Section DB 21 — Income Tax Act 2007: Amounts paid for non-compliance with covenant for repair

DB 21 Amounts paid for non-compliance with covenant for repair When this section applies (1) This section applies when— (a) a person who is a lessee of land uses it to derive income; and (b) the lease contains a covenant requiring the lessee to maintain the land or to make repairs to improvements on the land; and (c) the lessee does not comply with the covenant; and (d) the lessee is, consequently, liable to pay an amount to the lessor; and (e) either— (i) the lessee, during the term of the lease or after it ends, pays the amount to the lessor; or (ii) the lessor recovers the amount from the lessee during the term of the lease or after it ends. Deduction (2) The lessee is allowed a deduction for the amount paid to the extent to which it relates to maintenance or repairs and to the extent to which the lessee would have been allowed a deduction for the expenditure had the lessee incurred it during the term of the lease. Timing of deduction (3) The deduction is allocated to the income year in which the lessee pays the amount or the lessor recovers the amount. Relationship with section EJ 11 (4) This section is overridden by section EJ 11 (Amount paid by lessee for non-compliance with covenant for repair). Link with subpart DA (5) This section supplements the general permission and overrides the capital limitation. The other general limitations still apply. Defined in this Act: capital limitation , deduction , general limitation , general permission , income , income year , lease , pay , repairs , supplement , term of the lease , Compare: 2004 No 35 s DB 15