(1)In paragraph 7 of the Fourth Schedule to the Finance Act, 1937 (which specifies the cases in which, and the extent to which, income from investments and other property is to be included in computing profits for the purposes of the national defence contribution), the following sub-paragraph shall be inserted after sub-paragraph (a)—
“(aa)in the case of a trade or business part of which consists in banking, assurance or dealing in investments or other property, not being a business to which sub-paragraph (a) of this paragraph applies, the profits shall include all income received from investments or other property held for the purposes of that part of that trade or business, except—
(i)income received directly or indirectly by way of dividend or distribution of profits from a body corporate carrying on a trade or business to which the said section applies; and
(ii)income to which the persons carrying on the trade or business are not beneficially entitled;”
and in sub-paragraph (b) of that paragraph, for the words " in the case of any other trade or business, being a trade or business carried on by a body corporate " there shall be substituted the words " in the case of any trade or business, being a trade or business carried on by a body corporate and not being a business to which sub-paragraph (a) of this paragraph applies.
(2)At the end of the said paragraph 7 the following sub-paragraph shall be inserted :—
“(2)The references in this paragraph to income received from investments shall not, in cases where the persons carrying on the trade or business are neither domiciled nor ordinarily resident in the United Kingdom, include any interest received from tax-free Treasury securities unless the conditions of the issue of the securities so provide; and where any interest on tax-free Treasury securities is, in accordance with the provisions of this sub-paragraph, left out of account in computing the profits of the trade or business, any interest on money borrowed for the purpose of acquiring the securities, any other expenses attributable to the acquisition or holding of, or to any transaction in, the securities, and any profits or losses so attributable, shall also be left out of account in computing the profits of the trade or business.
In this paragraph, the expression " tax-free Treasury securities " means any securities issued by the Treasury under the power conferred by section forty-seven of the Finance (No. 2) Act, 1915, or the power conferred by section twenty-two of the Finance (No. 2) Act, 1931.”