Section 11(a) - Positive test - Coggle Diagram
Section 11(a) - Positive test
Expenditure and Losses
Case Law: Port Elizabeth Tramway
Expenditure and losses refer not only to cash outflows, but to liabilities, which may be settled in cash or otherwise.
Case Law: Nasionale Pers Bpk v KBI
If a payment is contingent upon the happening of an uncertain future event, the expense and corresponding liability can only be actually incurred once the conditions are met.
During the Year of Assessment
An expense must be deducted in the year of assessment that it is incurred, even if it will only produce income in future years.
An expense has to be claimed in the year that it is incurred. It cannot be claimed in later years.
Case Law: Sub-Nigel Ltd v CIR
In Production of the Income
Case Law: Joffe and Co v CIR
If something is not an inevitable concomitant of the business operations it is not deductible. Negligence resulted in the roof collapsing and is thus not an inevitable part of trade and not incurred in the production of income.
Not of a Capital Nature
New State Areas Ltd
Fixed (capital) vs. Floating capital (revenue)
Cost of establishing/ improving/adding income earning plant (fixed capital) is capital in nature and therefore not deductible vs. Cost of performing income-earning operations (floating capital) which is revenue in nature and therefore deductible.