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General deductions case law - Coggle Diagram
General deductions case law
Trade
Must be given a wide interpretation
Must have continuity and long term profit generating objective
Every profession, trade, business, employment, calling
Positive test
During the year of assessment
In the production of income
Actually incurred
Not of a capital nature
Expenditure and losses
Edgars Stores
An expense can only be deducted once there is an unconditional legal obligation to pay the expense
Nemojin
Assess the closeness of the connection of expenditure incurred and exempt income received or accrued. Apportion taxable income between taxable and exempt
Port Elizabeth electric tramway
What is the purpose of the expense? / How closely connected is that expense to the production of income?
Nasionale Pers BPK
Payments contingent on uncertain future events cannot be deducted, expense/liability can only be actually incurred once conditions are met
Golden Dumps (Pty) Ltd
An expense can only be actually incurred when the dispute with regards to the obligation is settled
Sub-Nigel Ltd
Expense must be deducted in the year of assessment that it incurred, cannot be claimed in later years
Labat
Shares issued for acquiring asset = expenditure incurred
Shares issued for services rendered = No expenditure incurred
Burgess
A wide interpretation should be given to trade
BP Southern Africa
Recurring payments for maintaining income earning operations are deductible
Mobile Telephone Networks Holdings (Pty) Ltd
Where fees are incurred for a dual purpose, apportionment has to take place
Joffe and Co
If something is not an inevitable concomitant of the business operation, it is not deductible.
Provider
Amounts paid in terms of a service package (employment contract) are deductible
New State Areas Ltd
Fixed vs Floating capital: floating capital expenditure = deductible. Fixed capital expenditure = non-deductible
Rand Mines
Cost incurred to create capital structure = capital
Cost incurred to work the capital structure = revenue
BPSA
Was enduring benefit created? The legal categorisation of a payment does not determine whether it is capital or revenue
