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Deductions Cases - Coggle Diagram
Deductions Cases
Not of a capital nature
Rand Mines
Cost incurred to create a capital structure = capital
Cost incurred to work the capital structure = revenue
New State Areas
Fixed vs Floating capital
Cost of establishing, improving, adding income earning plant is capital in nature, not deductible.
Cost of performing income-earning operations is revenue in nature and deductible.
Repairs
African Products Manufacturing
Restoration can either be by replacement or renewal of parts of the whole. Materials must be the same.
Repairs is different to improvements which is creating better assets
Flemming
The expenditure incurred must be as a result of damage or the need to repair an asset that has been subject to use in order to be classified as a repair. Not improvement.
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Section 23(g)
Warner Lambert SA
Expenditure incurred in ensuring that income is not lost, is incurred in the production of income
If there is a link between expenditure and the ability to trade, it will be incurred in the production of income.
Actually incurred
Edgars stores
An expense can only be deducted once it there is an unconditional legal obligation to pay the expense
Golden dumps
where there is an amount in dispute, the expense is only actually incurred when the dispute is settled.
Nasionale Pers Bpk
If a payment is contingent upon happening of an uncertain future event, the expense and corresponding liabilities can only be actually incurred once the conditions are met.