The Commissioner General of Inland Revenue vs. LOLC Micro Credit Ltd – CA TAX/0005/2020-2022

In the case between The Commissioner General of Inland Revenue, Department of Inland Revenue, Colombo 02 (Appellant) and LOLC Micro Credit Ltd, Rajagiriya (Respondent), the court addressed whether the Respondent qualified as a “bank” or “financial institution” under section 147 of the Inland Revenue Act, No. 10 of 2006, and whether the deduction of Rs. 138,222,745 as bad debts in its tax assessment was subject to the restricted regime of section 25(1)(eee) or the general provision of section 25(1)(ee). The court held that LOLC Micro Credit Ltd. was not a “financial institution” for the purposes of the Act; consequently, the restrictive 1% rule did not apply, and deductions fell under section 25(1)(ee), subject to adequate evidentiary proof of commercial recovery efforts. The principle esta