1
Q
Name the court cases that deal with “actually incurred”
A
- Nationale Pers Bpk
- Edgars Stores Ltd
- Golden Dumps
- Labat
2
Q
Name the court cases that deal with
“in the production of income”
A
-Port Elizabeth Electrical Tramway Co Ltd
- Joffe & Co
- BP Southern Africa
Provider
- Mobile Telephone Network Holdings
- Nemojim
3
Q
Sub-Nigel Ltd.
Facts
Principle
A
- insurance premiums that were paid.
- insurance payouts in future, subject to certain events
- incurred to ensure income
- deducted in yoa that it is incurred in.
- claimed in yoa that it is incurred in.
4
Q
Burgess
- facts
- principle
A
- borrowed money and invested in a short term investment company. Wanted to deduct the losses from the scheme.
- trade needed to be given a wider interpretation.
5
Q
National Pers BPK
- facts
- principle
A
- claimed provision for bonusses as deduction. only payable @ future date and that employee had to be still working for company.
- payable @ future date = uncertain future event
- payment that is contingent upon an uncertain future event happening = actually incurred once conditions are met.
6
Q
New States Areas Ltd
A
- required to install new sewerage system on premises and outside, local authority paid for installation and TP was required to pay back in installments.
- System on premises = capital in nature as it related to acquisition of asset. Outside was not permanent asset , incurred due to right to use of system belonging to local authority = deductible.
- floating vs fixed capital.
costs to establish/improve/add income earning plant = capital = fixed = not deductible
costs of performing income earning operations = floating = revenue = deductible
7
Q
Flemming
A
- Drilled new borehole, erected windmill and installed piping to feed water to dam. Done due to old borehole not pumping adequate water. No evidence that old did not work or that there was something wrong with it, rather to improve water supply.
- Repair as a result of damage or to maintain/restore to original position. NOT improve.
8
Q
BP South Africa
A
- made upfront payment to lease premises for 20 years. Rental was rather capital in nature due to the fact that it was an enduring benefit that was created.
- legal categorization of payment does not determine whether expense is capital or revenue in nature, but rather the purpose of the expense. Shorter endurance = easier as revenue in nature
9
Q
Rand Mines
A
-Mine management company acquired expenses to acquire a contract to manage the mine in the same group of companies. Deduction was disallowed
Contract created opportunity to generate income , was related to the income earning structure- capital in nature
- cost incurred to create capital structure = capital
- cost incurred to work capital structure = revenue
10
Q
Nemojin
A
- share dealing company carried on dividend stripping operations. Would declare dividends to eliminate all reserves. Would sell shares at a loss.
- HELPP!!!!!
11
Q
Mobile Telephone Networks Holdings (Pty) Ltd
A
- Incurred expenditure ito audit and training fees. They apportioned the the audit fees based on the type of audit 94% on interest income and 6% on exempt income. Training of employees to use the new accounting system
- Reasonable apportionment needs to take place. Training fees are necessary in order to trade effectively and in not capital in nature and deductible.
12
Q
Provider
A
- Two schemes for benefit of employees = life assurance & service bonus. Both schemes were dependent on the employee’s length of employment.
Designed to induce workers to remain and enter into the company. - Expenditure to induce employees to enter or remain in service of TP is deductible since purpose is to produce income.
13
Q
BP South Africa
A
- paid royalties to BP worldwide ito trademark license agreement iot display trademark. Payment was expressed as a rate per liter. SARS disallowed the deduction.
- Royalty payments = revenue in nature and is deductible if intellectual property is used in the production of income.
14
Q
Joffe & CO
A
- concrete business, concrete hood of building collapsed and killed a workman. Company was negligent and paid damages to worker’s family.
Negligence was found not to be part of the businesses trade - not inevitable concomitant of business operations it is not deductible
15
Q
Port Elizabeth Electrical Tramway
A
- driver of company was killed in an accident on duty. They had to pay consideration to the worker’s dependents and damages to the widow.
- purpose of the expense?
- closely connected to the production of income?
16
Q
Labat
- facts
- principles
A
- issued shares as consideration for acquisition of trademark. Ordinary meaning of expenses = spending funds, disbursement or consumption = diminishing of assets
- issue of shares was not diminishing of assets = not expenditure
- shares issued for acquiring ASSET = S40CA expenditure incurred amount.
17
Q
Golden Dumps (Pty) Ltd
A
- involved in dispute over delivery of shares. Claimed cost of shares as deduction.
- Can only be actually incurred when dispute is settled.
18
Q
Edgars Stores
- facts
- principle
A
- leased premises to conduct business. Rental was based on basic and annual turnover. They estimated their annual turnover to claim deduction.
- There is a contingent
- Deduction only allowed once there is an unconditional legal obligation
