Distilleries Company of Sri Lanka Plc vs Commissioner General of Inland Revenue – CA TAX 13/13-2021

In the case between Distilleries Company of Sri Lanka PLC and the Commissioner General of Inland Revenue, the court addressed the issue of whether a reimbursement made by the Appellant to retailers, intended to cover increased turnover tax for a specific period, was deductible as an expenditure incurred in the production of income under Section 25(1) of the Inland Revenue Act No. 10 of 2006, or constituted capital expenditure under Section 26(1)(h). The court held that the payment did not amount to capital expenditure and therefore did not fall under the restrictions of Section 26(1)(h), but also held that it was not an allowable deduction under Section 25(1), as it was not necessary for the production of the Appellant’s income. The decision reaffirmed the principle that for a payment to b