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Answer: In determining adjusted business income, no deduction is allowed for expenses incurred on the asset or depreciation of the asset. Tax deductions are provided in the form of Capital Allowance in lieu of depreciation expense for the purchase of assets used in the business, in determining the statutory income of a business source. Capital Allowance is only given to the person making the Eligible Spend (PYL) on the assets used for his business purposes as provided under the Schedule 3 of the ITA 1967 and will only be deducted if claimed. Capital Allowance is provided in the form of Initial Allowance (IA) and Annual Allowance (AA).