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Qualifying prospecting expenditure for the purposes of this Schedule is expenditure wholly and exclusively incurred in searching for, discovering or winning access to deposits of minerals in an eligible area or in testing any such deposits, but excludes expenditure on the acquisition of[Am. Act A471: s.13]

(a) the site of the source of the deposits; (b) the site of any works which are likely to be of little or no value when the source is no longer worked: (c) rights in or over any such site; or (d) rights in or over the deposits. 2. (a) A person who has incurred qualifying prospecting expenditure may elect to claim, within three months after the beginning of a year of assessment in the basis period in which the expenditure was incurred or within such period in that year of assessment as the Director General may allow, a deduction to be made under subparagraph 5(a) (in this Schedule that person and that year of assessment being referred to as the "prospector" and "the relevant year" respectively). (b) Where no election has been made under subparagraph (a), a person who has incurred qualifying prospecting expenditure may claim for the relevant year a deduction under subparagraph 5 (b). [Subs. Act 309: s.18] 3. A claim under paragraph 2 shall-

(a) if an election is made, be made in writing and shall be irrevocable; (b) specify the eligible area to which the claim relates and the amount of the qualifying prospecting expenditure claimed to be deductible; (c) contain a declaration described in paragraph 4 if a claim is made for a deduction under subparagraph 5(b); and in the case of subparagraph (b) or (c), shall contain such other information as may be necessary to enable the Director General to dispose of the claim in accordance with this Schedule. [Subs. Act 309: s.18] 4. The declaration referred to in subparagraph 3(c) is a declaration by the prospector that[Am. Act 309: s.18] (a) on a date before the end of the basis year for the relevant year he permanently ceased to search for deposits of minerals in the area to which the claim relates, to win access to any such deposits discovered by him in that area and to test any such deposits; and [Ins Act 309:18] (b) he has not carried on and has formed the permanent intention not to carry on any business consisting of or including the working of a mine in that area. 5. Subject to this Schedule, there shall be deducted for the relevant year under subsection 44 (1)-

(a) an amount equal to so much of the qualifying prospecting expenditure as was incurred in the basis period for the relevant year:

Provided that where the area specified in subparagraph 3(b) ceased to be an eligible area by reason of a lease, licence or certificate (other than a prospecting licence or certificate) granted or issued under any written law regulating mining being granted, issued or assigned to the prospector in any year of assessment subsequent to the relevant year, there shall be added under paragraph 43 (1) (c) in ascertaining the prospector's aggregate income for that year of assessment subsequent to that relevant year an amount equal to that prospecting expenditure or where a prospecting expenditure has been made to him for more than one relevant year the aggregate of all those expenditure for all those years; or (b) an amount equal to so much of the qualifying prospecting expenditure as was incurred before, but not more than ten years before, the end of the basis year of the relevant year. [Subs. Act 309: s.18] 6. Where-

(a) a claim under this Schedule is not allowable because the area specified under subparagraph 3(b) is not an eligible area or is misdescribed or because the amount of expenditure so specified is excessive; and [Am. Act 309: s.18] (b) the Director General is of the opinion that the claim would be wholly or partly allowable, if amendments were made affecting the area or amount so specified, he may make those amendments and allow the claim (in whole or in part) as amended. 7. Subject to paragraph 8, where a claim under this Schedule in respect of any area and expenditure has been allowed or disallowed, no other claim may be made for any year of assessment in respect of that area or expenditure. 8. Where a claim under this Schedule in respect of any area and expenditure is disallowed because the Director General is not satisfied as to any matter or which the declaration described in paragraph 4 relates, a further claim in respect of that area and expenditure may be made for a subsequent year of assessment. 9. Where a claim is made under this Schedule in respect of any area and expenditure, the amount of any deduction which would otherwise be made under subsection 44 (1) pursuant to this Schedule for any or all relevant years shall be reduced to the extent provided by paragraphs 10 to 13 (that amount being referred to in those paragraphs as the provisional deduction). [Am. Act 309: s.18] 10. (1) Where machinery or plant has been purchased by the prospector and used in any operation connected with any qualifying prospecting expenditure to which the provisional deduction relates (whether or not is was first used in that way), the provisional deduction under subparagraph 5 (a) shall be reduced-

(a) if the machinery or plant has been sold in the basis period for the relevant year by the amount of any consideration for the sale (ascertained in accordance with paragraph 11); (b) by an amount equal to any sum received or receivable by the prospector in the basis period for the relevant year for the use of the machinery or plant otherwise than in any such operation; and (c) if the machinery or plant has not been sold in the basis period for the relevant year in which he permanently ceased to search for deposits of minerals in the area to which the claim relates, to win access to any such deposits discovered by him in that area and to test any such deposits, by an amount equal to its market value at the date he permanently ceased to prospect in that area.

(2) Where machinery or plant has been purchased by the prospector and used in any operation connected with any qualifying prospecting expenditure to which the provisional deduction relates (whether or not is was first used in that way), the provisional deduction under subparagraph 5 (b) shall be reduced(a) if the machinery or plant has been sold before the date referred to in subparagraph 4 (a), by the amount of any consideration for the sale (ascertained in accordance with paragraph 11); (b) if the machinery or plant has not been sold before that date, by an amount equal to its market value at that date; and (c) by an amount equal to any sum received or receivable by the prospector before that date (and, in the case of machinery or plant to which paragraph 14 applies, after the date on which the machinery or plant was first used in any such operation) for the use of the machinery or plant otherwise than in any such operation. [Subs. Act 309: s.18] 11. For the purposes of paragraph 10, the consideration for a sale of machinery or plant shall be ascertained by taking the amount of any monetary consideration and the amount of the market value of any non-monetary consideration or, where there is only non-monetary consideration, by taking the amount of the market value of either[Am. Act 309: s.18] (a) the non-monetary consideration; or (b) the machinery or plant at the date of the sale, whichever is the greater: Provided that the consideration shall be taken to be the amount of the market value of the plant or machinery at the time of the sale in any case where the monetary consideration is less than the market value and the Director General is satisfied that the sale is a transaction to which section 140 applies. 12. The provisional deduction shall be reduced-

(a) by an amount equal to any sum received or receivable by the prospector at any time before the end of the basis year for the relevant year or in the basis period for the relevant year, as the case may be from the sale of any rights or other benefits arising from or connected with the area to which the provisional deduction relates, and by an amount equal to the market value at the time of the sale of any non-monetary consideration so received or receivable; and (b) by an amount equal to any sum received or receivable by the prospector at any time before the end of the basis year for the relevant year or in the basis period for the relevant year, as the case may be as a grant or other payment by the Government, a State Government or a statutory authority intended directly or indirectly to reduce the burden of the qualifying prospecting expenditure to which the provisional deduction relates. [Am. Act 309: s.18] 13. Where, by reason of the fact that as regards the prospector there is for the relevant year no or no sufficient defined aggregate, a deduction which would otherwise be made under subsection 44 (1) pursuant to this Schedule cannot be made or can be made only in part, the deduction (or, where the deduction can be made only in part, so much of the deduction as cannot be made) shall be made for the first year of assessment (being a year of assessment subsequent to the relevant year) for which in computing the total income of the prospector there is a defined aggregate, and so on for the years of assessment subsequent to that first year until the whole amount of the deduction has been made.

14. Where the operator uses in operations connected with qualifying prospecting expenditure any machinery or plant acquired by him otherwise than for such a use, the market value of the machinery or plant when first used in any of those operations (and not its price or market value when it was first acquired by him) shall be deemed to be included in that expenditure. 15. Where-

(a) there has been made under paragraphs 10 to 13 a reduction consisting of an amount equal to a sum receivable (but not received) by the prospector; and (b) within the six years following the relevant year the prospector satisfies the Director General that the sum in question or a part of that sum is irrecoverable. such adjustments in the ascertainment of the prospector's total income for any year of assessment shall be made as are necessary to compute the tax paid by him which would not have been paid if there had been allowed to him the deduction which would have been allowed if that sum or that part of that sum, as the case may be, had not been taken into account as receivable; and a sum equal to any tax so computed shall be repaid to the prospector by the Director General: Provided that, where this paragraph has been applied to a part of that sum, that part shall be left out of account in any subsequent application of this paragraph. 16. Where the prospector receives in the basis year for a year of assessment subsequent to the relevant year which coincides with the year in which he permanently ceased to search for, win access or test deposits of minerals in that area[Am. Act 309: s.18] (a) an amount to which, if it had been received or receivable by him in the basis year for the relevant year, paragraph 12 would have applied; or (b) an amount on account or in respect of an amount treated as irrecoverable with regard to which an adjustment has been made under paragraph 15, the amount so received shall be added under paragraph 43(1)(c) in ascertaining the prospector's aggregate income for that subsequent year: Provided that the amount (if any) so added in ascertaining the prospector's aggregate income for a year of assessment by virtue of this paragraph, together with any amount so added in ascertaining his aggregate income for any previous year of assessment in relation to the same claim, shall not exceed the total deductions allowed in pursuance of the claim under any of the foregoing paragraphs for the relevant year and any subsequent year of assessment. 17. In this Schedule"defined aggregate", in relation to the prospector and a year of assessment, means his aggregate income for that year reduced by any deduction falling to be made for that year pursuant to subsection 44 (2); "eligible area" means any particular area in Malaysia which does not consist of or include an area with respect to which there is or has been in force at any time before the end of the basis year for the relevant year any lease, licence or certificate (other than a prospecting licence or certificate) granted

or issued under any written law regulating mining and granted, issued or assigned to the prospector before the end of that basis year