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Deductions - Coggle Diagram

- - - - types of legal expenses that maybe deductible 1) fees for the services of legal practitioner 2)expenses wrt evidence /expert witness 3) court fees 4)witness fees 5) taxing fees 6)sheriff fees and other litigation fees
        
        PE Electric Tramway Co Ltd v CIR states that all expenses attached to the performance of business operations, for business purposes of earning an income are deductible. Those expenses may be necessary, attached to it by chance or are in bona fide incurred for the more efficient running of the business but they must be closely connected to the costs of performing it
        
        Joffe & Co Pty Ltd v CIR states that the expense of damages is tax deductible only if that risk was inherent in the taxpayers trade. if in compliance with the relevant industry rules & safety requirements and an accident occurs the damages are deductible . if however you're negligent cannot deduct those damages as expenditure.
  - - - the taxpayer must show that he will be obligated to incur the future expenditure + establish a quantifiable obligation
        
        CSARS v Clicks Retailers Pty Ltd (SCA) to make use of this deduction the expense incurred must arise form the same contract of sale.
- - - - PE Electric Tramway Co Ltd v CIR states that compensation paid to the family of a dependent will amount to an expense that is incurred in the production of income + Expenses must be incurred to produce an income (expenses incurred to produce exempt income are not deductible) + expenditure attached to the performance of a business bona fide performed for the purpose of earning income are deductible regardless of whether they are necessary, in bona fide or by chance. the court also develops 2 question to hep us determine if the expenditure is deductible under this category. ( important consideration how closely connected is the expense to the business)
        
        SG Taxpayer v CSARS the 2 question appears as 1)what is the purpose of the expenditure from the taxpayers view 2) what that income actually causes to happen or bring about. the main consideration is whether there is a sufficiently close connection between the contribution a certain payment/ expenditure and the business
    - - Edgars stores v CIR states that only expenditure in respect of which the taxpayer has incurred an unconditional legal obligation during that year of assessment + should expenses be incurred that are unconditionally liable but cannot be quantified parties can estimate the expense based on the available information and claimed in that tax year
        
        Pyott Ltd v CIR states that certainty is important whether the obligation has been completed and must be unconditional
        
        CIR v Golden Dumps states that should parties be involved in a dispute and that dispute has not been resolved, it cannot be said that a liability has been actually incurred because the taxpayer could not properly claim the deduction in that tax year + tax liability to pay was conditional upon the sellers performance + prior to delivery the taxpayer has not actually incurred an unconditional obligation to pay + there must be an indefensible duty to pay pay before the end of the tax year
    - - CIR v George Frost Timber Co Ltd states that money spent in creating or acquiring an income producing concern must be capital in expenditure + provides us with elements that point to expenditure being of a capital nature 1) adds to a taxpayer's income earning structure 2) it is a once off expenditure from which future income will flow 3) it creates a lasting benefit or advantage for the taxpayer. states that payment for the use of an asset is expenditure of a revenue nature.
        
        New State Areas Ltd v CIR AD states that when capital employed in a business is frequently changing its form from money to goods and vice versa. This is done for the purpose of making a profit then the capital so employed is floating capital. floating capital expenditure = a deductible expenditure e.g. Trading stock and fixed capital expenditure= capital expenditure which may qualify for capital allowances but not for a deduction
        
        Palaborwa Mining Co Ltd v SIR makes use of the enduring test which is closeness of the connection + court stated that the Mining Co had a short term benefit that had no residual value +purpose and closeness of the expenditure amount to an important factors that need to considered+ expenditure was incurred wit the sole purpose of accelerating the earning of those profits.
    - - Joffe v CIR states that a loss amounts to expenditure that is an involuntary deprivation and voluntary payment amount to expenditure
        
        CSARS v Labat SCA defines expenditure as the action of spending funds, disbursement or consumption and hence the amount of money spent + Expenditure requires a diminution (even if only temporary) or at the very least movement of assets of the person who expends it
    - - CIR v Pick n Pay wholesalers (Pty) Ltd states that expenditure incurred for general philanthropic purpose would not amount to a deduction
      - see trade definition below