Withholding tax paid by a withholder

11/02/2024 YEAR 2020/2021 20

Nyantamba, G
 Adjustments format
Net Profit after/before Tax XX
Add back: Non Allowable deductions
Income Tax x
Penalties x
Fines etc.
x X
Less: Allowable Income (X)

Add back: Allowable expense (Not Ded) X

Less: Non Allowable expenses

(X)
Adjusted Taxable profit(B’ness
11/02/2024 YEAR 2020/2021
Inc) 21
XXX Nyantamba, G
 SPECIFIC DEDUCTIONS
• Interest expense
• Trading stock allowance (TSA)
• Repair and maintenance
• Agric., environ. and R&D expenditure
• Contribution and donations
• Depreciation allowance
• Business and investment losses
• Unrelieved losses

11/02/2024 YEAR 2020/2021 22

Nyantamba, G
A. Interest
Defn:Is the payment for the use of
money under debt obligation which is
not a repayment of capital.
It is wholly and exclusively used AND
hence allowable if:-
• Borrowed money used wholly and
exclusively
• Used to acquire asset(s) employed
wholly and exclusively

11/02/2024 YEAR 2020/2021 23

Nyantamba, G
EXEMPT CONTROLLED RESIDENT
ENTITY (ECRE)
It is resident and at any time during
the year of income, 25 percent or
more of the underlying ownership of
the entity is held by
a) Entities exempt under the 2nd Schd
b) Approved retirement funds
c) Charitable organizations
d) Non-resident persons

11/02/2024 YEAR 2020/2021 24

Nyantamba, G
ECRE Cont..
LIMIT OF ALLOWABLE INTEREST
FOR ECRE
It should not exceed the sum of
interest equivalent to debt-to-equity
ratio of 7:3 for the year of income
• If there a change in equity/debt the
average balances at the end of the
month or part of the month shall be
used

11/02/2024 YEAR 2020/2021 25

Nyantamba, G
“debt “ excludes
• Non-interest bearing debt obligation
• Debt owed to a resident fin. Institution
• Debt owed to a non-res. Bank/fin. Inst
whose interest tax is withheld in URT
“equity” means
• Paid up share capital
• Paid up share premium
• Retained earnings on unconsolidated

11/02/2024 YEAR 2020/2021 26

Nyantamba, G
 Example
ABC is a exempt controlled resident
entity; for year of income 2019 ABC
capital structure is Debt 500m while
equity is 200 mil.
a) If the interest expense for year is
20m, Calculate the maximum allowable
interest expense
b) Rework(a) above assuming Debt is
700m and non allowable interest if any

11/02/2024 YEAR 2020/2021 27

Nyantamba, G
B.TRADING STOCK ALLOWANCE
It is allowable deduction and is calculated
as follows
TSA = Opening st + Purchases – Closing st
NOTE:
• Closing stock should the lower of the
cost and the Market Price
• The closing stock above will be opening
stock

11/02/2024 YEAR 2020/2021 28

Nyantamba, G
C. REPAIRS AND MAINTENANCE
Repair-to restore into its working
conditions
Maintenance-to maintain to its working
conditions. R&M allowable if:-
• Incurred during the year of Income
• Made on depreciable assets
• Asset be owned by the business
• Asset used wholly and exclusively
• Should not improve the value of asset

11/02/2024 YEAR 2020/2021 29

Nyantamba, G
D.AGRIC., R&D AND ENVIR. EXP.
 Allowed when incurred wholly and
exclusively for the business
Agriculture exp. means exp. incurred by
the owner/occupier of farm land in
conducting an agric., livestock or fish
farming business in
– Clearing land and excavating irrigation
channels
– Planting thereon perenial crops or trees
bearing such crops

11/02/2024 YEAR 2020/2021 30

Nyantamba, G
Environmental expenditure means
expenditure incurred by occupier of the
farmland for prevention of soil erosion
is allowable deduction
Research and development expend.
– Improving business products or process
– Initial public offer and first listing with
DSE
Exclude: Expenditure included in the cost
of any asset

11/02/2024 YEAR 2020/2021 31

Nyantamba, G
E. GIFTS TO PUBLIC AND
CHARITABLE INSTITUTIONS
a) Contributed to charitable institutions or social
development project,
b) Donations under section12 of the Education fund
Act 2001,
c) Amount paid to local government authority,
which are statutory obligations to support
community development project
d) Contribution made to the AIDS Trust Fund
e) Contribution made to Govt to fight COVID -19
The above are only ALLOWABLES OTHERWISE if
incurred wholly and exclusively for the business

11/02/2024 YEAR 2020/2021 32

Nyantamba, G
NOTE
• Amount so contributed in (a) above
should not exceed 2% of the persons
income calculated before granting
such deductions

11/02/2024 YEAR 2020/2021 33

Nyantamba, G
Example:
Thomson Co. ltd was incorporated in
the UR in the year 2010; it was
engaged in construction activities
and financial consultancy services.
The following information was
extracted from the company's
return of income for the year 2019

11/02/2024 YEAR 2020/2021 34

Nyantamba, G
• Consultancy fees Tshs.
20 million
• Gross income (construction activity) Tshs.
300 mil.
• Expenses (allowable) Tshs.
150 million
• Donation to education fund (TEA) Tshs.
50 million
• Payments to a charitable organization (HIV -
children) amounting to Tshs. 10 million
• Local dispensary rehabilitation amt to Tshs. 5 mil.
• Donation to a charitable institution, an amount of
Tshs. 25 million, for construction of two
classrooms.
• Required: Calculate the taxable income, for
Thomson Co. ltd, forYEAR
11/02/2024 the2020/2021
year 2019 35
Nyantamba, G
F.DEPRECIATION ALLOWANCES
“For the purposes of calculating a person's
income for a year of income from any
business, there shall be deducted in
respect of depreciation of depreciable
assets owned and employed by the person
during the year of income wholly and
exclusively in the production of the
person's income from the business the
allowances granted under the Third
Schedule

11/02/2024 YEAR 2020/2021 36

Nyantamba, G
 G. LOSSES ON REALIZATION
OF BUSINESS ASSETS AND
LIABILITIES
• Losses on:
• Realisation of business assets and
liabilities
• Business assets used wholly and exclusively
for business purposes
• Debt obligation for purchase of the asset
to be used solely for business purposes

11/02/2024 YEAR 2020/2021 37

Nyantamba, G
CONT....
• Any debt or liability apart from debt
obligation where such liability was
incurred wholly and exclusively in
production of business income

11/02/2024 YEAR 2020/2021 38

Nyantamba, G
 H. Unrelieved Losses from
business or investments

• Losses from business or investments

– Unrelieved loss of the year of income
from business or investment
– Unrelieved loss of a previous year of
income of the persons from any business
or investment

11/02/2024 YEAR 2020/2021 39

Nyantamba, G
 NOTE
• For unrelieved loss
– In case of foreign source loss from an
investment only in calculating such
persons’ foreign source income from
investment
– In case of other foreign sources only in
calculating such persons’ foreign source
income

11/02/2024 YEAR 2020/2021 40

Nyantamba, G
 NOTE
• If you calculate income from more
than one business or investment and
unrelieved loss is deducted in more
than one calculations, then you have
to choose the calculation or
calculations that will allow the loss or
part of it to be deducted

11/02/2024 YEAR 2020/2021 41

Nyantamba, G
 DEPRECIATION
ALLOWANCE

11/02/2024 YEAR 2020/2021 42

Nyantamba, G
 DEPRECIATION
ALLOWANCE
• For the purpose of calculating a person’s income
from any business, there shall be deducted in
respect of depreciable assets owned and
employed by the person during the year of
income wholly and exclusively in the production
of the person’s income from business, the
depreciation allowance should be calculated
according to the 3rd schedule of ITA, R.E: 2019

11/02/2024 YEAR 2020/2021 43

Nyantamba, G
 Depreciable asset
Definition:
An asset employed wholly and exclusively
in the production of income from a
business, and which is likely to lose value
because of wear and tear, obsolescence
or the passing of time but excludes
goodwill, mineral or petroleum rights, an
interest in land, a membership interest in
an entity and trading stock

11/02/2024 YEAR 2020/2021 44

Nyantamba, G
COMPUTATION OF DEPRECIATION
ALLOWANCE(D.A.)

STEP 1:IDENTIFICATION OF DEP. ASSETS

STEP 2:CLASSIFICATION OF DEP. ASSETS
STEP 3: POOLING OF DEP. ASSETS
STEP 4: CALCULATION OF D.A.

11/02/2024 YEAR 2020/2021 45

Nyantamba, G
 STEP 1: IDENTIFICATION OF
DEPRECIABLE ASSETS
• Involves the identification of the
depreciable assets in which
allowance should be granted by
considering the conditions for an
asset to be granted Depreciation
Allowance (D.A)

11/02/2024 YEAR 2020/2021 46

Nyantamba, G
 STEP 2: CLASSIFICATION OF
DEPRECIABLE ASSETS
• Depreciable assets should be
classified into seven classes
• It involves sorting a depreciation
assets to the class in which they
belong
• Depreciable assets are classified
as follows:-

11/02/2024 YEAR 2020/2021 47

Nyantamba, G
 CLASS 1
• Computers
• Data handling equipment with peripheral
devices
• Automobiles
• Buses and mini-busses with seating
capacity of less than 30 psg
• Goods vehicles of less than 7 tonnes
• Construction and earth moving equips

11/02/2024 YEAR 2020/2021 48

Nyantamba, G
CLASS II
• Busses with seating capacity of 30
psg or more passengers
• Heavy general purpose or specialised
trucks
• Trailers and trailer-mounted
containers
• Rail road cars, Locomotives and
equipment, Vessels

11/02/2024 YEAR 2020/2021 49

Nyantamba, G
CLASS II CONT...
• Vessels, Barges, Tugs, Similar water
transportation equipment
• Aircrafts, self-propelling vehicles
• Plant and machineries used in:
– Manufacturing & Mining operations
• specialized public utility plant,
equipment, and machinery irrigation
installations and equipment

11/02/2024 YEAR 2020/2021 50

Nyantamba, G
CLASS III
• Office furniture
• Fixtures and equipment
• Any asset not included in
another class

11/02/2024 YEAR 2020/2021 51

Nyantamba, G
CLASS IV
• Deleted

11/02/2024 YEAR 2020/2021 52

Nyantamba, G
CLASS V
• Buildings, Structures and similar
works of a permanent nature
including dams, water reservoirs,
fences USED IN:-
 Agriculture
 Livestock farming
 Fishing farming.

11/02/2024 YEAR 2020/2021 53

Nyantamba, G
CLASS VI
• Buildings, structures, similar works
of permanent nature other than
those in CLASS V

11/02/2024 YEAR 2020/2021 54

Nyantamba, G
CLASS VII

• Intangible assets including

trademarks, patent rights, copy
lights etc.

11/02/2024 YEAR 2020/2021 55

Nyantamba, G
CLASS VIII
• Plant and machineries including
windmills, electric generators and
distribution equipment used in
agriculture; EFD purchased by VAT
non registered;
• Equipment used for prospecting and
exploration of minerals or petroleum

11/02/2024 YEAR 2020/2021 56

Nyantamba, G
 STEP 3: POOLING OF
DEPRECIABLE ASSETS
• This involves the process of sorting
and bringing together assets belong
on the same class. These results into
a pool of depreciable assets,
therefore a pool of depreciable
assets is contain the assets belongs
on the same pool

11/02/2024 YEAR 2020/2021 57

Nyantamba, G
RATES
• CLASS 1 37.5%
• CLASS 2 25%
• CLASS 3 12.5%
• CLASS 4 Deleted
• CLASS 5 20%
• CLASS 6 5%
• CLASS 7 1/n (n=useful life)
• CLASS 8 100%

11/02/2024 YEAR 2020/2021 58

Nyantamba, G
 RATES CONT..
• Class VII
– One divided by useful life of the asset
in the pool and rounded down to the
nearest half a year

11/02/2024 YEAR 2020/2021 59

Nyantamba, G
STEP 4: CALCULATION OF
DEP. OF DEPRECIABLE POOL
A. REDUCING BALANCE METHOD
This method is used for CLASS I, II
and III of depreciable assets
Formula
D.A. = Depreciation basis (DB) × Rate
D.A.=(TWDVS + Additions – Incomings)× Rate

11/02/2024 YEAR 2020/2021 60

Nyantamba, G
The B.D. is the TOTAL of:-
• The D.B. of the pool at the end of the previous YOI,
if any, after deducting depreciation for that pool
for that YOI (since reducing balance methods is
used) and
• Amount added to the D.B. of the pool during the
YOI in respect of additions to the cost of assets in
or added to the pool
• Reduced, but not below zero, by incomings for the
assets in the pool or that have been in the pool
derived during the YOI. The incoming normally is
deducted at the market value of realized assets

11/02/2024 YEAR 2020/2021 61

Nyantamba, G
B:STRAIGHT LINE METHOD
• This method is used for CLASS V, VI
and VII of pools of depreciable
assets

• It is given by the following formula

Dep. allowance (D.A.) = A X B X C
365

11/02/2024 YEAR 2020/2021 62

Nyantamba, G
B:STRAIGHT LINE METHOD
• A is the depreciation basis of the pool
or cost of an item:
• B is the depreciation rate applicable
to the pool and
• C is the number of days in the person’s
year of income; hence the date of
purchase of an asset is irrelevant in
the calculation of annual allowances

11/02/2024 YEAR 2020/2021 63

Nyantamba, G
 INITIAL ALLOWANCE
• This is additional/extra depreciation
allowance granted to specific assets having
specific conditions when they are firstly
added to the pool.
• This is granted in respect of plant and
machineries of class II or III used for:
– Manufacturing and fixed in a factory
– used in fish farming; or
– Providing services to tourists and fixed in a
hotel

11/02/2024 YEAR 2020/2021 64

Nyantamba, G
NOTE
• If the asset qualifies for initial
allowance during that year of income,
Additions to the cost of a
depreciable asset included in a
person's pools of depreciable assets
are added to the depreciation basis
of the person's relevant pool twelve
months after the time is recognized.

11/02/2024 YEAR 2020/2021 65

Nyantamba, G
Rates of initial allowances
The total initial allowance is 50%
granted into two portion;
 25% During the first year of income
 25% During the second year of
income
Amount added to the pool shall be
reduced by I.A. irrespective of the
YOI in which the I.A. is available

11/02/2024 YEAR 2020/2021 66

Nyantamba, G
 Restriction :Non Commercial
vehicles
Non commercial vehicles not exceeding
30m/=
Commercial vehicle means a road vehicle designed
to carry loads of more than half a tonne or
more than 13 passengers; or a vehicle used in a
transportation or vehicle rental business

11/02/2024 YEAR 2020/2021 67

Nyantamba, G
 REALISATION OF
DEPRECIABLE ASSETS
 An asset treated as realized WHEN
the person parts with ownership of
the asset e.g. sold, exchanged,
transferred, distributed, cancelled,
redeemed, destroyed, lost, expired
or surrendered

11/02/2024 YEAR 2020/2021 68

Nyantamba, G
 A. EXCESS OF INCOMING OVER
TWDVs
• THE EXCESS OF:
– Incomings for pool 1,2,3,4,5,6 over
– EITHER:
– FOR 1,2,3 depreciation basis of the
YOI calculated but disregarding those
incomings OR
– For 4,5,6 WDV at the end of the YOI
disregarding the incomings
SHALL BE included in business income

11/02/2024 YEAR 2020/2021 69

Nyantamba, G
B. ALL ASSETS ARE REALIZED
The pool shall be dissolved
GAIN = A – B (include in b’ness income)
LOSS = B – A (Allowed deduction)
A = Incomings for the assets
B =Sum of:
– WDV at the end of previous YOI
– Initial allowance for the following YOI
– Expenditure added to the pool during the
YOI or to be added in the following YOI

11/02/2024 YEAR 2020/2021 70

Nyantamba, G
C: WHEN D.B IS LESS THAN 1million

Where B.D of a pool of depreciable assets

at the end of a YOI reduced by D.A. is
less than one million THEN

D.A for YOI = D.A + TWDV at the end of

YOI

11/02/2024 YEAR 2020/2021 71

Nyantamba, G
D.A: MINERAL OR PETROLEUM
OPERATIONS
Depreciation allowance expenditure
incurred during a YOI shall be placed in
a separate pool
First Year 20% of expenditure
Second Year 20% of expenditure
Third Year 20% of expenditure
Fourth Year 20% of expenditure
Fifth Year 20% of expenditure

11/02/2024 YEAR 2020/2021 72

Nyantamba, G
Depreciation allowance expenditure Means
Additions to the cost of depreciable assets
owned and employed by a person wholly and
exclusively in mineral or petroleum
operations AND
Expenditure incurred in respect of mineral
operations wholly and exclusively on
reconnaissance, appraisal and prospecting or
exploration operations or in developing
mineral or petroleum operations and
infrastructure.

11/02/2024 YEAR 2020/2021 73

Nyantamba, G
EXAMPLE: BUSINESS INCOME
CHAPAURINGE TOUR GUIDE (T) Ltd runs tourist resort in MUSOMA Tanzania
The following information is made available:
CHAPAURINGE TOUR GUIDE (T) Ltd
INCOME STATEMENT FOR THE YEAR ENDED 30TH SEPTEMBER 2014
TZS TZS
• GROSS PROFIT 960,600,000
• LESS:Expenses
• Telephone and Electricity 23,000,000
• Repair and maintenance 109,000,000
• Insurance 58,000,000
• Advertisement and promotion 24,000,000
• Salaries and wages 111,500,000
• Professional charges 65,200,000
• Dividends paid to Shareholder 21,150,000
• Depreciation 27,800,000
• Travelling and transport expenses 275,000,000
• Management and Consultancy fee 102,000,000
• General administration expenses 29,000,000
• Motor vehicle expenses 230,000,000 1,075,650,000
• NET LOSS (115,050,000)

11/02/2024 YEAR 2020/2021 74

Nyantamba, G
Additional information
In arriving at the net profit/loss figure the following items were included as other
income;
A. Interest from bank 12,000,000
B. Bad debt recovery 5,700,000
C. Sales of furniture 10,500,000
In arriving at the net profit/loss figure the following items were included as expenses;
D. Telephone and electricity
Local and international calls 8,510,000
Acquisition of switch board 6,900,000
Repair of electric generator 1,250,000
Electricity bills 6,340,000
E. Repair and maintenance includes
Office general repairs 26,200,000
Office vehicle repair expenses 32,000,000
Acquisition of CCTV cameras 28,000,000
Repairs of saver room 7,000,000
Purchase of shredder for office use 15,800,000

11/02/2024 YEAR 2020/2021 75

Nyantamba, G
F. Insurance expenses includes
Life insurance premium to employee 32,200,000
• Office vehicles insurance expenses 18,000,000
• Facilitation fees 1,500,000
• Fine for document forgeries 6,300,000

G. Advertisement and promotion includes;

• Newspaper advertising 2,000,000
• Large Neon Sign Company name 12,000,000
• Website design
10,000,000

G. Professional charge includes;

• Audit fees
10,000,000
• Registration of property (MV) 25,000,000
• Penalty for late filling of return 5,500,000
• Debt collection fee 6,300,000
• Motor vehicle license fees 8,000,000
• Legal fees
10,400,000

11/02/2024 YEAR 2020/2021 76

Nyantamba, G
I. General and Administration expenses
• Bad debts written off
2,000,000
• Donation to a public schools as per EFA 1,000,000
• Allowance for receivables (General) 4,000,000

NOTE: It was agreed that the deprecation allowance permissible for the company
to be TZS 18,000,000

• REQUIRED:
• On the basis of the above information compute the company’s Business income for
the year of income 2014 as per the Income Tax Act (R.E. 2014) as well as the Tax
administration Act, 2015

11/02/2024 YEAR 2020/2021 77

Nyantamba, G
 SUGGESTED SOLLUTION: BUSINESS INCOME
NAME OF THE TAXPAYER: CHAPAURINGE
SOURCE OF INCOME: BUSINESS
YEAR OF INCOME: 2014
RESIDENTIAL STATUS: RESIDENT
• COMPUTATION OF INCOME FROM BUSINESS FOR THE YEAR 2014
• NET LOSS FOR DURING THE YEAR
(115,050,000)
• Add back: Non allowable deductions
• Acquisition of switch board
6,900,000
• Acquisition of CCTV cameras
28,000,000
• Purchases of shredder for office use 15,800,000
• Fines for documents forgeries
6,300,000
• Large Neon Sign of the company 12,000,000
• Website design of the company 10,000,000
• Registration of properties (MV) 25,000,000
• Penalty for late filling of return 5,500,000
• Allowance for receivables- General 4,000,000
• Dividends paid
21,150,000
• Depreciation
27,800,000 162,450,000
47,400,000
• Less: Allowable deductions
• Depreciation as per ITA 2004 (18,000,000)
• Less: Non allowance income(furniture) (10,500,000)
(28,500,000)
11/02/2024 YEAR 2020/2021 78
• Adjusted Taxable income from business
18,900,000
Nyantamba, G
PRACTICAL QTN: DEPRECIATION
Lion’s Tours Limited carries on a business of tour
operator in Arusha town.
• The written down values for class 1,2, and 3 at
the end of previous year of income, ending
31.12.2019 were Tshs. 84,820,000 47,650,000
and Tshs. 19,600,000 respectively.
• During the year of income commencing 1.1.2020,
the following amounts were added to the
depreciation basis:
• On 1st January 2020 the following were
purchased:

11/02/2024 YEAR 2020/2021 79

Nyantamba, G
 A four-wheel seven-tone Scania truck at
cost of 20,000,000.
 Brand New six Toyota Mark II, these were
purchased for Tshs. 18,000,000 each
including duties & taxes.
 Three Desktop computers were purchased
at 800,000,000 each.
 One 30 seaters minibus for Tshs.
14,000,000, two-second hand 20seaters
coaster bus each for 7,000,000 and 50
seaters Isuzu bus for 35,000,000.

11/02/2024 YEAR 2020/2021 80

Nyantamba, G
 One Helicopter for taking tourist to the top
of Mountain Kilimanjaro was purchased for
Tshs. 40,000,000.
 20 tones ship to be used for ferry the
customers to Zanzibar were bought for Tshs.
35,000,000.
 Office Tables for 450,000, filling cabinet
for 1,500,000 and reception counter for
600,000 were also added during the year

11/02/2024 YEAR 2020/2021 81

Nyantamba, G
 A saloon car purchased in 2019 was involved
in an accident and insurance money
amounting to Tshs. 3,500,000 was received
as compensation.
 A pick up – which was purchased in 2015,
whose NBV was 4,000,000 was sold during
the year for 6,000,000

11/02/2024 YEAR 2020/2021 82

Nyantamba, G
On 1st October 2020, the following
depreciable assets were purchased
 Two pickups for 4,500,000 Tshs. Each
 One semi- trailer costing Tshs. 16,000,000
 One Electric Generator for 1,000,000 Tshs.
 4 UPS equipments used as electric stabilizers in
computer items at 250,000 each and a cash
register of 100,000.
 Out fashioned furnitures, which were purchased
two years back and had, a book value of 500,000
were sold for 800,000

11/02/2024 YEAR 2020/2021 83

Nyantamba, G
 Lions also owned a 2-story building, which was
constructed and put into use as an office
building from 1.1.2015. The cost of construction
of this building was 180,000,000. The same
building has a market value of Tshs.
165,000,000.
Required:
By applying relevant provisions of ITA 2004
RE:1029 Compute depreciation allowance for
year of income 2020

11/02/2024 YEAR 2020/2021 84

Nyantamba, G
 THE END

11/02/2024 YEAR 2020/2021 85

Nyantamba, G