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MTRCL’s annual payments to KCRC for the service concession to run KCRC’s railway operations for 50 years held to be non-deductible capital expenditures
The Court of First Instance (CFI) now grants MTRCL leave to appeal against the decision of the Board of Review (BOR) that the annual payments, together with the upfront payment, were all part of the consideration for MTRCL’s acquisition of the service concession from KCRC. The service concession was an advantage of an enduring nature relating to the enlargement of the profit-earning structure of MTRC’s business. It was therefore a long-term asset acquired by MTRCL in the merger. As such, the annual payments were deferred consideration for the acquisition of the service concession and were thus non-deductible capital expenditures.
Clients who have any questions on the capital-versus-revenue nature of an item should contact their tax executive.