Question

what is the reason for following restricted expenses:

1) any costs borne or losses incurred during that tax year where the costs were recovered , or the losses were compensated under a contract, insurance policy, court judgment or other.

2)Any amounts considered by the SGT not to be reasonable by reference to the value of the services rendered or other considerations relating to such services.

3) loss from the disposal of securities listed in Muscat Securities Market.

Answer 1

Ans.

1) any costs borne or losses incurred during that tax year where the costs were recovered , or the losses were compensated under a contract, insurance policy, court judgment or other.

Reason:This is restricted expense becuase costs or loss has already been recovered. So there is no sense of claiming the tax benefit again on that cost or loss which has been recovered. Logically also if you are claiming any expense or loss than you should also be recognising income from recovery of that cost or loss which ultimately will net off the gain and loss to zero.  

2) Any amounts considered by the SGT not to be reasonable by reference to the value of the services rendered or other considerations relating to such services.

Reason: Any excess expense claimed by business is disallowed by taxation authorities because it will lower the tax liability of business leading to reduced tax revenues to government from claiming extra expense. Same way when services rendered to business has been overvalued than it would lead buiness to pay reduced tax on lesser income due to understated profits. So, excess value is restricted expense in this case.  

3) loss from the disposal of securities listed in Muscat Securities Market.

Reason: This is not the ordinary business loss. Income from sale and purchase of securities is a speculative income for companies. So, this income is separately reported as income from speculative business. This is not mixed with regular business income. So loss from disposal of securities is speculative loss which can be written off against speculative income by carry forward to next years. That is the reason for loss from disposal of securities to be restricted expense.

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