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INLANDREVENUEBOARDOFREVIEWDECISIONSCaseNo.D27/04Personalassessment–personalassessmentonthetotalincomeofanindividual–allowabledeductionforinterestpayableonanymoneyborrowedforthepurposeofproducingthatpartoftherentalincome–burdenofproofontheappellant–sections42(1)and68(4)oftheInlandRevenueOrdinance(‘IRO’).[DecisioninChinese]Panel:AnthonyHoYiuWah(chairman),KarlKwokChiLeungandPeterSitKienPing.Dateofhearing:19March2004.Dateofdecision:15July2004.TheappellantandhiswifeappealedagainstthedeterminationoftheCommissionerinrespectofthepersonalassessmentraisedonthemfortheyearofassessment2001/02.Duringtheyearofassessment2001/02,theappellantandhiswifejointlyownedtwoproperties:PropertyAandPropertyC;bothofwhichwereabletoproducerentalincome.WithrespecttoPropertyC,thetotalamountofinterestpaymentsonmoneyborrowedforproducingtherentalincomeexceedsitsnetassessablevalueofthatproperty.Theappellantcontendedthatforthepurposeofpersonalassessment,alltherentalincomederivedfromPropertyAandPropertyCshouldfirstbeamalgamatedbeforebeingdeductedagainstthetotalinterestpaymentsforproducingthoserentalincomesofPropertyAandPropertyC.Ontheotherhand,theCommissionercontendedthattheamountofinterestpayabletobeallowedasdeductionislimitedtothelesservalueofthenetassessablevalueofthatpropertyandtheamountoftheinterestpayableonanymoneyborrowedforthepurposeofproducingthatpartoftheincome.Hence,theissuebeforetheBoardwas:Iftheappellanthadborrowedmoneyforproducingrentalincomeofoneproperty,andtheamountofinterestpayableonsuchloanexceededthenetassessablevalueofthatproperty;canhesetoffthoseexcessiveinterestpaymentsagainstthewholeorpartofthenetassessablevalueofanotherproperty?Held:Ithasbeenwell-establishedinD86/99thattheprovisoofsection42(1)oftheIROdoesnotallowaglobaldeductionforinterestpayableagainsttotaltaxablepropertyincome,evenlessdoesitallowaglobaldeductionforinterestpayableagainsttotaltaxableincome.Thisinterpretationastotheprovisoofsection42(1)oftheIROhasbeenadoptedbytheBoardintwosubsequent
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