Please enable JavaScript.
Coggle requires JavaScript to display documents.
"TRADE" & 5 ELEMENTS OF THE POSITIVE TEST, edgars, rand mine…
"TRADE" & 5 ELEMENTS OF THE POSITIVE TEST
IN THE PRODUCTION OF INCOME
Joffe & Co Pty Ltd
- losses are possibly expenditure of an involuntarily nature. Expenditure is voluntary payment.
Port Elizabeth Tramway
- losses include losses of floating capital. What is the purpose of the expense? How closely connected is that expense to the production income.
Provider
- expendititure incurred to induce th eemployees to enter and remain in the service of the taxpayer may qualify as a deduction since the purpose it to produce income. Amounts paid in terms of service package.
Mobile telephone networks
- only fees incurred in the production of income are deductible. When audit fees are dual purposed of need to be apportioned.
ACTUALLY INCURRED
Nasionale Pers Bpk
- if a payment is contingent upon the happening of an uncertain future event, the expense and correspondng liability can only be actually incurred once the conditions are met.
Edgars Stores
- An expense can only be deducted once there is an unconditional legal obligation to pay the expense
Golden Dumps Pty Ltd
- where an obligation to pay an amount is in dispute, the expense can only be actually incurred when the dispute is settled with regards to the obligation and the amount thereof.
DURING THE YEAR OF ASSESSMENT
Sub Nigel Ltd
- expenditure must be deducted in the year of assessment that it is incurred, it cant be claimed in years thereafter.
CARRYING ON A TRADE
Burgess
- a wide interpreattion should be given to trade
NOT OF CAPITAL NATURE
New State areas Ltd
- cost of establishing/ improving/ adding income earning plant (fixed capital) is capital in nature so therefore not deductible. Cost of performing income-earning operations (floating capital) which is revenue and therefore deductible.
Rand Mines
- expenditure incurred to obtain an income earning right ot structure will be capital in nature.
REPAIR
Flemming
- expenditure incurred must be as a result of damage or need to repair an asset that has been subject to use. in order to be classified as a repair. The cost must maintain the income earing ability of the asset, not improve this.
African Produts Manufacturing Co Ltd
- Repait is restoration. Restoration can either be by replacement or renewal of parts of the whole. Mateterials need to be the same. Repair is different from an improvement which is creating a better asset.
