s 40D Retrospective revocation of approval of approved royalties, fees or contributions
40D.—(1) Where —(a) a company has an approval under Division 1 of this Part for royalties, fees or contributions payable under an agreement or arrangement (A); (b) the company is granted an approval under section 40A for an activity where, for the purposes of carrying on that activity, the company had entered into agreement or arrangement A; and (c) the Minister revokes the approval mentioned in paragraph (a) under section 39(2) with effect from a date (called in this section the effective revocation date) that is before the date on which notice of revocation of the approval is given to the company (called in this section the date of revocation notice), then — (d) where the commencement of the approval period is before the effective revocation date, section 40B(5) and (6) applies to any royalties, fees or contributions payable under agreement or arrangement A on or after the effective revocation date; and (e) where the effective revocation date is before the commencement of the approval period, section 40B(5) and (6) applies to any royalties, fees or contributions payable under agreement or arrangement A on or after the commencement of the approval period. (2) Where subsection (1) applies and the tax relief amount under section 39 for the relevant period is more than the tax relief amount under section 40B for the relevant period, the difference between the amounts —(a) is considered to have been deducted from the royalties, fees and contributions payable by the company under agreement or arrangement A during the relevant period under section 45A of the Income Tax Act 1947; (b) is a debt due from the company to the Government; and (c) is, with the prior sanction of the Minister, recoverable in the manner provided by section 89 of the Income Tax Act 1947. (3) Where subsection (1) applies and the tax relief amount under section 39 for the relevant period is less than the tax relief amount under section 40B for the relevant period, the Comptroller must refund the company the difference between those amounts. (4) Where —(a) a company is applying for or has been granted approval under section 40A for a relevant approved activity, and the company is also applying for revocation under section 40C(1) of the approval of the royalties or technical assistance fees or contributions to research and development costs in relation to that activity; (b) on or before the date of its application under section 40C, the company —(i) contravenes or had contravened section 38(2) in respect of the agreement or arrangement under which the approved royalties, fees or contributions mentioned in section 40C(1) were payable; or (ii) contravenes or had contravened any condition under section 37(3)(a) in respect of the approval for those approved royalties, fees or contributions; (c) the company did not disclose the contravention to the Minister at any time prior to or when making the application under section 40C; (d) the Minister revokes the approval for those approved royalties, fees or contributions under section 40C(4)(a); and (e) the contravention by the company subsequently comes to the knowledge of the Minister, then the consequences in subsection (5) follow. (5) The consequences for subsection (4) are as follows:(a) the Minister may rescind his or her approval of the application for revocation under section 40C, and instead revoke the approval of the approved royalties, fees or contributions under section 39(2) with effect from an earlier date (called in this section the earlier date); (b) upon the Minister revoking the approval under paragraph (a) —(i) the consequences in subsections (1)(d) and (e), (2) and (3) apply as if the earlier date were the effective revocation date for the purposes of those provisions; and (ii) without affecting sub‑paragraph (i), where the earlier date is a date before the commencement of the approval period, the amount of tax which, but for section 39(1), would have been deductible by the company from the royalties, fees or contributions payable by it to the non‑resident person under section 45A of the Income Tax Act 1947, for the period between the earlier date and the day before the commencement of the approval period (both dates inclusive) —(A) is considered to have been deducted from the royalties, fees and contributions payable by the company to the non‑resident person during that period; (B) is a debt due from the company to the Government; and (C) is, with the prior sanction of the Minister, recoverable in the manner provided by section 89 of the Income Tax Act 1947. (6) In this section —“commencement of the approval period”, in relation to a relevant approved activity, means the date on which the period of approval for the relevant approved activity commences, as specified in the approved activity certificate for the relevant approved activity; “relevant approved activity” means —(a) for the purposes of subsections (1), (2) and (3), the activity mentioned in subsection (1)(b); and (b) for the purposes of subsections (4) and (5), the activity mentioned in section 40C(1); “relevant period” means —(a) where subsection (1)(d) applies, the period between the effective revocation date and the date immediately before the date of revocation notice (both dates inclusive); and (b) where subsection (1)(e) applies, the period between the commencement of the approval period and the date immediately before the date of revocation notice (both dates inclusive); “tax relief amount under section 39 for the relevant period” means the amount of tax which, prior to the date of revocation notice, a company had, in reliance on section 39(1), not deducted from the royalties, fees or contributions payable to a non‑resident person under section 45A of the Income Tax Act 1947 during the relevant period; “tax relief amount under section 40B for the relevant period” means the amount of tax which, but for section 40B(5) and (6) (read with subsection (1)), would have been deductible by a company under section 45A of the Income Tax Act 1947 from any royalties, fees or contributions payable by the company to a non‑resident person during the relevant period.[Act 39 of 2023 wef 01/04/2023]