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Special inclusions, Special Inclusions, This overrides other elements in…
Special inclusions
Par (a): Annuities
Annuity is defined in case law
Characteristics according to court
Provides for fixed annual payment
Payment is repetitive
Chargeable against some person
including any amount contemplated in the def of living annuity
Exemption for certain purchased annuities --> 10A insurance company
Any amount received or accrued by way of annuity
Par(gA) know-how payments --> compensating for imparting knowledge
this is for know how payments
know how payments = amounts received for use of any knowledge or information or rendering of assistance or service in connection with knowledge
include for e.g.
Sale of operating manuals
technical advisory fees in interacting way
receipt of any amount that carries with the right on part of TP to have info or knowledge given to him
Par(c) Services rendered
Employment
Par(c) amount has ascertainable money value
if cannot establish amount in cash NOT GI
Voluntary awards = part of GI even not in GI
e.g waiter tips, police informant bonus,
Anti-avoidance provisions
Amount received for services rendered is received by person who rendered services --> rise to GI
Note 4 --> comp nominates an employee to act as director the directors fees earned by employee is not taxed in employees
Services
all amounts received for services rendered, employment capital of revenue in nature = GI
(c) EXCLUDES any benefits in par(i) - fringe benefits
this is anti-avoidance provision
money taxed in hands of person who did the job not receiver
Par (cA) & (cB) Restraint of trade
cA amount received by following:
person who is or was a labour broker without exemption
entity which is or was personal service company, personal service trust or personal service provider
cB provides included in GI of natural person if restraint has been imposed in respect of:
employment or holding of office
Past/ future employment or holding of an office
not a payment for services rendered but payment taken to render a service
Par(d) lump sum benefits
accruing to director or employee included in GI
directly/ indirectly in respect of proceeds from a insurance policy held by employer or director where person was employee/director
amounts from ceded insurance policies not GI ---> pay out on death/ illness/ disablement
any voluntary amount including voluntary award, received or accrued in respect of
relinquishment
termination
loss
repudiation
cancellation
variation of any office
employment or appointment
Provisions
above doesn't apply to lump sum awards from any --> pension fund, pension preserve fund, provident fund, provident preserve fund or retirement annuity fund
on death the amount accrued to such person immediately before death
Par (b) alimony/ maintenance
(b) of definition includes
Any amount payable by spouse/ former spouse
Under written agreement of separation or divorce
by way of alimony or allowance or maintenance to TP or any children
Exemption to GI of receiver i.r.t. alimony received
Par(f) Commutation of amounts due
an amount due under employment/ service contract converted into up front lump sum is included in GI --> special inclusions
e.g pension fund = special inclusions par(c)
Par(g) lease premiums
Note
lease premium doesn't include obligations expected from lessee like maintenance
lease premiums received in lump sum payment different from rental deposit & up-front rental
IN 109 Says following not lease premiums
payment by lessor to lessee to vacate building
payment lessor to lessee to cancel lease --> included in lessors GI = normal business operations
recovery by lessor for lessee of cost making alternation to premises
commission to auctioneer on acquisition on lease farm
payment by one lessee for cession of rights held under lease
lease premium is paid to lessor instead of or in addition to rent --> must haave ascertainable value -e.g. sub lessee to sub-lessor
to determine if lease premium SARS takes substance over form approach
.lease premium includes assets like --> land & buildings, machinery, motion picture films, patents, designs, trademarks, copyrights, any model plan, pattern, formula or process of any property or right of similar nature
Bullet rental is renal thus GI not special inclusion because no lease premiums
includes all lease premiums received by or accruing to TP capital in nature or not
Special Inclusions
Par(h) leasehold improvements
improvement made by lessee to property that been leased
includes in GI of lessor:
any right which has accrued
to have improvements effected to land & or Buildings
i.t.o lease agreement for such land or buildings
Lessor included in GI if stipulated in lease improvements must be made
Provision
When lease includes obligations value of improvements falls in lessors GI
IN 110 --> when lease signed by all or improvement completed value of improvements included in lessors GI --> value is in lease or value respresents fair and reasonable value
cost of improvements can exceed amount in contract --> lessor only taxed on amount stipulated in contract
Relief for lessor
circumstances where lessee and lessor treated as connected persons
IN 110 --> when lessee receives benefits of improvements at expiry date but been completed for a long time --> allowance for deduction is difference between PV and amount in contract
Par (jA) Proceeds from disposal on certain assets
Proceeds from capital assets similar to trading stock = included in GI
Assets [not purchased assets]
Produced
Constructed
Assembled
Manufactured
Full proceeds included no wear and tear claim, no recoupment and no CGT allowed
Par (k) Dividends
Div = rev nature thus fruit of cap employed thus normal GI definition
Exemption --> non-residents and residents by S10B provisions
any amount received or accrued by way of div/ foreign div
Par(IC) government grants
Included in GI whether rev/ cap thus not purpose of CGT
Possible exemption
Par(n) amounts deemed receipts or accruals
This overrides other elements in GI definition