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General deductions Court cases - Coggle Diagram
General deductions Court cases
5 elements of positive test
Expenditure and losses
Joffe & Co
Principle: Losses are expenditures of a non-voluntary nature.
Mobile Telephone Networks Holdings
Principle: Apportion expendtiture btween taxable and exempt income
Actually incurred
Nasionale Pers Bpk
Principle: If payment is contingent (dependent) upon the occurrence of an uncertain future event, the expense and corresponding liability can only be actaully incurred once the conditions are met.
Edgars Stores Ltd
Principle: An expense can only be deducted once there is an unconditional legal obligation to pay expense.
Golden Dumps
Principle: Where an obligation to pay an amount is 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
Principle: An expense must be deducted in the year of assessment that it is incurred.
The production of income
Port Elizabeth Electric Tramway Co Ltd
Principle: The compensation (expense) paid to the widow must satisfy the following criteria to be considered in the production of income
What is the purpose of the expense
How closely connected is that expense to the production of income
What act/action gave rise to the expense
Joffe & Co
Principle: If something is not an inevitable concomitant of the business operations it is not deductible. Negligent acts are not inevitable part of trade and thus are not incurred in the production of an income
BP Southern Africa
Principle: Recurring payments to maintain income earning operations are deductible. Royalty payments are deductible if used in production of an income.
Provider
Principle: Amounts paid in terms of a service package are deductible
Not of a capital nature
New State Areas Ltd
Principle: 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 not deductible
Cost incurred to create the capital structure=capital
cost incurred to work the capital structure=revenue
BP Southern Africa
Principle: The legal categorization of a payment does not determine whether it is capital or revenue, but rather the purpose of the expenditure. The shorter the period of endurance to which the payment realtes, the easier it is to argue that it is revenue in nature. Was an enduring benefit created.
Trade
Meaning of carrying on a trade
Burgess
Principle: Trade must be given a wide interpretation
