Please enable JavaScript.
Coggle requires JavaScript to display documents.
Meaning of carrying on a "trade" - Coggle Diagram
Meaning of carrying on a "trade"
Section 1 of ITA = defines "trade" widely
trade
business
every profession
employment
calling
occupation or venture
including: letting of any property; use of any patent/design/trademark
No definition of phrase "carrying on of a trade" in the ITA (only "trade")
Burgess = trade must be given a wide meaning
Positive test to trade
during YoA
Sub-Nigel
Expenditure in previous YoA can't be deducted in current YoA
Where an obligation to pay an amount is in dispute, expense can only be actually incurred when dispute is settled for obligation and amount thereof
Golden Dumps⚱️
Can only be deducted in YoA the expense was actually incurred
in the production of income
Hardest leg/element to achieve
income = gross income less exempt income
expenditure incurred to produce exempt income (not deductible + can be apportioned)
PE Eletrical Tramway🚆
What is the purpose of income?
How closely connected is expense to production of income?
What action gave rise to income?
Was the action performed to producing income?
Is the expenditure to be deducted closely connected to the performance of the act?
Joffe & Co
Employee killed during engineering project by collapsing roof
Damages paid to dependants v/s legal expenses of defending claim
MTN Holdings☎️
Audit fees
94% of time on interest income
6% of time on exempt dividends
Dual purpose = apportionment
actually incurred
Nasionale Pers 📰
If payment contingent upon happening of an uncertain event, the expense and corresponding liability can only be actually incurred once conditions are met
∴ deduction of accounting provisions for future expenditure not allowed
Actually incurred v/s necessarily incurred
Deductibility of expenditure≠ on a cash basis
Not necessary to have paid
Once liability incurred, money is owed
Not actually incurred if only an accounting provision
Edgars Stores
Actually incurred = unconditional legal obligation
not of a capital nature
Expenditure & losses
Joffe & Co ⛑️
If activity isn't an inevitable concomitant of business operations≠ not deductible
Negligence led to roof collapse≠ not an inevitable part of trade & not incurred in production of income
Not of a capital nature
capital receipts and accruals do not form part of gross income
capital expenses not allowed as a deduction from income
Test = enduring benefit⃗ - capital